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Deferred fees, departure fees, and exit fees
You may have to pay a significant amount when you leave a village. This may be called a deferred, departure or exit fee. There can also be recurrent fees that continue after you leave.
Such fees are one way that commercial retirement villages generate a profit, and not-for-profit villages improve their services or subsidise recurrent charges paid by residents while they live in a village.
The fee may be part of your purchase price, deferred until you leave, to allow you to use your money while living in the village. Alternatively, a set amount of your ingoing contribution may be non-refundable.
These fees can be complicated and how much they are often depends on variables such as how long you have been in the village.
The fee cannot be calculated as a dollar amount until you have left your unit and, sometimes, until the new resident has made an entry payment or a valuation of your unit has been obtained.
The fee is usually calculated as a percentage per year of either:
- your ingoing contribution or purchase price
- the new resident’s ingoing contribution or purchase price.
These fees are usually calculated up to a specified maximum percentage stated in your contract. For example, if the fee is 2.5 per cent per year up to a maximum of 25 per cent and you are there for 10 years or longer, the most you will be charged for the fee is 25 per cent. This will be deducted from the amount you get if you leave.
If there is any capital gain on your unit, how much of it you keep will depend on your contract.
Some contracts assign all capital gains to the retirement village owner. As you would still have to pay a departure fee, you may end up leaving with less money than when you entered the retirement village. This may be offset by other features of your contract, such as lower recurrent charges.
What do I get back when I leave the retirement village?
If you own a strata title retirement village unit:
- you will get the proceeds of selling your unit, less departure fees (which can be substantial)
- your investment is secured by your own land title, as with any property purchase.
If you do not buy your own unit, some or all of your ingoing contribution may be refundable to you or your representatives when you leave. This amount is secured by a first-priority statutory charge over the retirement village land if your ingoing contribution, or that of any other or previous resident of the retirement village, is or was more than $10,000. This charge applies even if the retirement village changes hands.
Other fees and charges
For more information about fees and charges, view our related pages: