As our population ages, many Victorians over 55 years of age are choosing to live in Retirement Villages. There are a number of new villages being built and many of the existing villages have waiting lists.
If you are thinking of selling your house or unit and moving to a Retirement Village it is important that you receive proper legal and financial advice as Retirement Village Contracts are usually lengthy and complex and create legal obligations, and often give different types of legal security to that which you may have as an owner of your own home or unit.
The entry into a Retirement Village is a lifestyle choice and cannot be justified simply for financial reasons. Most people choose to live in a Retirement Village because they know that they will be living amongst people of their own age. Some people are seeking physical security or safety, others are looking for company and social activity and the opportunity to intermix with people of their own age. Others simply want to have somebody else look after the garden or attend to maintenance. Whatever the reason, it is a change of lifestyle.
You are required to observe the rules and regulations of the village and to pay periodical service fees to the village manager and are likely to incur considerable further costs when you die or leave the village either by choice,or because you are no longer able to care for yourself.
The operation of Retirement Villages in Victoria is governed by the Retirement Villages Act 1986. Whilst the Act is intended principally to protect the interests of residents in Retirement Villages, it does not dictate the types of contracts or other arrangements which can be entered into between a owner and a village resident.
It does, however, require that before signing any residence documents or contracts, the intended resident must have been given the documents at least 21 days before they are signed. This is to enable you to obtain legal advice and if necessary, financial advice and not to make hasty decisions on such an important matter.
If you own a house or a unit you will have a registered Title to the land on which the house or unit is built. This will not necessarily be the case if you choose to live in a Retirement Village. Some villages have separate Titles to each unit and the Titles are bought and sold just the same as if you were buying a house or unit but in many cases you receive only a lease or a licence to occupy the unit. In order to live in the village you will be required to enter into a Service Agreement with the village manager or the village owner and will be required to obey the rules and regulations of the village and to pay a service fee, which may be payable weekly or monthly to cover the costs of the services provided by the village. These will include such things as insurance,gardening, external maintenance, social activities and any other services provided by the village.
When you sell your village unit you will most likely be required to pay a deferred management fee which is usually a fee calculated on an annual percentage basis over the number of years in which you have lived in the village and calculated on the amount being paid by the incoming resident. As this fee could be as high as 30 to 35 percent of that amount it is important that you are aware of it.
In many villages there is only one Title to all of the units and the Title remains in the name of the village owner. In these cases the resident is given a lease or licence, which may be a whole of life lease or a long-term lease or an equivalent license.
The Retirement Villages Act recognises that this form of residency requires greater protection for the resident and the Retirement Villages Act give the resident a Charge over the Title upon which the Retirement Village is built.
Just as in a Title based Retirement Village the resident will be required to enter into a Service Agreement which may be part of the lease of license or may be a separate document and will require the resident to pay an ongoing service fee and to pay a deferred management fee at the conclusion of the lease or licence.
Almost all leases or licenses will terminate on the death of the resident or if there are two residents then on the death of the survivor. In almost all independent living units the occupancy can also be terminated if the resident or residents become incapable of looking after themselves, although this depends on the level of care being provided particularly in the case of low care serviced apartments or hostels which also fall under the umbrella of Retirement Villages.
It is most important that you obtain legal advice and financial advice before making a final decision about entering into a particular Retirement Village. It is important that you understand the rights and obligations, which you will be acquiring as a resident in a Retirement Village before you make your final commitment to this lifestyle.
Accredited Property Law Specialist, MAHONS with Yuncken & Yuncken
This Information Outline is provided courtesy of Mahons with Yuncken &Yuncken Lawyers who are experienced in this area of law. They are located at 178 Whitehorse Road Blackburn Victoria 3130 or call them on (03) 9877 3077 if you would like more information on this legal topic, or you wish to obtain formal advice regarding your situation.
Mahons with Yuncken & Yuncken Lawyers is a proactive legal firm with offices in Blackburn in Melbourne's east and Mill Park to the north of the city. The firm has a diverse range of clients in many industries in Victoria throughout Australia and internationally with whom it consults on their day-to-day business activities on a broad range of matters. We pride ourselves on our personal approach and the achievement of exceptional results for both small and large business, and private individuals. The practice has ready access to Victoria's best barristers, both senior and junior, with whom we have a close working relationship.