What To Know Before Moving Into A Retirement Village

August 11, 2022
Elderly Couple In Pool At Retirement Village

The process of selecting, moving into and moving out of a retirement village can be tricky. There are a lot of factors that go into selecting the right place for you or your loved one. Many people aren’t sure what they need to know before moving into a retirement village and about the important considerations that arise.

The operation of retirement villages is heavily regulated in New South Wales, principally by the Retirement Villages Act 1999 (the Act) and the Retirement Villages Regulation 2017 (the Regulations). These laws set out key rights and obligations for residents and operators, ensure prospective residents are given important information before they sign a contract, require village contracts to be in a standard form, and provide a system for resolving disputes.

It is important to understand that retirement village residents are not automatically entitled to aged care services, even if these are on site. This will need to be taken into consideration when choosing a retirement village.

Choosing A Retirement Village

The type of residence right offered by an operator will determine:

  • Whether you will be a registered interest holder or a non-registered interest holder; and
  • The capital costs for which an operator will be responsible.

This division is essential to the regulation of fees payable by residents during the village contract term and payments due to residents on permanent vacation from their dwelling.

At CM Lawyers, after we have reviewed the contract and associated documents, we will advise you of the type of residence right offered and whether you will be a registered or non-registered interest holder. This will have an impact on your estate upon your death.

An operator must give you a general inquiry document within 14 days of you, or someone on your behalf, enquiring about becoming a resident. At least 14 days before you sign the contract, the operator must also give you a disclosure statement specific to a dwelling you become interested in, and a copy of the proposed village contract. Generally, if there is any term in the contract inconsistent with the disclosure statement to your detriment, the information in the disclosure statement will override the inconsistency.

Careful consideration of the information in the disclosure documents and the proposed contract is required. It is a good idea to obtain these documents from various retirement villages in the area in which you are thinking of living. This will help you compare their services and prices and identify the best village for your needs and budget.

It is useful to visit the villages you are interested in, inspect all available units and talk to some residents or a representative of the resident’s committee to find out more about living there. It is also prudent to ask to see a copy of the village rules, if there are any and the asset management plan.

Payment For Retirement Village Residency Right

Payment for a freehold title is referred to as a purchase price. Any other lump sum payment made under a residence contract or in consideration for, or in contemplation of, becoming a resident of the village is referred to as an ingoing contribution.

A purchase price is not usually refundable by the operator when you move out, as opposed to an ingoing contribution which is refundable. A waiting list fee is not an ingoing contribution.

An ingoing contribution is normally paid by initial holding deposit, a further deposit on providing a signed contract, with the balance due on taking occupation. An ingoing contribution may take various forms including a loan, lease premium, prepaid rent or licence fee.

The Retirement Village Contract

Couple Signing Retirement Village Contract

The operator must give you, or a person acting on your behalf, a completed copy of the village contract at least 14 days before you sign. A holding deposit is typically paid at this time and will be held in trust by the operator. During this period, you can negotiate certain terms of the contract with the operator.

Should you no longer wish to proceed at this stage, the operator is required to refund any deposit paid by you within 14 days of receiving written notice. If you wish to proceed, the signed contract will be returned with the balance of the deposit, which must be held in trust.

At CM Lawyers, we will check to see if details of any promised services or facilities are included in the contract. We will also make appropriate enquiries about the financial position of the operator. This will include requesting copies of the audited financial accounts of the village and closely examining the disclosure statement to determine whether the operator paid refunds to former occupants when due and if the auditor believes that there is considerable uncertainty regarding the ability of the operator to meet the liabilities of the village as and when they fall due. We will also examine the asset management plan.

By entering into the village contract, you will acquire a residence right to occupy a dwelling within the retirement village and be entitled to use the communal facilities and services. Ongoing recurrent charges will be payable for services and facilities and various shared residential costs such as council rates and maintenance. The operator must give you a copy of the signed contract within 14 days after it is signed. Keep this somewhere safe with your disclosure documents.

The following documents must be attached to your contract:

  • The disclosure statement that was given to you;
  • The condition report (if applicable);
  • A list of the village services and facilities; and
  • The current village rules (if any).

A range of documents must be available at the village or the operator’s place of business for you, or a person acting on your behalf, to freely inspect. If an operator fails to have these documents available for inspection, we can apply to the NSW Civil and Administrative Tribunal (NCAT) for an order directing the operator to comply.

The key documentation between the operator and a resident includes:

  • General inquiry document;
  • Disclosure statement;
  • Standard village contracts;
  • Approved budgets in relation to expenditure;
  • Audited accounts with statements as to the overall solvency of the operator; and
  • Refund calculation statement detailing the fees and charges payable by a resident or their estate on permanent vacation.

Certain matters cannot be included in your retirement village contract, such as terms that:

  • Require you to take out ambulance cover or insurance, except in relation to motorised wheelchairs;
  • Restrict the period of time you may be absent from the village, for example, when you are on holidays, visiting relatives, or in hospital;
  • Require you to have a will or to disclose its location to the operator;
  • Charge you the operator’s costs of corresponding with you or your representatives;
  • Impose a penalty for breaching the village rules or the contract;
  • Waive an operator’s liability for negligence.

The full list of excluded matters is in Schedule 3 of the Regulations.

When Acquiring A Residence Right As A Couple

When acquiring a residence right as a couple in a freehold property, that is, on becoming proprietors of a fee simple estate in land, owners of strata title lots, or proprietors of community title lots, the transfer must specify whether you are taking as joint tenants or tenants in common, and the shares of each tenant in the case of tenants in common. Ordinarily, couples will want to take as joint tenants so that on the death of one of them, the deceased’s share passes by way of survivorship to their spouse. Couples with children from previous marriages and those making different contributions may wish to take possession as tenants in common so that the deceased’s share will pass in accordance with their will, thus protecting the interests of their children and other beneficiaries. Similar considerations apply to a registered lease.

The operator can recover its legal and other expenses incurred in connection with the preparation of the village contract from you. These costs are usually paid at completion but occasionally will be claimed on exchange. In certain circumstances, these costs are capped and we will discuss this with you once we have reviewed the contract.

Cooling-Off Rights 

If you change your mind, you have a cooling-off period of 7 business days after you enter into a village contract. As long as you have not moved into the dwelling, you can rescind (cancel) your contract during this period and receive a refund of any money you have already paid. You simply need to notify the operator and any other party to the contract in writing that you rescind the contract. We are able to do this on your behalf if required. However, there is no cooling-off period if you occupy the unit within the 7-day period.

In relation to freehold title, in addition to this 7 business day cooling-off period, the Conveyancing Act 1919 provides for a 5 business day cooling-off period, which can be, and typically is, waived as per section 66W. If the cooling-off period is exercised in relation to a residence contract, the Retirement Villages Act prevails over the Conveyancing Act to prevent a resident from forfeiting 0.25% of the purchase price. The operator is required to issue a full refund within 1 month.

Moving into Your Retirement Village Home

Elderly couple getting keys to retirement village

You will be allowed to move in when you have paid the balance of the ingoing contribution and certain legal costs of the operator, completed a condition report (if applicable) and entered into a residence contract, service contract or both. Occupation may be allowed earlier under a residential tenancy agreement that expressly excludes the operation of the Act. Loan and licence arrangements also exist and are mainly offered by non-profit organisations such as church or charity village operators.

The Condition Report

A condition report is a record of the condition of your dwelling at the beginning of your residency. The operator must complete the condition report before you occupy the dwelling. It must be completed with you, or a person on your behalf, in attendance, unless you give written approval otherwise. You may also consider taking photos, in the event a dispute arises.

The operator must give you the completed condition report at least 14 days before entering into a contract and must also give you a copy with your contract. If the unit is still under construction, the completed condition report must be given to you 14 days before you move in.

When you vacate, you will be required to leave the unit, including any garage, courtyard and other inclusions, in a similar condition as set out in the condition report, other than fair wear and tear. Keep the condition report safe, as you may need it if there is a disagreement when you move out.

These requirements do not apply, and you do not need a condition report, if you are a registered interest holder, i.e. if you will own the unit under strata, community or company title or will have a long-term registered lease which entitles you to at least 50% of the capital gains when you leave.

Settling-In Period 

There is a 90-day settling-in period. If you find you need to terminate your village contract within 90 days of the date you became entitled to move in, you are required to pay:

  • Fair market rent;
  • The cost of any repairs for damage in excess of fair wear and tear;
  • A reasonable administration fee (maximum $200); and
  • The reasonable costs the operator had incurred in making alterations or adding any fixtures or fittings to the unit at your specific request.

You do not have to pay any departure fees. Any recurrent charges you paid must be refunded within 14 days.

You are entitled to a refund of your ingoing contribution or the proceeds from the sale of the unit. The timing for payment of this refund depends on the type of village contract you signed.

If you were a non-registered interest holder, you are entitled to a refund of your entry payment within 14 days after terminating the village contract. If you were a registered interest holder, you will usually need to wait until the unit is sold, re-leased or occupied by a new resident to obtain your refund, which could take considerably longer.

To terminate your contract, you are required to give written notice to the operator, or if it is a residence contract being terminated, permanently vacate the village, before the end of the settling-in period. Again, we can provide this written notice to the operator if required.

Cancelling The Contract 

You may be able to rescind (cancel) your contract if the operator did not give you a disclosure statement when required, or if the information in it is false or misleading. To do this you must, within 3 months after you move in, apply to NCAT for an order allowing you to rescind your village contract.

Pension Considerations

The purchase price or ingoing contribution paid for a right to occupy a dwelling within a retirement village, and to be used as a principal residence, will not be included in the asset test for the age pension. The purchase price or ingoing contribution paid is halved in relation to couples and if this amount exceeds the extra allowable amount set out within the Social Security Act 1991, you will be deemed to be a homeowner for pension purposes. However, the dwelling will then be a special residence and principal home under the Social Security Act 1991 making it an exempt asset. We suggest that you contact your accountant or financial advisor about pension considerations.

Rent assistance

If the purchase price or ingoing contribution falls under the “extra allowable amount” set out within the Social Security Act 1991, you will be entitled to rental assistance which can be put towards paying recurrent charges. Although an advertised purchase price or ingoing contribution may be higher than those of some other providers, the entitlement to rental assistance may still mean a better deal for you overall, taking the quality and extent of the services offered into consideration.

Moving out Of A Retirement Village

When moving out of a retirement village, there is usually a liability to pay a departure fee to the operator, and a share of any capital gain, as stipulated in the contract. The formula for calculating the departure fee and the share of capital gain is not regulated and is determined by the operator. Other fees payable following permanent vacation may include costs of reinstating or refurbishing the premises, recurrent charges to a limited degree, and, in some cases, costs of sale. These costs will normally be paid out of the proceeds of sale of the residence rights, or from the operator’s refund of the ingoing contribution.

Dispute Resolution

Disputes are handled almost exclusively within NCAT, and the Act provides for many offences and the power for NCAT to enforce the terms of village contracts, and to strike down those that are inconsistent with the Act, Regulations and village rules. Should a dispute arise with the operator or another resident, we will be happy to assist you in reaching a resolution.


Stamp Duty

Residence rights granted under freehold and company title are liable to stamp duty. A lease premium paid on the transfer of an assignable lease is also dutiable. Ad valorem (according to value) rates apply on either the market value or consideration paid, whichever is greater. Duty is not chargeable on a lease of premises within a retirement village. This exemption also applies to licences. The exemption extends to prepaid rent, periodic rent, a loan and an ingoing contribution paid as a lease premium on the initial grant of an assignable lease. We will advise you of any stamp duty liability once we have reviewed the contract and associated documents, and the time for payment.

Capital Gains Tax (CGT)

Generally, a resident is not liable to pay CGT on any capital gain received on moving out as the principal dwelling exemption applies. This extends to all residence rights under the Act. There are instances where CGT may be payable in separate but related circumstances, and we will discuss this with you further in due course.

Land Tax

A resident’s dwelling within a retirement village used as his or her principal residence is exempt from land tax. The exemption does not extend to unused development lots unless the operator is a registered charity or the village is under community title, and an operator may seek to recover any land tax from residents collectively via recurrent charges as per the terms of the village contract.

Goods And Services Tax (GST)

GST may apply to various supplies on moving in, living in and leaving the retirement village. Generally, the operator will be liable to pay GST, but will most likely seek to pass this on to the residents under the terms of the village contract. We will advise you of your position in relation to GST once we have reviewed the contract.

Wills, Powers Of Attorney And Enduring Guardianships

If you do not already have a will, power of attorney and appointment of enduring guardian, this is an appropriate time to consider making them. The need for an appointment of an attorney and appointment of an enduring guardian is most likely to come into play if you lose capacity during residency and need to move on to serviced living facilities within the retirement village or to an aged care facility. If you would like to do so, please make an appointment for this purpose.

At CM Lawyers, we have years of experience navigating Retirement Village Contract for our clients. We take pride in making sure that our clients are confident and protected before making this big decision. Please Contact Us today if you or a loved one is considering making the move into a retirement village in NSW.

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Thank you for reading this article, please note that this content is accurate at the time of posting but is not updated regularly. The content throughout this site should be viewed as informational and informative but not considered legal advice. We cannot guarantee that any of the information on the website is current and laws are regularly changing. For more accurate information or to obtain proper legal advice, please contact our office today.

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