This means that retirement living may not be as simple and straightforward as you might have hoped.  It also means that the financial implications of moving to a retirement village can be quite complicated and making sensible comparisons between retirement villages that have different legal structures or different departure fee structures can be very difficult.

What is a Retirement Village?

A retirement village is essentially a community for seniors.  The term is something of a misnomer because you don’t necessarily have to be retired at all.  Entry is generally restricted to people who have attained 55 years of age or have retired from full-time employment, and their spouses.  The average age is somewhere in the low to mid 70’s and the average entry age is somewhere in the mid to high 60’s.

Types of Retirement Villages

There are basically two kinds of retirement village: resident funded and donor funded.  The latter are invariably owned and operated by so called “non-profit” organizations.  They include an element of charitable subsidy and entry is generally restricted to the needy.  The former may be owned and operated by non-profit organizations or the private sector and they are conducted on a commercial basis to produce a “surplus” or profit, respectively.  It may not be safe to assume that the "surplus motive" of the non-profit organizations is any weaker than the "profit motive" of the private sector.

Accommodation and Facilities

The size and style of retirement village accommodation varies enormously, from bed-sitter apartments to spacious brick and tile homes.  Most retirement villages have common areas and a range of facilities available for the use and enjoyment of all residents.

Levels of Care

A number of terms are used to describe the level of care that is provided in a particular village or in relation to particular units.  Units that are described as “independent living units” or “self-care units” provide the lowest level of care, although a range of personal services may be available on request on a user pays basis under an arrangement known as “flexicare”.  Units that are described as “assisted living units” or “serviced apartments” provide the highest level of care, usually including the regular provision of a range of personal services. 

Confusion sometimes arises because low level residential care facilities, previously known and often still referred to as hostels, sometimes also describe their accommodation as “assisted living units”.  Hostels and nursing homes are regulated and partly funded by the Commonwealth Government and different legislation, admission criteria and funding arrangements apply.

Legal Structures

There are at least 8 different legal structures:

Different structures can have different implications and raise different issues in terms of applicable legislation, stamp duty, GST, service charges, responsibility for refurbishment and capital replacement costs, security of tenure, operator default, termination, vacating the premises, capital losses and credit risk. 

Legislation

Each State and Territory has enacted specific legislation that regulates the operation of retirement villages.  The legislation in each jurisdiction is different and has its own definition of what is and what is not a retirement village.  In some cases the legislation applies differently to different legal structures and contractual arrangements.

Particular legal structures and contractual arrangements may also attract the application of other legislation, such as strata title, community title, companies and securities, manufactured home or tenancy legislation.

Financial Considerations

Retirement village residents may be required to pay:

The nature of the initial entry price depends on the particular legal structure.  For example, it may be the purchase price of a freehold property, security or other asset, or it could be described as a loan, premium or prepayment of rent.  No initial entry price is payable in the case of a conventional lease.

Departure fees are particularly important and particularly difficult to fully understand.  There are well over a dozen different departure fee structures and they are a key factor in determining how much you (or your estate) get back when you leave the village.  Depending on your financial resources, how much you get back could well determine or limit your future accommodation choices.  No departure fee is payable in the case of a conventional lease and may not be payable in the case of a manufactured home.

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