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Understanding retirement village contracts
Retirement villages offer a number of different contractual arrangements.
There may be different types of contracts offered to residents in the same retirement village. For example, different contracts may apply to independent living units and assisted living.
Retirement villages may also offer different contracts at different times. For example, two residents living next door to each other in similar accommodation, who entered the village at different times, might have different contracts with different rights and responsibilities.
The most common types of contracts for retirement villages are long-term lease or licence and strata title. Other arrangements include company title, unit trust and periodic tenancy.
Retirement village contracts are not the same as ordinary residential property contracts.
By law, you must be given a retirement village contract, and disclosure statement, at least 21 days before you sign. However, you can take more time to consider your decision.
Before signing, take all documents about the retirement village to a legal practitioner or financial adviser who understands the legal and financial implications of retirement village contracts.
You can find legal practitioners through the Law Institute of Victoria’s legal referral service, and financial planners through the Financial Planning Association of Australia.
Strata title
Buying a strata-title unit
Strata title is a common contract offered by retirement villages run for profit.
You pay the agreed purchase price to the unit owner, usually through their selling agent, such as the retirement village operator or an estate agent.
This means you can occupy the premises and become a member of the owners corporation (formerly body corporate), as with any other strata-title scheme.
Unlike other strata-title schemes, buying a retirement village unit is conditional on:
- the retirement village operator approving you as a resident
- you signing a management contract with the village owner.
Any disputes about these conditions must be resolved through the Victorian Civil and Administrative Tribunal (VCAT).
As a strata-title unit owner, you will:
- be registered as the owner of the unit on your title deed held at the Land Titles Office
- have to pay owners corporation fees while you own the unit.
You may also have to pay:
- goods and services tax (GST) if the unit is new and you are the first owner
- a recurrent charge, also known as a maintenance charge, usually monthly or quarterly. For more information, view our Fees and charges - retirement villages section.
You may be asked to sign several contracts; for example, a sale contract and a management contract between the manager of the village and you as the unit owner, that defines the services that are provided to you by the manager.
For specific information about how an owners corporation works in a retirement village, view our Fees and charges - retirement villages section and Having a say in your retirement village page.
For more information about how an owners corporation works in a retirement village, view our Owners corporations section.
Selling a strata-title unit
You have the right to sell your unit through the selling agent of your choice, usually either an estate agent or the village operator.
However this is not the case if you signed a retirement village contract that assigned exclusive selling rights to the retirement village operator, before 1 August 2006.
Depending on the terms of your contract, you may also have to pay the operator:
- a share of any capital gains
- departure or exit fees
- other charges from the proceeds of the sale.
For more information, view our Fees and charges - leaving a retirement village page.
If a retirement village operator has a waiting list at a village but is not the selling agent for a unit, you do not have to sell to people on that list. The operator may not be obliged or able to supply the waiting list to the selling agent.
Long-term lease or licence
You pay an ingoing contribution and in return, receive a lease or license to live in a particular retirement village unit for a period ranging from 49 to 199 years.
You will also have to pay a recurrent maintenance charge, usually on a monthly or quarterly basis. In some retirement villages, this charge is a fixed percentage of the age pension.
Depending on the terms of your contract, you may also have to pay the operator:
- a share of any capital gains
- departure or exit fees
- other charges deducted from your exit entitlement.
Company title
Under this arrangement:
- you buy shares in a company that owns a retirement village. The shares give you the right to occupy a particular unit in the village
- a Board of Directors, appointed by the shareholders, operates the retirement village and you will be required to comply with the company’s constitution
- if you leave the retirement village, you will be entitled to receive the sale price of the shares at settlement, less any outgoing deductions (as above).
Company title is a complex area of law that was not developed for private residential accommodation. It is important to understand that, under this arrangement, you are not buying property, but shares in a company.
Before you sign the contract, make sure you get independent legal and financial advice about what you are agreeing to with a company title.
Unit trust
This arrangement is similar to a company-title scheme, except that you buy a unit in a trust that carries an entitlement to occupy the unit.
The retirement village is legally owned by the trustee, who holds it for the benefit of the unit holders in keeping with the terms of the trust.
As with company title, if you leave the retirement village, you will be entitled to receive the sale price of the unit in the trust at settlement, less any outgoing deductions (as above).
As with company title, unit trusts are a complex legal structure. Before you sign the contract, make sure you get independent advice about what you are agreeing to.
Periodic tenancy
Periodic tenancy arrangements are sometimes used by not-for-profit organisations running community-based villages.
A periodic tenancy is a lease (written or verbal) between the resident and the owner in which there is no fixed date for the end of the lease. This means the agreement operates from rental period to rental period.
In some cases you pay an ingoing contribution, some or all of which may be refundable at the end of the tenancy period. Paying rent gives you the right to live in the unit and use any common facilities.