Retirement Village Contracts

Understanding Retirement Village Contracts

Moving into a retirement village can be one of the biggest lifestyle and financial decisions you’ll ever make. Unlike buying a regular home, retirement village living usually means you enter into a specific legal agreement with the village operator. That agreement — your contract — sets out your rights, responsibilities and the fees you will pay during your stay and when you leave.

It’s essential to understand exactly what’s in your contract, how different legal structures work, and what protections you have under Australian law. This guide explains what you need to know about retirement village contracts so you can make an informed decision and protect your finances for the long term.

What is a Retirement Village Contract?

A retirement village contract is a legally binding agreement between you and the village operator. It spells out:

• The type of tenure you have — for example, leasehold, licence to occupy, strata title, or company title.
• Your rights to live in the village and use its facilities.
• What you pay upfront, ongoing, and on exit.
• Who is responsible for maintenance, repairs and capital works.
• Your obligations — for example, respecting community rules or paying fees on time.
• What happens if you want to sell or leave.

Your contract must comply with your state or territory’s retirement village legislation. Each state and territory has slightly different rules about what operators must include and how contracts must be presented to residents.

2. Different Types of Legal Arrangements

There isn’t just one type of retirement village contract. The structure affects your rights, who owns the unit, and what happens when you leave. Let’s look at the main types.

Leasehold

Common in many modern villages. You pay a lump sum for a long-term lease — often 49 or 99 years — which gives you the right to occupy the unit and use village facilities. You don’t own the property title. The operator remains the landlord. A deferred management fee (DMF) usually applies when you leave.

Licence to Occupy

Very common in private villages. You pay an entry contribution for the licence to live in the unit. Technically, you have no lease or title but a contractual right to occupy. Again, you usually pay a DMF when you exit.

Strata Title

Less common but some villages are strata titled, just like a block of units. You buy the unit outright and own the property. You’ll pay body corporate levies for shared costs and may still have a DMF. Reinstatement costs, resale restrictions and village by-laws all apply.

Company Title

Older style, but you may come across it. You buy shares in the company that owns the village. The shares give you the right to occupy a specific unit. You have shareholder rights — but reselling your shares often needs board approval.

Rental Villages

Instead of paying a big upfront fee, you pay weekly rent. There is usually no DMF. Renters may still pay for services like meals or cleaning. This model can be simpler but you don’t have the same legal protections or asset security.

Required Disclosure Documents

Under state laws, operators must give you detailed information before you sign. This includes:

• A disclosure statement with all fees, charges, and how they’re calculated.
• Site plan and facilities information.
• Resident rules and village by-laws.
• The draft contract — often called the residence contract, lease or licence.

You must also be given a cooling-off period after you sign — usually 14 days but it varies by state. During this time, you can change your mind and cancel without penalty (though some administration costs may apply).

Key Fees in Your Contract

Most contracts include:

• Ingoing contribution: What you pay upfront to enter the village.
• Ongoing fees: Weekly or monthly payments for services and maintenance.
• Exit/deferred management fee: A percentage of your entry payment or resale value deducted when you leave.

Some contracts also include:

• Marketing or resale costs when you leave.
• Reinstatement or refurbishment costs to bring the unit back to saleable condition.
• Fees for extra services like meals, personal care or nursing.

Common Clauses to Watch For

Some contract terms can be surprising. Look closely for:

Deferred Management Fees (DMF)

How is it calculated? On your ingoing price or resale value? Is it capped? How quickly does it reach the maximum? Many DMFs are 2–3% per year for up to 10 years (so a 20–30% fee).

Reinstatement and Refurbishment

Does the contract require you to cover costs to reinstate the unit to its original condition? Or to upgrade it to current village standards? This can run to tens of thousands of dollars.

Capital Gains or Losses

Do you share any profit or loss on resale with the operator? Some contracts say you get 100% of the capital gain; others share it 50/50 or even 70/30. Some give you no share at all.

Selling Process

Who is responsible for selling your unit? Do you have a say in the price? What happens if it doesn’t sell quickly? Are there marketing costs or agent fees?

Time to Refund

Some states cap how long operators can hold your exit payment. In some contracts, your money may be tied up until a new resident moves in — so check timeframes.

Rights and Protections

Each state has legislation to protect residents. Some key protections include:

• Cooling-off period.
• Operator must hold ingoing funds in trust.
• Restrictions on fee increases (often require resident vote or budget approval).
• Dispute resolution mechanisms.
• Clear timeframes for exit refunds in some states.

But remember: you still need to read your contract carefully. Laws provide a framework, but your contract spells out exactly how things work for your village.

Example: Comparing Two Contracts

Imagine two villages:

Village A: Licence to occupy. Entry fee $400,000. Ongoing fees $600/month. DMF 3% per year, capped at 30%. 100% capital gain to resident. Reinstatement costs paid by resident.

Village B: Strata title. Buy unit outright for $500,000. Strata levies $400/month. No DMF. You pay for all maintenance inside unit and share of building insurance. 100% capital gain or loss yours. Marketing costs and agent fees on exit are yours too.

Over 10 years, Village A may look cheaper upfront but cost more on exit. Village B costs more upfront but you own an appreciating asset — if property prices rise. If they fall, you bear the loss.

What to Ask Before Signing

• What type of tenure am I getting? Do I own the unit or just have the right to occupy?
• What happens if I want to leave early? How much will I get back and when?
• How are ongoing fees calculated and can they go up?
• Is there a deferred management fee? What percentage and how is it calculated?
• Who pays for repairs and upgrades inside my unit?
• What if the operator sells the village or goes bankrupt?
• What resident committees or dispute processes exist?

Get Good Advice

Always get independent legal advice from a solicitor experienced in retirement village law in your state. They can check your contract for hidden risks and explain any complicated clauses. A good adviser will also explain how the contract could affect your pension or eligibility for means-tested care fees in the future.

10. Practical Tips for Residents

• Take your time — don’t be rushed by salespeople.
• Visit at different times. Talk to existing residents about fees and management.
• Get everything in writing — if the operator promises something, it should be in the contract.
• Keep a copy of your signed contract in a safe place and tell your family where it is.

Final Thoughts

Moving to a retirement village can bring freedom, security and connection — but only if you go in with eyes wide open. Understanding your contract is the best way to protect your lifestyle and your nest egg.

Always read every page, ask questions, and get legal and financial advice. When you know your rights and responsibilities, you can enjoy village life with peace of mind and avoid surprises later on.

At OMS, we’re here to help you navigate retirement village contracts and all the financial aspects of growing older in Australia. Visit our other pages for guides on fees, the Age Pension, and how to plan your move with confidence.