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What is involved in a retirement village contract?
Retirement village contracts are not the same as ordinary residential property contracts. A retirement village contract spells out your rights and responsibilities as a retirement village resident.
You may be asked to sign several agreements to enter a village. For example, a:
- contract of sale between you and the retirement village owner
- management contract between you and the retirement village manager
The Retirement Villages Act 1986 provides a broad framework regulating the relationships between residents, village owners and managers, rather than detailed rules.
You must look carefully at the contract and rules of the retirement village you are considering. Before signing, take all documents to a legal practitioner and/or financial advisor who understands the 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.
There are usually significant costs when you leave a retirement village. For more information, view our Fees and charges – retirement villages section and Leaving a retirement village section.
What must a retirement village provide before I sign a contract?
The Retirement Villages Amendment (Records and Notices) Regulations 2013 and the Retirement Villages Amendment (Contractual Arrangements) Regulations 2013 came into effect on 1 July 2014. They require retirement village operators to:
- provide an information factsheet (in the approved form) to prospective residents enquiring about the village, to help them compare villages
- allow prospective residents to inspect particular documents held by the operator including, for example, the site plan of the village
- provide an expanded pre-contract disclosure statement (in the approved form) to those intending to sign a contract, to help them understand the costs of moving into, living in, and leaving their unit
- use standard content and layout in retirement village contracts to make them easier to understand and compare. Content will have to include a basic set of mandatory rights and responsibilities of residents, managers and owners.
The factsheet and disclosure statement will help inform older Victorians about the financial obligations associated with retirement village living. You should still seek independent advice and read all contracts carefully.
The retirement village owner, or the owner’s agent, must give you a copy of the contract at least 21 days before you sign it.
The retirement village operator also has to give you other documents, including:
- any contract relating to services the operator will provide to you
- any other agreement about payment of an ingoing contribution or a recurring charge for goods and services
- disclosure statement
- rules or by-laws of the village and any agreement to abide by them
The retirement village owner must give you at least 21 days from when you receive these documents to sign the contract. However, you can take more time to consider your decision.
When you evaluate the documents, check what extra charges may apply. You might be charged for services that you are not going to use, such as a pool.
Disclosure statement for retirement village contracts
By law, the retirement village operator must give you a disclosure statement at least 21 days before you enter into a retirement village contract. The disclosure statement helps you understand the costs of entering, living in and leaving your unit.
A retirement village owner or operator may face penalties for:
- including false information in the disclosure statement
- failing to provide you with the disclosure statement and the other residence documents at least 21 days prior to you signing the contract for goods and services.
The disclosure statement must be in the approved form.
Important information for prospective retirement villages residents
There are a number of important things that you should consider before deciding to enter a retirement village.
- Discuss your decision to enter a retirement village with your family, friends, and other people who usually discuss important matters with you.
- You should take all of the documents relating to the village to a legal practitioner who understands the financial implications of retirement village contracts.
- Regarding life at the village itself, you should find out whether:
- the lifestyle of the village (including social activities and religion) meets your needs
- the facilities at the village meet your present needs and whether they will meet what you expect will be your future needs
- you have any say in the design, construction and furnishing of your unit if construction is not yet complete
- the retirement village provides any nursing care, an emergency call system or other facilities specially designed for the elderly
- you can be moved from the village or within the village without your consent, and if so, under what circumstances
- your long term occupancy at the village is secure
- the residents are actively involved in decisions concerning the level of maintenance and services provided and their cost, and how these fees are to be varied in the future.
- You should also enquire about:
- pets, visitors, car parking and public transport
- when you get access to your money after you leave the village
- what system the village has for resolving disputes
- what restrictions exist on the persons to whom you may sell your unit
- the restrictions (if any) on your use of your unit and of the village facilities generally
- what protection you have if the village is sold to an organisation that has management plans or philosophies that are inconsistent with the way in which the village you propose to enter is managed.
- Compare the terms and amount of repayment of your in-going sum with other charges imposed on residents at the village, such as regular maintenance charges and any other extraordinary costs.
Much of this information is set out in the information factsheet and disclosure document referred to above.
Other information to consider before signing a retirement village contract
Financial information about the retirement village
You may find it useful to ask the retirement village for financial information, including:
- a clear written statement of all of the ingoing, ongoing and outgoing costs
- statements of expenditure for the last three financial years, and anticipated expenditure this and next financial year
- accounts for the last three years. In some villages, the residents may have agreed to waive the usual requirement that accounts be audited for one or more of the preceding years
- most recent quarterly accounts of income and expenditure
- the trust deed for any trust fund where your payments will be deposited
- statement of balances of the retirement village’s capital replacement fund or maintenance fund for the last three years.
By law, the village operator must allow you to inspect any of these documents that it has in its possession or control.
Development plans of the retirement village
You can also seek information about development of the retirement village, including:
- the overall site plan
- plans showing the location, floor plan and main dimensions of all available premises
- terms of any development consent for the retirement village if it has not been completed or if there are services and facilities that the operator claims will be provided in future.
If there are services and facilities that do not yet exist, ensure these are included in your contract.
By law, the village operator must allow you to inspect any of these documents that it has in its possession or control.
Always keep any promotional material provided by the retirement village that describes services and facilities not yet provided.
Information about company title and strata title retirement villages
For a retirement village operating under a company title scheme, ask for the company’s constitution and replaceable rules (formerly known as articles of association).
If the village is subject to a strata title scheme, get a copy of:
- rules of the owners corporation
- owners corporation certificate
- minutes of the last annual general meeting
- any management agreement.
Note: Operators cannot require people buying a strata title unit to assign exclusive selling rights to the operator.
Buying off-the-plan retirement village units
Retirement village units can be advertised for sale before building starts. Purchasing a unit before construction is complete is called ‘buying off the plan’.
You may be able to reserve the unit of your choice and choose between different styles and levels of fixtures and fittings. Generally, a deposit is required, with final settlement to be made when the unit is ready for occupation.
When buying off the plan, you:
- cannot inspect the actual property. You have to rely on an artist's impression, a floor plan and advertising material to understand what you are paying for
- should be clear about the completion date
- are entering complex contracts. You should get legal advice before signing.
You qualify for concessions on the land transfer duty (formerly known as stamp duty) when you buy property off the plan. The amount payable depends on construction of the building and its value: the closer to completion, the higher the duty. For more information about duty, visit the State Revenue Office of Victoria website.
Buying without being able to see the finished product does have risks, including:
- differences in the expected and actual quality of the final finishes
- unexpected changes to the plans.
If you are considering buying a retirement village unit off the plan:
- If financing the move to a retirement village through sale of your current home, coordinate the two events so you are not forced to find alternative accommodation while the village unit is completed.
- Investigate other villages by the same developer. Were they completed on time? Did the developer fulfil promises made in the promotional material?
- Know exactly what you are going to get, down to the finishes, colours, carpets, fixtures and fittings.
- Make sure planned future amenities and facilities are included in the retirement village contract you sign with the village owner.
- Keep all of the promotional material provided to you.
- Make sure your agreement with the developer includes a guaranteed completion date and includes the right for you to terminate the agreement and recover the full amount of your deposit without any penalty if the guaranteed date is not met.
- Make sure your agreement includes a guarantee that the developer will rectify any defects in their work that become apparent after you move in, at no financial cost to you.