Here are the most frequently asked questions about the laws behind the Retirement Villages Act.

1. What are the types of village contract?

The main options are:

a. Freehold accommodation tenure - not common.
b. Leasehold.
c. License accommodation tenure. In freehold, you own the title deed for the property. A lease contract is mainly used by the private village operators; you receive a registered lease on the village title. The license contract is predominantly used by not-for-profit operators; you make a loan to the operator and receive a license to live in the village. Most villages in Australia are either lease or license.
d. Company title, where the resident receives a share in the company that owns the real estate of the village which share gives the resident the right to occupy a particular unit.

2. What is a departure fee or deferred management fee?

This is a fee that is deducted from the amount you or your estate receives when you leave the village. It is commonly calculated as a percentage of your home's value over a set period of time - for instance, 10 years. It increases by, say, three percent each year you stay in the village, but once you have reached the capped amount it doesn't increase further - i.e. it may be capped at 30 percent. A departure or deferred management fee is calculated on your ingoing ‘purchase price' or the re-sale price of your village home.

3. Will I receive a capital gain when I leave?

This depends upon the village - it can be entirely received by you, entirely received by the operator, or shared between you and the operator. The basis upon which the capital gain is shared - or not - will often determine the size of the departure fee.

4. What are weekly fees?

These are fees payable to the operator to cover the general expenses of running the village. In Queensland, the fees are not allowed to increase each financial year by more than the CPI - except for rates and taxes, wages of village staff and insurance premiums. In New South Wales, where ‘recurrent charges' are not increased by way of a fixed charge, any increase in recurrent charges currently must be approved by residents after 60 days' notice of what the increase is to be from the operator.  If the operator and the residents can't agree, the issue goes to the Consumer, Trader & Tenancy Tribunal for adjudication. There is currently amending legislation before the New South Wales Parliament which might change this procedure.

5. How are costs controlled?

Before increasing the charge for a particular general service, the village operator must consider whether there is a more cost-effective alternative solution. The operator can only offer a new service if the residents agree to it being supplied by special resolution at a residents' meeting.

6. Who insures the village?

The operator must insure the village at full replacement value, including the accommodation units ‘owned' by residents. In strata title villages, insurance for the buildings in is the responsibility of the Owners' Corporation.

7. Village budgets

The operator must prepare a budget and submit it to each resident. They also have to provide a financial report for the past 12 months, which must be independently audited.

8. How are the residents represented?

Residents typically establish a Residents' committee. The committee can deal with the operator on behalf of residents about the day to day running of the village, and any complaints or proposals raised by the residents. Establishment of a residents committee is not mandatory - it's a matter for residents.  In strata villages, commonly there is no separate Residents' Committee in addition to the Executive Committee of the Owners' Corporation.

9. Who pays for maintaining the village?

The village operator must pay into a ‘capital replacement fund' according to a formula developed by an independent quantity surveyor so as to ensure facilities can be replaced when they get beyond their useful age i.e. a swimming pool or road. The ‘maintenance reserve fund' is paid for by the residents out of their weekly fees for the maintenance and repair of the village's capital items.

10. How do I get the relevant information before ‘buying in' to a village?

A public information document must be provided to you. It must contain an extensive amount of information, including the:

• Cooling off period after you sign the contract.
• Ingoing contribution payable.
• Exit fee payable.
• Resident's capital gain entitlement.
• Services charges.
• Amounts payable into the maintenance fund.
• Resident's rights.
• Dispute resolution process.
• Rights to terminate the contract.

11. Can the operator terminate my residency?

You need to check each contract, but the major reason for termination is if your village home is no longer suitable for you given your health - which generally means you need to move on to low or high level care for your own welfare. Generally, the operator can only terminate your residency if you have intentionally injured a person in the village or if you have damaged property.

12. What is the minimum age to join a village?

The minimum age to join a village is usually 55, but some villages have higher limits. Residential parks and rental villages, on the other hand, are not so strict. Incidentally, this age limitation is a rare example of where the law allows discrimination by age!

13. What happens if my partner passes away?

You can stay in your home, usually as long as you can cope with it and can look after yourself, provided you qualify for occupancy under state laws and the terms of the village contract.  It can sometimes be a problem if the village contract was in the name of the deceased resident only. For better protection, the village contract should always be obtained in joint names.

14. Can I take a pet with me into the village?

Some villages will allow cats, small dogs, fish or birds - others none at all. Certain villages will allow residents to bring in an existing pet, but will not allow a replacement if it passes away.

15. Can I have visitors, such as my grandchildren, come stay at my unit?

This depends on each village's rules - some allow overnight stays or up to a month without consent.

It is important to get independent legal advice from a solicitor who is familiar with village options before entering into a village contract. Unfortunately, few solicitors are familiar with village contracts. They may charge anything from $1,200 to $2,000 and you may have to pay 50 percent of the operator's legal costs for preparing your village contracts. You may also want to look at getting independent financial advice to make sure you have the financial resources to remain in the village long-term.

For more information please contact Graham Rushforth or Guy Vinden at Atkinson Vinden Lawyers at [email protected] or [email protected] or visit their website.