Long Term Leases
This approach is adopted in about 60% of retirement villages, with new residents entering into long term leases, usually for a period of 49, 99 or more years, which provide them with the right to the use and enjoyment of their specific retirement accommodation and the common areas and facilities of the village. The lease will usually be very detailed and specify the obligations of the Village operator to manage and administer the Village and the resident's obligation to pay an entry fee, exit fee and ongoing services charges - and the circumstances in which the lease can be terminated.
Termination will usually occur automatically on the death of a resident or, if the residents are a couple, the death of the surviving member. Residents should also be able to terminate the lease after having provided reasonable notice to an operator, and while this may be a right under legislation it should be clarified in any discussions. Remember that you cannot contract out of your statutory rights - they will prevail over lease conditions if there is any clear discrepancy.
Financial: Entry and Exit
You will be required to pay an entry fee in the form of an up-front capital payment - there is no standard name for this fee but it is often called a refundable deposit, accommodation bond or interest free loan.
On terminating the lease/vacating your accommodation you will be charged a departure fee (again, often called a variety of names) which will be deducted from your up-front entry fee. Calculating departure fees can be complex, because the factors used vary according to each agreement, and because you often can't know the precise figure until the accommodation has been sold, leased or licensed to a new resident. This is because some agreements will make you liable for ongoing costs until the accommodation is occupied again and also, if your arrangement includes a sharing of capital gains, you can't necessarily forecast the sale price with certainty.
We deal separately with Exit and Departures fees in much more detail elsewhere.
Residents in these types of Villages are typically responsible for the following types of costs on a personal basis:
- All utilities and services that are separately metered - including electricity, gas, telephone and broadband
- Any additional personal services agreed with the operator
- Insurance of their household contents, and
- A regular Maintenance or Operating Charge to cover expenses incurred by the Operator in managing and administering the Village. This covers a wide range of costs, including staff costs, utility costs (water and rates), property and public liability insurance and possibly a "sinking fund" to fund major repairs and capital replacement. How this cost is allocated amongst the residences varies, but often it will based on the relative size of the residences, the number of occupants or sometimes set as a percentage of the Age pension - in any event, it will be set up as direct debit on a bank account.