What is the retirement village contract and what should you know about it?
All villages operate under a Retirement Village Act legislation and other regulations that shape the retirement village contract.
First, you need to understand that you will not own your village home. In effect, you will be leasing it in some form.
If your village is operated by a church or charity, you will be given a licence to occupy when you pay your upfront fee to enter the village.
If your village is operated by a private company, you will be given a registered lease, in most cases for around 49 years, which is stronger security than the church's licence to occupy.
Your money will be treated as a type of loan to the operator that will be repaid to you less fees when you leave the village.
The reality is operators will repay your money when the next tenant takes over your home and they pay their upfront fee.
This is the same as a property lease where if you wish to leave early you get your bond back when the next tenant comes in.
Your risk is that it may take time to find that next tenant and you, or your estate, will be responsible for fees until then.
The laws of most states now fix a maximum time that operators can hold back on repaying your money – between six months and 18 months. Some operators are now guaranteeing repayment within six months.
In the worst case the operator may go out of business leaving residents in limbo. This has happened two or three times in the past 20 years across 2000 villages. Other operators usually step in and rebuild the village business, but it has caused short-term disruption.
So village contracts concentrate on the property and tenancy issues between the operator and you. Who is responsible for what costs.
• if there are disputes how are they settled,
• and protections for both the operator and the resident.
The contracts are complex and it is important to get legal advice.
There are many layers of protection for you - and the operator.
The idea is to allow you to age well.