Moving into a retirement village can be a complicated business – and moving out can be just as complicated.
There are many reasons you might need to move from your retirement village – from moving to an aged care facility or a change in your location or lifestyle.
So, what is involved with moving out of a retirement village?
Dean Claughton from Coleman Greig Lawyers has compiled a checklist of things to consider when moving out of your retirement village.
The first thing you need to consider before you set your move in stone is where you’ve going to live. Claughton said you should start discussing your feelings about moving with the people closest to you. “It is important that they know that you are no longer interested in living in your current village,” he said. “It is equally essential that you know where you are going to live beyond the moving out process. “Getting these details straightened out early on can take a load off your shoulders when you’re done with your financial obligations.” Once you’ve got that sorted, you should move onto considering the financial implications of your move.
This is where it’s important to have a good understanding of what is set out in your retirement village contract, particularly the departure fees. So, what is a departure fee? Well, Claughton explains it’s a standard fee charged when you move from your retirement village. “When you moved in, it is likely that you paid the village what is known as an ‘ingoing contribution’,” he said. “Now, as you are about to leave the village, it is commonplace for the operator to keep a percentage of this initial lump sum that you paid them.” Quite often the length of time you’re in a retirement village can affect the amount you have to pay in departure fees. A recent case, used an example by Claughton, involved a village that charged a departure fee of 5% for each year you’ve lived in the village up to six years. Claughton said in that particular example, you could end up paying as much as 30% of your ingoing contribution in departure fees if you moved out of the village after living there for more than six years. “The longer you live in a retirement village, the more you have to pay,” he said. “Your paperwork will document what percentage the village operator will be keeping but if you’re having trouble finding the information or would like to confirm the exact figures, your lawyer can assist you.”
Another important financial aspect of living a retirement village can be a clause in your contract requiring you to return your unit to its original condition. Claughton said he’s found the clause in most contracts for retirement villages. “If you move, you may have to refurbish the place so it’s in the condition it was in when you moved in,” he said. “If you’re a long term resident of 10 or 15 years, that could potentially cost you tens of thousands of dollars.”
However, there is a plus side.
It turns out most retirement village contracts have a clause covering capital gains. According to Claughton, that means you could reap the financial benefits of a rise in the value of your retirement village unit. “If you pay $500,000 to move in and your unit gets resold for $750,000, you could be entitled to some of that $250,000 capital gain,” he said. “However, that figure will be brought down by the departure fees.” One thing you should remember, according to Claughton is that a move to a retirement village is not to making an investment. “You might get lucky and break even when you move, but you’ll likely lose some of the money you put in,” he said. “You’re not making an investment by moving to a retirement village, you’re not there to make money.”
Another thing you need to consider is how long it will take to sell your unit and get your ingoing contribution back. Generally, real estate agents don’t sell retirement village units – that responsibility usually comes down to the village operator. Claughton said having the village operator act as the selling agent can work in your favour. “They are well-versed in dealing with retirement village contracts and, of course, it is in their best interests to receive a good return on their property,” he said. “Make sure you read over the fine print in any contracts as your responsibilities for the sale may include paying commission and advertising costs.” It’s important to remember and plan for a long period of sale, which can be tricky if you need to leave the village in a short space of time due to health reasons or settlement on a new property. According to Claughton, it can take as long as three to four months to sell your retirement village unit. Once the village enters a new agreement with a new resident for your unit, it can take up to 14 days for them to return your ingoing contribution (minus the departure fees).
You’ll still have to pay for recurrent charges for things such as maintenance and insurance until the new resident enters moves into your unit. “Alternatively, if the village operator is unable to find a new resident within 42 days of you leaving, then you will be able to split the recurrent charges with the village; in that the village will pay half and you will pay half until a new resident can be secured,” Claughton said. “Bear in mind that this can be a significant ongoing outlay if your property isn’t filled quickly following your departure – especially if you are moving to another retirement village where you will also be expected to make regular payments.”
Once you’ve considered all of these things, then you can approach your retirement village manager/operator about moving. Claughton advises that if you’re not sure about anything, you should seek some advice. “You can either seek legal advice, see a financial planner or an ombudsman as the last resort,” he said. ‘There are people who specialise in retirement village financial advice, so it pays to speak with someone who has more of an idea about it.” And remember, if your move is because you’re not happy with your retirement village, there are other methods you can take to resolve them. If you’re a new resident, you can take advantage of the settling in period. “A settling in period means if you’re not happy within the first 90 days in the village, you can say you’re not happy, move somewhere else and basically get all your money back,” Claughton said. “If you have a problem with the village operators, then try to work out it out with them first or go to the tribunal – there’s one in every state.”