Tips for ensuring you choose the right retirement housing
Retirement should be a blissful time of your life – travelling, quality time with family and friends, finally enjoying your favourite hobbies and past times and, if you believe the TV commercials, relaxing walks on the beach, visiting fabulous locations and generally living a carefree existence.
However, if you plan to spend your sunset time in a retirement village, your story could be a different tale!
Retirement villages have received significant negative coverage in the media lately, so I thought it timely to provide some guidance for those considering moving to such a property.
Purchase and Sell Arrangement
Most of the negative press is a result of the quite unique structure or arrangement adopted by retirement villages and some nursing homes. If you’re surveying the retirement housing scene, you’ll realise there are a range of different levels, based primarily on the level of dependency and care required, from independent living through to complete care nursing homes. Each has a different type of ‘buy-in’ arrangement and it is quite different from purchasing and selling a private home.
When you buy a home you get the freehold title and can realise all the capital gains, or losses, on selling and have the freedom to bequeath the property as you see fit.
This is not the case when ‘buying’ a retirement village unit. Most are usually set up as a lease or a licence contract, not an actual purchase, therefore you never actually own the freehold.
The cost structure and particularly the ‘exit’ arrangements can be complex. In addition, while most people move to retirement villages for the hassle-free living in regard to home maintenance and the many on-site facilities – these do come at a cost. Ongoing, monthly service fees and quite high fees for some services can catch the unaware off-guard.
To add to the confusion, the arrangements can vary across villages, so if you are considering several locations, you need to carefully compare like with like.
Attractive Entry, Undignified Exit
The entry fee for many villages will, on the surface, look very attractive and appealing. Much less than buying a similar level of property, ie a 1-2 bedroom unit, and if you are selling a substantial family home to move in, will appear as if you have plenty of money left to support yourself and/or capital for lifestyle purposes.
But remember, you’re not purchasing your retirement village unit on the same basis as you would purchase a home and the initial appeal may quickly dim when you balance the entry fee with the exit fee. Yes, you actually pay when you leave. This fee is often called Deferred Management Fee and can be calculated on quite a complex formula involving capital gains between you the resident and village, how long you have been living there and a number of other factors.
The level of the exit fees can often mean you will miss out on what you would consider to be the capital gain and in some cases receive back far less than what you paid when you first moved in.
Ongoing Fees and Charges
While most people move into retirement villages for the lifestyle and facilities – security, communal facilities and activities, on-site dining and medical services, maintenance etc – as with everything in life ‘there’s no such thing as a free lunch’. These services come at a cost and this is an ongoing, usually monthly fee, paid to the village operators.
Obviously this service or maintenance charge will vary from village to village, depending on location and also the quality and extent of the facilities provided. When comparing villages, closely consider the ongoing fees against what is offered and what you really need. Will you really use that indoor heated swimming pool? Do you require daily transport to shops or will you drive yourself? Will you really take enough advantage of the gourmet dining experience or do you intend to continue preparing most of your own meals?
As this is a monthly fee and if you are on a fixed income, this can have a serious impact on your disposal income and your lifestyle.
Of course the operator does require funds to maintain the village and these fees will reflect their ongoing costs – council rates, staffing, general maintenance, insurance, etc – similar to what you are currently paying to maintain your own home.
Apart from the set monthly service fee, residents can easily get caught out with some of the individual charges for specific services, which are not covered in the general agreement. These charges, very high in some cases, formed the basis of much of the media coverage of late. Eg an exorbitant fee to change a light bulb!
Before you sign, ask for a list of these individual extras charges so you can make an informed comparison from village to village.
Get Advice Before You Sign!
As lawyers, we strongly advise you to seek legal advice on any retirement village contract. Our expert conveyancing team is well informed with the terms and conditions and interpretations of contracts and agreements for all types of retirement housing and will explain all the details to you. If considering a number of properties, we will advise which is the better option for you, in regards to achieving your financial objectives, taking into consideration long-term capital gain or the need for lifestyle cashflow and other considerations.
We want to ensure you enjoy a blissful lifestyle in the retirement village of your choice and not be shackled with financial burden for the rest of your life.
So please call myself or one of our team to discuss your retirement village plans. Our team is extremely experienced in all types of conveyancing matters and can advise you across all stages of the process.