Retirement villages all have different legal structures so the actual ownership of residences within them will vary from village to village.

If you are thinking about investing in a home within a retirement village then ensure that you are fully aware of the financial conditions and commitments.

Definition of a Retirement Village

Legal language varies from state to state in Australia but essentially a retirement village is accommodation built for people who are over 55 years and are no longer working full time, and their spouses. They can be privately owned villages or owned by a not-for-profit organisation. Retirement villages are designed for people who can still live independently and don’t require ongoing nursing care in their residence. Retirement Villages don’t receive any government funding.

Who owns the homes?

Every retirement village is different but in most cases, the co-operative or organisation that owns the retirement village keeps ownership of the individual homes. In many cases, residents give the organisation an interest free loan to the value of the home that they will live in. They get to live in the home for the length of the agreement in exchange for the loan. When a resident makes the decision to move out or to move into assisted living or a supported residential facility, the home they were occupying is sold and the proceeds go the retirement village organisation. They receive back the money that they loaned initially.

Expenses and Maintenance

Every organisation is different but all are bound by laws in their state which hold them to standards regarding the information and the clarity of the information that they provide to residents or potential residents. Some will charge residents an annual fee which they may choose to pay or to have deducted from their initial loan amount. Other organisations will have a policy where all fees and rates are automatically deducted from the initial loan amount. Regardless of which process they follow they need to communicate all fees and charges to potential residents in writing and as part of the contract agreement.

Profit and Loss

Once again, every organisation is different and has different policies for the distribution of profits or losses from the sale of homes within the villages. Some organisations will be give the resident a percentage of the profit made from the sale of their residence while other organisations hold all profits made. Some will deduct losses from the initial loan amount while once again; other organisations will cover the losses as well. If an organisation is run by a not-for-profit they are more likely to keep profits and cover losses. You need to be clear as to the policy of any organisation that they you are thinking of purchasing a retirement home with.

What does assisted living or aged care offer that retirement villages don’t?

• Help with showering and dressing
• Meals and other nutritional requirements
• Dispensing of medications
• Laundry and linen services
• Nursing care
• Mobility assistance

Purchasing a retirement residence in a village is a long term decision. If you move at 55 and keep good health, there is every chance that you will spend up to 40 years living in that home. This is longer than most people spend in what we look on as the family home. Make the decision carefully, 60 is now the new 50.