Buying in a retirement village is vastly different to buying a residential home, particularly around the issue of tenure and title.
“Tenure” refers to the type of legal arrangement that allows you to live in the retirement village. Strong tenure is where you have a long-term secure agreement with rights; a weak tenure is where your occupation is at the mercy of others or easily cancelled.
Residence contracts, whether they are leases or licences, are perpetual, in that they have long terms of 49 or 99 years, durations that would reasonably be expected to outlast the resident! The longest tenure of a resident in a retirement village that I have ever seen was over 30 years (and still going)!
Retirement village legislation in all states and territories is primarily concerned with consumer protection and key to that philosophy is ensuring a resident’s rights around tenure. Therefore, your tenure in a retirement village is secure, and can only be terminated by you as the resident, or by the operator in very strict instances.
Termination by the resident
A resident can terminate their contract at any time with written notice (usually 30 days) to the village operator.
Death of the resident triggers immediate termination of the contract (dated as at the date of death).
Read more about what happens upon termination HERE.
Termination by the village operator
The instances of termination by the village operator could be defined as material breaches of contract, encompassing:
- Non-payment of fees;
- Resident no longer able to live independently; and
- Threat of harm.
Let’s discuss these further:
Non-payment of fees
Village fees are based on an annual budget that is designed to cover the costs of administering, staffing, operating and maintaining the village. Basically, the forecast costs for the year are totalled, then divided by the number of units to determine the individual charge (read more about village fees HERE). If the budget is accurate, the village should conclude the financial year with $0 left in the account, because the fees raised have covered the costs incurred.
If a resident ceases paying fees, it leaves the budget with a hole and there is less revenue available to cover estimated expenses. This can leave the village in a precarious situation where there may not be enough money to cover items such as rates or insurance. For this reason, it is a material breach of the residence contract if village fees are not paid, and the village operator may be forced to terminate the contract and make good outstanding fees from the re-sale proceeds.
Resident no longer able to live independently
Retirement villages are ideally suited to ageing-in-place for residents. Homes are single-level and designed for low maintenance and easy living, and care services can be brought in or provided by the village operator. In fact, research shows that retirement villages delay entry into residential aged care.
There may come a time however, when a resident is simply unable to live independently in their retirement village unit, even with extensive care services in place, and the village operator could move to terminate the residence agreement.
What does this look like in practice?
A village operator would consider a resident as unable to live independently if they are a danger to themselves or others (for example, putting food on the stove and forgetting it is there, potentially starting a fire), if they are impacting other residents (overly-reliant on neighbours for food, transport, care, etc, unable to maintain personal hygiene), if they are wandering from the village and require close supervision or restricted movement, or if their unit shows evidence that they can no longer cope with independent living (unit is dirty or unhygienic, overly-filled with personal items or rubbish, possibly a fire-hazard).
It is not completely within a village operator’s discretion to determine if a resident cannot live independently, however. The residence contract and retirement villages legislation would normally require an independent assessment of the resident by a medical practitioner. This could be an assessment by the resident’s doctor or an aged care assessment (ACAT), supporting the conclusion that alternative accommodation is appropriate. In this event, the operator would then have grounds to terminate the residence contract.
Threat of harm
If a resident harms a person or property within the village, or is threatening harm to a person or property, then village operator may have grounds to terminate the residence contract.
The last word
A termination by the village operator is considered a very drastic step and would only occur after all other avenues are exhausted. It would never be something that is just “sprung” on you – there would be extensive discussions and correspondence prior to being given a notice of termination.
In my experience, a termination by the village operator is very much a last resort and mostly used where families are struggling to convince Mum or Dad that they can no longer live in their unit independently and need to move back in with family or to aged care.