In this article we reveal all the hidden fees and charges associated with retirement villages!
I hate myself for writing this headline, but it seems to be a question that people ask online, so I will attempt to answer it.
Firstly, there are no “hidden costs” in retirement villages.
Legally, there can’t be. Everything has to be disclosed – some states like Victoria even have a required pre-sale document called a “Disclosure Statement” to ensure potential residents are aware of all the fees and charges before signing up. And really, there is no benefit for village operators to hide costs so why would they? Retirement village operators want happy residents and positive word of mouth from former residents, so rest assured, there is no conspiracy to hide fees.
The issues come about because people/residents find fees that they weren’t expecting, because they didn’t read or didn’t understand the residence contract (likely they signed the contract before reading this website. Just sayin’)! I can certainly understand this, because residence contracts can be voluminous and the fees may not be clearly presented (but not hidden!). You won’t find a summary page titled “All of the fees and charges you can expect”.
To make your life easier, I have prepared an exhaustive list of all the fees and charges below that you can expect to find in your residence contract, easily divided into three sections:
Buying into a retirement village – fees and charges
- Deposit – some villages will charge you a deposit to hold a unit off the market until you are ready to settle the purchase. Unlike normal residential property sales, the amount and terms surrounding the deposit are purely at the whims of the village operator. However, you will find that deposit amounts are not very high and fully refundable if you withdraw from the purchase. If you do settle, the deposit is off-set against the purchase price.
- Purchase price – the price you pay to acquire the right to occupy the unit. Can also be known as an ingoing contribution. Has the form of a bond in that it is paid back at the end of your tenure, less contracted fees and charges (like the exit fee).
- Lease registration – if you are buying a right to occupy in the form of a lease, it will have to be registered on the property title. State Governments charge a fee for this (of course) and the village operator will either charge a capped fee or simply on-charge the actual fee.
- Stamp duty – if you are buying a freehold unit then state stamp duty applies (God help you if you are in Victoria!)
- Administration fee – some operators may charge an administration fee, or contract preparation fee. Might be around $1,000.
- Legal fee – note a legal fee is not for you to go and get legal advice! A legal fee would typically be charged if the operator uses an external legal agent to prepare the contract. The legal agent would typically also act as the escrow or trust account for transaction settlement purposes.
Living in a retirement village – fees and charges
- Village fees – see our article on village fees for a deep-dive on what these fees are and what is included. Village fees are a fortnightly or monthly charge payable by every resident to cover the operation and maintenance of the village. Typically around $150-250 per week, depending on the size of the village, number of elevators, the level of staffing and breadth of facilities provided.
- Strata fees – if your unit is a freehold unit there will be strata fees payable as well. This does not apply to lease/licence villages. Strata fees cover an Administration fee and a Sinking fund contribution. If you are in a freehold village with strata fees then your village fees will be cheaper becaue some of teh typical inclusions are covered by the Strata Fees. The combined total of the village fee and strata fees should be similar to the village fee in a lease/licence village noted above, around $150-250 per week.
- Special levies – again, this would only apply in a freehold village and is a once-off charge billed to resident owners to fund a specific cost that is higher than anticipated. A good example would be a large section of underground water pipes in an older village that have deteriorated over time and now need replacing.
- Personal services – some villages may offer personal services to residents at an additional cost. The difference between a personal service and an inclusion in the village fee is a that the village fee covers all items of benefit to the community as a whole, whereas a personal service is a benefit only to a specific person. For example, gardening work in a community garden bed would be covered by the village fee. However, if a resident wants village staff to do some work in their own garden bed, it would be a personal service. Similarly, cleaners maintaining the public areas would be funded by the village fee, whereas cleaners working in your unit would have their time worked charged to you as a personal service. The personal services on offer and the applicable charge will be disclosed in your contract. Examples would be unit cleaning, meals, laundry and domestic services.
- Serviced apartment fee – some villages that offer serviced apartments as well as independent living units will charge a separate fee to the occupants of the serviced apartments, in addition to the village fee. The serviced apartment fee will be to cover the costs of the dedicated services offered to the residents of the serviced apartments. This would typically include kitchen/dining rooms costs and overnight staff costs.
- Your costs – additional expenses that you will have to fund include electricity and water usage, wifi or any cable TV or streaming connections, telephone connection and usage, and insurance for your personal items.
- Repairs, maintenance, servicing and replacement – a resident is generally responsible for the repair, maintenance, servicing and replacement of items inside their unit. There is more detailed explanation of this in our ebook, available HERE.
Leaving a retirement village – fees and charges*
- Exit fees – also know as deferred management fees or exit charges. This is the biggest fee charged and forms the profit return for the village operator. Read our article Exit fees in retirement villages – a complete guide for more information.
- Capital gain share – your contract may have a provision for the sharing of any capital gains with the village operator. The operator’s share will be deducted from your exit entitlement (the money you receive from resale of the unit).
- Capital loss – if your contract has a provision for the sharing of capital gains, then it is likely that you have a responsibility to fund ALL the capital loss! This will also be deducted from your exit entitlement. You can learn more about capital gains and capital losses in my ebook HERE.
- Reinstatement – the cost of repairing any damage or “advanced wear and tear” on the unit is at the exiting resident’s cost and will be deducted from the exit entitlement. This also includes the removal of any items that you installed during your occupation – see article Can you make changes to your retirement village unit?.
- Refurbishment costs – for the purposes of this article, I am referring to “refurbishment costs” as the work done to the unit after exit with the objective of modernising it and increasing the resale value. Also referred to as “renovation costs”. The costs charged to you will be your share only of the costs incurred and are most typically applied to contracts where the exiting resident gets some or all the capital gains. I go into detail on how to understand and evaluate these arrangements in my ebook HERE.
- Outstanding village fees & personal services charges – the exited resident is still required to pay village fees for a period of time after exit, as specified in the state or territory retirement villages legislation. Read more about that HERE. Some personal services charges may still be applicable, but typically, these charges cease immediately once the personal services are no longer being used.
- Lease de-registration – state governments charge a fee to de-register the lease that they also charged you a fee to register. Public servants gotta eat right?
- Legal fee – same as previous, this is a fee typically charged if the operator uses an external legal agent to prepare the contract.
- Administration fee – same as previous, this is a fee to compensate the operator for the work involved around the exit, which is pretty substantial.
* Note: Any fees applicable upon your exit from the village are accrued and deducted from your exit entitlement.
The last word
I reiterate that village operators are legally required to disclose all fees and charges and have no reason or incentive to hide costs. The concept of “hidden fees” has been cooked up by the media because it makes a great headline. It is the responsibility of the purchaser and their legal advisor to understand the fees and charges that apply so there are no surprises.
There is a fees and charges checklist included in the ebook HERE to assist you in identifying all the disclosures from the contract.