Fees and charges explained

In some States and Territories, following the signing of a residency contract, purchasers are entitled to a refund if they change their mind about the sale during a ‘cooling off’ period.

There are several charges and fees that apply and all payments made before, during and after living in a retirement village must be specified in the residence contract.

Each community has its own set of costs, so it is important you are provided with the full details of all applicable charges and what these costs cover. Consulting a financial advisor, accountant or lawyer to assist you in making an informed decision before entering into any agreement, is recommended.

There are a number of different costs involved when buying into a village which can include:

◆ deposit

◆ entry fee or purchase price

◆ service and/or maintenance fees

◆ exit fees, also known as a ‘departure’ or ‘deferred management’ fee

All these should be listed and explained in your contract. If there is any part of the contract you don’t understand, don’t be afraid to ask questions or speak with family members or a financial adviser who may be able to help you.

It is important you seek legal advice and have the full details of all applicable charges, what they cover and what you need to pay if you decide to leave the village before you sign any contracts.

Generally, you will need to pay a deposit to secure a unit or apartment. Ask the village how long it can be held for you.

Should you change your mind within this specified time, the deposit will be refunded. If you enter into a binding arrangement with the village, the deposit will be part of the purchase price or entry payment.

Check with the village operator if this cooling off period applies and how long this period is.

It’s also important to know whether the village charges an administration fee for refunds.

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Before moving into a village, you will need to pay an entry payment, which may be refunded if you move out of a village.

The cost of entering a village will vary for different operators and can depend on the location, type of accommodation, facilities and services offered.

Monthly service and maintenance charges also apply and you may be required to pay for extra personal services, such as laundry.

How much entry payment you’re required to pay will also depend on the type of tenure you enter into. Leaseholds and licence tenures are generally set up so the entry payment is usually the current market value of the property.

Under strata, community and company titles, you generally pay a ‘purchase price’ for the legal title to your property.

Sometimes residents can negotiate an alternative financial arrangement with a retirement operator around the entry payment for example, where the provider agrees to postpone payment until the resident leaves the unit. In this case you will still be required to pay a weekly maintenance fee.

Some operators offer a deferred management fee which means the village will deduct a ‘deferred’, ‘departure’ or ‘exit’ fee at the time of settlement of sale or re-occupancy of your home. The fee forms part of the purchase price, but its payment is deferred until the end of the occupancy.

It is calculated at the time of entry and applied on exit. The amount is calculated using a formula that generally involves a percentage of your successor’s entry cost multiplied by the number of years of your occupancy, and may include a proportion of capital appreciation.

The deferred management fee must be specified in the entry agreement or residence contract, to ensure you have clarity about the size of this payment should you need to leave the village.

You will normally have to pay stamp duty if your tenure is strata, community or company title. You will also have to pay stamp duty on leasehold titles if the lease is ‘assignable’ – this is when you can sell the balance of the term of the lease to a new resident when you leave the village.

For other leasehold or licence arrangements, no stamp duty is typically payable, but make sure to check the particular arrangement in your State or Territory.

These recurrent charges are payable at regular intervals, either fortnightly or monthly. You should be informed of the expected, regular contributions prior to entering the village.

This fee may also include a contribution towards other village funds which are used to meet capital replacement and/or long term maintenance costs.

Recurrent charges might cover expenses such as:

◆ Administration (stationery, office equipment, phone use)

◆ Wages, salaries and related costs (village manager, office person, handyperson or gardener or ‘on call’ overnight support staff)

◆ Property management (council rates, insurance)

◆ Food and catering (in the case of serviced apartments)

A Capital Replacement Fund is commonly used to fund a planned maintenance program. Over time carpets or major appliances, such as stoves, hot water services or air conditioners in residences, will need replacing, and this type of fund will ensure those upgrades can take place as required.

A long-term maintenance fund, also known as a ‘sinking’ fund, is usually set up to meet expenses which could include maintenance of road surfaces, downpipes and gutters, painting, security and salt damp repairs.

It may also be used for the repair of recreational facilities such as spas and swimming pools.

If you have any special care or dietary requirements, you will be required to cover these additional services.

Personal or additional service charges relate to services specifically provided to you on a personal needs basis, which will also cover residence cleaning.

The schedule of services and charges payable by you should be detailed in the residence contract prior to you entering the village.

When you decide to leave a retirement village permanently, the village operator either takes the responsibility for, or assists you or your estate with the resale or re - licencing of your property.

Leaseholds and licences tenures will be refunded when you move out of the village, minus any exit or deferred management fees. Refunds are usually reliant on the property being re-occupied, so it may take a while to come through.

Under strata, community and company titles, you will not get any money back until the property is sold.

While the resale value will be determined by the market, there are additional factors in a retirement village that can add value to your villa or apartment. These include sound management, attractiveness and the services and amenities available to enhance lifestyle.

After the sale or re-occupancy of the retirement accommodation the operator will deduct a ‘deferred’, ‘departure’ or ‘exit’ fee. This fee forms part of the purchase price, but its payment is deferred until the end of the occupancy.

It is calculated at the time of entry and applied on exit. The amount is calculated using a formula that generally involves a percentage of your successor’s entry cost multiplied by the number of years of your occupancy, and may include a proportion of capital appreciation.

Even if you have left the village, you may be charged some fees to cover costs, such as ongoing maintenance fees, until your property is sold or occupied.

Regulations regarding this vary from each State and Territory; generally there is a maximum amount of time that ex-residents are liable for fees after leaving. This ranges from 42 days in NSW and the ACT, up to 9 months in Queensland or up to 18 months in South Australia.

automatically be used to justify an increase in fees because the CPI might be higher than the actual cost increase incurred by the village.

If you are a new resident at a retirement village, it may be a good idea to check with other residents to find out what the annual increases have been in the past, to help you get a better understanding of what to expect of future fee and charge increases.

An increase of recurrent charges will generally be discussed during an annual meeting between the village operator and residents.

Depending on when the villages’ annual meeting is held, a period of a few weeks or months may elapse before residents are liable to pay an increased fee.

The village operator may require the payment of an increased fee to be backdated to the beginning of the financial year.

In most States and Territories special levies can only be imposed if authorised by a special resolution and passed at a meeting of the village residents.

While levies are rare, from time to time, a special levy may be charged by a retirement village for budget shortfalls in a particular year which may include, for example, costs to cover road resurfacing due to tree root damage.

All fees and charges that apply at retirement villages are subject to increases, however recurrent charges cannot be increased beyond a ‘reasonable’ level.

Many villages use the Consumer Price Index (CPI) as a guide for fee increases, however it can’t to read more

Ask the village operator about the last time a special levy was charged, why and how they will be imposed.