Throughout the ages and stages of our lives, we make a number of big decisions and changes. For some of us, deciding to make the move into a retirement village is something we look forward to as it brings reduced responsibility and a world of new opportunities. However, this change can also be concerning and complex because it’s not the same as just moving houses.
The Elder Law and Property Law Teams here at Wakefields Lawyers are here to make this complex transition simple for you and your family. We understand these new challenges sometimes come at a time in life when your circumstances might have significantly changed and we look to support our clients every step of the way.
What’s different to simply purchasing a home?
The biggest difference moving into a retirement village compared to purchasing a new home is it’s more of a lifestyle decision than an investment. While you may be paying a similar amount to buying a property, what you are actually purchasing is the right to occupy the unit (called a licence to occupy), rather than the physical structure and land.
There are rules that can come with a licence to occupy, often around who can purchase a licence, how you can use the unit, who can stay there and any alterations to the structure. Different villages will have different rules so it’s important to understand them all completely before you commit to an Occupation Right Agreement (ORA) – the legal document formalising the agreement.
The team at Wakefields Lawyers are highly skilled at interpreting these agreements and making sure you’re getting what you expect and that you won’t be prohibited from doing what you intend with the unit.
What are the financial implications?
Almost all ORAs will specify that the right to occupy the unit is transferred back to the village when you no longer need it. You will not usually receive any capital gain and generally won’t get back all of what you paid for the unit.
The ORA will usually specify a ‘deferred management fee’ (DMF) to be deducted from the sale price. The DMF is capped, but is typically a percentage of the purchase price multiplied by the number of years of occupancy. The cap on this is typically 20-30% accruing over three to five years, however it will be on a pro-rata basis if you leave before the specified time.
For example, if your unit has a maximum fee of 25% over five years, for each year of occupancy 5% of the purchase price will be deducted from the initial capital sum you paid for the unit. So on a unit with a licence to occupy costing $400,000 the most you will pay in a DMF is $100,000. This will vary from village to village so if you are concerned about the legacy you leave for your loved ones this can be a big factor in selecting a village.
Residents will also need to consider the ongoing fees for the unit, weekly or monthly outgoings can either be fixed for the whole term of occupancy or adjusted for inflation. Some villages require the outgoings to be paid after you have left until the unit is reoccupied (although after six months these are reduced by 50%). These fees usually cover things like rates, insurance, grounds maintenance and staff wages, but do vary from village to village.
You will also want to know all other costs associated with the unit and village. These can include things like:
Ready to move?
Usually our clients have made the decision to move to a retirement village by the time they come to their lawyer. It’s important to come to us early so we can help ensure you understand all of your financial obligations when making this move and help you to navigate the complex agreements in place. Our elder and property law specialists will ensure that you’re committing to something that meets your needs, aligns with your goals and that there are no surprises once you’re enjoying your new lifestyle.
Talk to Wakefields Lawyers today to discuss your next phase in life. You can reach us at 04 970 3600 or email us at firstname.lastname@example.org.