Retirement villages explained: the lifestyle, the money and the law

A retirement village is a group of homes for older people, usually units or villas, with shared spaces and a manager on site. You live in your own home and come and go as you please. What changes is what’s around you.

For many people, the biggest change is company. Neighbours are at a similar stage of life. There’s often a clubhouse, a social calendar and people to walk with or have a cuppa with. If the house has grown quiet, or you’ve been on your own since losing a partner, that can matter more than any fee.

Villages are also designed for getting older. Homes are often single level, with fewer steps and smaller gardens. Many have security features and an emergency call system, so help is close if you have a fall. Someone else looks after the grounds and the shared buildings.

If you’re the kind of person who says “I’m fine” at home, it’s worth being honest about why a village appeals, or doesn’t. Some people find it a relief. Others feel hemmed in by rules and neighbours. Both are fair answers.

• Company and a ready-made community
• Activities, outings and shared facilities
• Security and, in many villages, an emergency call system
• Less upkeep: no big garden or gutters to worry about
• Homes designed to be easier to live in as you age

Most villages ask for a large payment up front. In Queensland it’s usually called an ingoing contribution. In NSW you may see it called an entry payment, an ingoing contribution or a loan. It can be similar to the price of a modest house or unit in the same area.

What you get for that payment depends on the type of contract. Often you don’t own the unit outright. You may have a lease or a licence, which is the right to live there under the contract. Some villages are strata title, where you do buy the unit. The type of contract changes your rights when you leave, so ask which one you’re signing.

The entry payment is not like buying a house that you can sell for whatever the market will pay. Part of it, or part of the sale price later, usually goes to the operator as the exit fee. More on that below.

Every village charges an ongoing fee, weekly, fortnightly or monthly. In Queensland it’s called a general services charge. In NSW it’s called a recurrent charge. It pays for running the village: management, staff, gardening, common-area cleaning and upkeep, insurance and similar costs.

In Queensland, the operator must keep general services charges in a separate fund and can only use that money to provide general services. Increases are generally limited to the rise in the Consumer Price Index (CPI, a measure of inflation) unless residents vote to approve more, with some exceptions such as rates, insurance and award wage rises. Residents also pay into a maintenance reserve fund for repairing the village’s shared items.

In NSW, the operator must prepare an annual budget for residents, and there are rules about how recurrent charges are set and increased. NSW Fair Trading publishes a figure called the average resident comparison figure, which helps you compare living costs between villages.

Extra services, such as meals, cleaning inside your unit or personal care, usually cost more on top. Ask what’s included and what isn’t.

The exit fee is the part most people don’t expect. It’s also called a deferred management fee or a departure fee. It’s paid to the operator when you leave, usually taken out of the money you get back.

It’s usually worked out as a percentage of either your entry payment or the resale price. The percentage typically builds up each year you live there, until it reaches a maximum after a set number of years. Contracts differ a lot, so the only number that matters is the one in your contract.

There is also the question of capital gain and capital loss. Capital gain is any rise in the value of your unit between when you moved in and when it’s resold. Depending on your contract, you might keep all of it, share it with the operator, or get none of it. Some contracts also share any loss.

This is why a village is not a financial investment. You may get back much less than you paid. That doesn’t make it a bad choice. It just means you should go in with your eyes open.

When you leave, your unit is usually resold to the next resident, and you get your exit entitlement. That’s the money owed to you after the exit fee and other agreed amounts are taken out.

In Queensland, the operator must pay your exit entitlement by the earliest of these: the date in your contract, 14 days after the resale settles, or 18 months after you leave if the unit hasn’t sold. If a unit hasn’t sold within 18 months, the operator generally has to buy it or pay you out, unless it has a reasonable excuse. You may have to keep paying the general services charge in full for up to 90 days after you leave. After that, you and the operator share those costs in the same proportion you share the sale proceeds.

In NSW, the rules depend on your type of contract. If you have a loan or licence, or a lease under 50 years, the operator sells the unit and pays the selling costs. You stop paying general services charges no more than 42 days after you leave. If the unit hasn’t sold, you can apply for an exit entitlement order. The time limit is 6 months in metropolitan areas and 12 months elsewhere in NSW. Strata and company title residents generally sell their own unit and follow different rules.

A retirement village is not an aged care home. Most residents live on their own terms and look after themselves. Villages are not required to provide nursing care.

That said, many villages make it easier to get help at home. Some offer extra services for a fee. Residents can often get government-funded home care through the Support at Home program, the same way they could in a house. A few villages sit next to an aged care home, but it’s run separately under a different law (the Aged Care Act), with its own assessment, contract and fees, and it doesn’t guarantee you a place there.

If care needs grow, you may move to an aged care home later. In NSW, there are rules that may let you use part of your exit entitlement for aged care accommodation costs before your unit sells. Ask any village how they handle this, and what happens to your fees while you wait for a sale.

Staying at home is a full answer, and for many people it’s the right one. If you’re weighing a village against your house, compare the whole picture, not just the entry price.

A house has costs that are easy to forget: rates, insurance, repairs, garden care, a new roof or hot water system, and paying someone to do the jobs you can no longer do. A village bundles many of these into the weekly fee, then takes the exit fee at the end.

Your money situation also changes. Selling a house and moving can affect the Age Pension and Rent Assistance. Some village residents can get Rent Assistance, depending on how much they paid to get in. The Financial Information Service at Services Australia is free and can explain how a move might affect your payments.

• Rates, insurance and utilities now, compared with the village weekly fee
• Expected repairs on the house over the next ten years
• Help you may need to pay for at home, such as cleaning or gardening
• The exit fee you would pay after, say, five or ten years
• The effect on your pension or other payments

Both states have a law called the Retirement Villages Act 1999: one in Queensland and one in NSW. They set out what operators must tell you and give you time to think.

In Queensland, the operator must give you a Village Comparison Document and a Prospective Costs Document at least 21 days before you sign. The second one shows the entry, ongoing and exit costs for the unit you’re looking at. After you sign, you have 14 days to change your mind without penalty.

In NSW, you must get the contract at least 14 days before you sign, and there’s a 7-day cooling-off period after signing. There’s also a 90-day settling-in period. If you leave in that time, you don’t pay a departure fee, though you do pay some costs, such as a fair market rent for the time you were there.

These protections help, but they don’t replace advice. Talk to your own solicitor, ideally one who knows village contracts. In Queensland, Caxton Legal Centre runs a free service for village residents. In NSW, Seniors Rights Service offers free legal help.