Recent revelations of elderly people being thrown out of home because of fine print in their retirement village contract and then being hit with shockingly high exit fees highlight the need to exercise caution and obtain independent legal advice before signing a retirement village contract.
Retirement village operators can charge high exit fees
Several vulnerable senior citizens who thought they had a home for the rest of their lives with the necessary care were shocked to find that a large part of the profit made by one of the largest retirement village operators depended on high exit fees incurred when they died or were forced to leave.
One retiree told ABC's Four Corners that she felt "shock, disbelief and powerlessness" while another person warned that their village was a "financial sinkhole".
Retirement village contracts can be dense and technical
A retirement village contract can be up to 120 pages long, extremely complex and written in dense legal language that conceals obscure pitfalls, loopholes and unexpected fees which could cost the retiree dearly.
Moving into a retirement village is a very important lifestyle change. You want to have peace of mind knowing that the retirement village you have chosen is right for you and is secure financially.
No substitute for independent legal advice
Some retirement village operators refer prospective customers to lawyers who they say are experts in the field, but I would be wary of any so-called legal expert provided by the company, as they may not have your best interests at heart.
It is far better to seek out your own independent legal expert before you sign a complex retirement village contract that will have a huge impact on your life. It involves your life savings, so you need to be aware of any hidden dangers in the contract and ensure that it doesn't disadvantage you.
Implications of the retirement village contract for your estate plans
The contract might commit you to paying ongoing fees and levies you don't want or need, then impose hidden high-cost penalties should your circumstances change, such as your partner dying or you deciding that you want to leave.
You should also be aware of any impact the contract might have on your family or on your plans for the inheritors of your estate.
Questions to ask before you sign a retirement village contract
There are ten things to look for when signing a retirement village contract.
- What type of ownership will you have? For example, registered lease, unregistered lease, registered interest holder or unregistered interest holder.
- Will you have access to care if required?
- What are the ongoing fees payable?
- Is a departure fee payable and if so, how is it calculated?
- How may recurrent charges be varied?
- Will you be liable to pay the operator's fees in relation to your termination of the contract?
- Are you liable to pay costs in relation to refurbishing or repairing your villa?
- If a refund is payable, when will the operator make payment of the refund?
- Once you permanently vacate, will you still have to pay recurrent charges until a new resident enters into a contract with the operator?
- Who is liable in relation to repairs, maintenance and replacement of capital items?
Rules, rights, obligations and relationship with village operator
There are other important questions which you should ask prior to signing a retirement village contract.
- What are the retirement village rules and how can they be amended?
- What are your general rights and obligations?
- What happens if the operator changes?
- Is there a residents' committee which allows residents to communicate with the operator?
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.