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Legal Aspects of Moving Out of a Retirement Village

Retirement villages are the choice of more than 170,000 seniors in Australia. If you are one of these 170,000 people, you are a part of a growing trend.

As more and more people move into retirement villages, more and more face the legal aspects of moving out.

You guessed right – you signed a contract so there will be legal aspects of moving out of the retirement village. If you are reading this before moving in, this is the smart move – be prepared. If you are already living in a retirement village and planning to move out, here are the issues you will be facing:

1.     Type of contract

The type of contract you have signed can determine your exit strategy. There are 3 basic types of retirement village arrangements:

–         Strata title – you own the unit and have signed a contract

–         Loan and license – often in non-profit organizations

–         Leasehold – you lease the unit you live in

There are exit fees related to all these contracts but they highly vary from one retirement village to the other. However, there are other aspects of the contract that define your exit strategy – for example, if you own the unit, your contract most probably requires you to pay certain fees until it is re-sold even if you don’t occupy it.

If you want an easy exit type of contract look for retirement villages with rental agreements rather than lease agreements.

2.    Contract length

Another issue that might derive from your contract is its length. Your retirement village contract is usually for a 5-year lease but that might vary too.

If you are reading this you have probably decided to leave the retirement village before the contract is over. This will be considered breach of contract and you might end up paying a lot of money.

3.    Departure Fee

Departure fees are the ongoing amounts occurred on an early basis (in your contract). Beware, many people in the industry still call Departure Fee Deferred Management Fee – they are the same thing. If you move out from one unit to another, you are not required to pay such a fee.

These are the fees that you have agreed to pay upon departure and they depend very much on your length of stay. This fee will be deducted from your initial payment when entering the village.

If you are in a strata contract for example, you do not need to pay departure fee as your contract was not a lease but ownership one.

The departure fees equal the ongoing fees for the time that you lived in the village but might also include refurbishment fees.

4.    Repayment

After you leave the retirement village it makes sense that you will receive your money back (minus departure fees), right?

But that’s not always the case. Look carefully at your contract and find out after what time you will be entitled to your repayment. Many contracts include clauses that can retain payment even years after you have left the retirement village.

One of the most shocking cases we have heard of is about a man whose mother passed away in a retirement village and he waited over 8 years to receive the repayment because the management was unable to sell her unit.

5.    Selling the unit

In many cases you need to sell the unit to a new resident before you can receive any of the repayments you are entitled to. Many cases of years of waiting have been reported in Australia so it is advisable to consult a lawyer if the repayment and selling period seem to lengthy to you.

However, once you have signed the contract agreeing that only the village’s management can sell the unit, there is not much you can do. Often times the management has the full and only right to post ads or deal with finding a new resident.

This can significantly reduce the number of your options, as you won’t get any repayment before a new resident has leased your unit.

Legal issues related to moving out of a retirement village are important because as we saw in this short article, they can cost you a lot of money. There is no easy-in easy-out way with retirement villages. That’s why hiring an experienced retirement village lawyer is your best move. Let her help you find the best fit for your needs.

If you are already a resident who wants to move out and feels stuck and confused by all the legal issues, let us help by contacting us at [email protected] or +61 (2) 9615 9635.