Moving into a retirement village can be daunting, particularly when you sit down to read through your contract.
Sometimes your contract can contain big words and key terms that you might not understand.
That’s why it’s important to make yourself familiar with those key terms.
But apart from getting legal advice, what else can you do to help you understand your contact?
Well, the Property Council of Australia and Russell Kennedy Lawyers partnered together last year to release a new guide to making moving to a retirement village easier.
The guide sets out a glossary of the key terms in retirement village contracts.
From Administration Fee to Valuer, here are some of the key terms you might find in your retirement village contract.
Administration Fee: An Administration Fee is a fee charged by the retirement village when you choose to move out or sell your unit. It’s generally charged as a % of your ingoing contribution. It’s used by the retirement village to cover the cost of finding a new resident for your unit, which includes opening your unit for inspection, cleaning the unit, conducting any refurbishments or repairs, interviewing and meeting prospective new residents and promoting and advertising the unit for sale. Generally, retirement village operators act as real estate agents for your unit.
Capital Gain: Capital Gain is the amount the New Ingoing Contribution, paid by a new resident moving into your unit, exceeds the Ingoing Contribution you paid when you moved into your unit.
Capital Loss: Capital Loss works the same as Capital Gain, but instead it’s the amount your Ingoing Contribution exceeds the New Ingoing Contribution. It could mean that your unit has devalued in the time you’ve been living in it.
Commencement Date: The Commencement Date in your contract is the date the contract commences, although that doesn’t necessarily mean that is the day you move in.
Common Areas and Facilities: The Common Areas and Facilities in a retirement village are facilities used by, but not necessarily owned by you as a resident such as pathways, roads, garden areas, community centres, gyms or pools.
Dispute Resolution Procedures: Dispute Resolution Procedures are the procedures used under the Act to resolve any disputes that might arise between you and the retirement village operator or you and another resident.
Eligible Resident: An Eligible Resident is the term used to describe a person deemed suitable to move into your unit after your contract has ended or you sell up and move. An Eligible Resident has to meet a minimum age requirement and be capable of living independently in the village.
Exit Entitlement: The Exit Entitlement is the money paid to you on the Exit Entitlement Date. It’s generally the sale price of your unit, minus any Exit or Administration Fees charged by the retirement village operator.
Exit Entitlement Date: This the date your Exit Entitlement is paid to you. It’s paid either when a new resident moves into your unit, or a set period of between two and five years from the termination date of your contract.
Exit Fee: An Exit Fee is an amount set out by the retirement village operator that you must pay on the Exit Entitlement Date. It can be as much as 40% of your ingoing contribution, and is generally taken out of your Exit Entitlement.
Fair Market Value of the Unit: The Fair Market Value of the Unit is the sale price agreed to between you and retirement village operator, based on the sale price of similar units in the village. If you and the retirement village operator don’t agree on a price, then it will be determined by a valuer – and that price is final and binding. If a valuer is used, the cost is split 50/50 between you and the retirement village operator. If your unit hasn’t been sold within six months of the date the valuer decided the Fair Market Value of the Unit, then you and your retirement village operator sit down and see if you can agree on a sale price. If you fail to reach an agreement, you and the retirement village operator will have to get a valuer back in to come up with an updated Fair Market Value of the Unit.
Ingoing Contribution: An Ingoing Contribution is the amount you pay to the retirement village operator when you move into your unit. It’s a one-off payment that essentially secures your right to live in the village.
New Ingoing Contribution: A New Ingoing Contribution is the amount by the new resident who moves into your unit when your contract expires or you choose to move out/sell.
Operating Charges: Operating Charges are basically the costs associated with operating the villages. They are the costs incurred by the retirement village operators including salaries and wages for staff, rates, taxes, charges and other fees, insurances such as public liability insurance and GST. You may be required to contribute to the Operating Charges by paying a Recurrent Charge.
Optional Services: An Optional Service is a service which the retirement village operator can make available to you from time to time. They are provided on a user pays basis, which means you pay for them, not the retirement village operator. They are no covered by any fees or charges you pay for other services.
Pre-Paid rent: Pre-Paid Rent is another form of Ingoing Contribution or entry fee that you may need to pay when moving into your unit, dependent on what model of ownership you’re using (freehold vs leasehold for example).
Rates and Taxes: Rates and Taxes are any rates, taxes, charges and outgoings which are charged to your unit. These can includes council rates and utility rates, dependent on what arrangements your retirement village has.
Recurrent Charge: A Recurrent Charge is a fee you pay to the retirement village operators as a contribution to the retirement village’s Operating Charges. This can be a fee paid weekly, fortnightly or monthly.
Services: Services are the services provided or made available to you by the retirement village. They are usually listed in your contract.
Term: A term is the number of years set out in a leasehold arrangement. The minimum term is a term of 49 years.
Termination Date: The Termination Date is the date that your contract is terminated/ended.
Valuer: When your contract refers to a Valuer, it’s referring to a valuer who has at least five years’ experience valuing residential properties in a retirement living development. The person must be agreed on by you and the retirement village operator. If you don’t agree, the valuer will be appointed by a relevant institute.