Just How Much Can A Village Operator Take On Departure
Under the provisions of the Retirement Villages Act, a
retirement village operator can ask a new resident to pay an
ingoing contribution. These contributions are often quite
substantial, and most residents moving into a village rely on the
sale of their previous home to fund this contribution.
Depending on how long the resident remains in the village, the
operator is also then entitled to a proportion of this contribution
when the resident vacates the premises, or passes away. This is
known as a departure fee, and under the Act, this proportion is
currently capped at 30%.
In most scenarios, the village takes 30% of the original ingoing
contribution paid by the resident, although it is becoming more
common for village contracts to state that the departure fee for
the resident leaving the village (or passing away) is dependent
upon the ingoing contribution that is being paid by the new
resident moving into the village.
To put this into perspective, in a matter we recently completed
at Coleman Greig, the ingoing contribution fee of a resident moving
into a retirement village was around $1,000,000.00. The contract
said that the departure fee would be based on the ingoing
contribution to be paid by the new incoming resident. This would
mean that if the value of the dwelling had increased significantly
over the period in which they lived in the village, for example if
the new resident's ingoing contribution was set to be
$2,000,000.00, then the village operator could take 30% of
this sum (i.e. $600,000.00) from the departing
resident. This is double the amount they would take if the
departure fee had been based on the original ingoing
Contract clauses, ingoing contributions and departure fees are
important considerations when deciding which retirement village you
should move into - or your parents and elderly relatives.
Retirement villages tend to have quite complex contracts and you
should always consult a solicitor before entering into a village
contract. At Coleman Greig we can review retirement village
contracts and provide expert advice concerning the implications on
your family now and into the future.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The Council announced planning policies to encourage more inner suburban retirement village and aged care development.
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