Dreaming of moving into a retirement village but the unknown costs are putting you off? Well, some big changes could be coming for the retirement village industry to make things fairer for all residents.
A review of retirement villages took place earlier this year with the aim of striking a balance to safeguard the interests of village residents while still encouraging innovation within the sector.
While each individual retirement village has its own way of doing things here are some common threads.
- You must sign an Occupation Right Agreement (ORA) and there’s currently tons of paperwork and legal jargon that can be hard to understand.
- You will have to pay an entry fee for the right to live in your unit or villa.
- You won’t receive any capital gains, meaning you won’t benefit from any increase in the value of the property.
- You will be charged weekly fees to cover rates, insurances, and the upkeep of the facility – and these weekly fees can continue long after you have vacated your unit – in fact there is currently no limit on how long they can continue to bill you!
- You will be charged a fixed deduction fee (also called a deferred management fee). It’s a percentage of the entry fee – around 20-30% and is deducted from the sale of your unit when you move out.
- You could also be charged for any repairs to heat pumps and white goods.
- Options to move into care at the facility are confusing and not guaranteed.
- There is no independent body to hear and deal with a complaint or dispute you may have.
The proposal for change is urging retirement village operators to be more transparent and provide clearer and more comprehensive information about the services they offer, and the financial implications for residents.
Here’s some of what’s on the table for operators to consider.
- The retirement village operator repays the capital within a fixed period of time (e.g. 6 or 12 months).
- Shares the capital gain with the resident.
- Pays interest on the entry fee after the unit has been empty for six months.
What happens next, you ask?
Once the consultation period is over, advice will be given to the new Minister in our newly formed government so stay tuned.