An independent view on retirement villages
Over the past few weeks, articles about retirement villages have received a lot of press and most of it was unfavourable. As independent advisers, we have been asked on numerous occasions whether we think the articles have been fair. So here is what we think.
Social isolation is the single biggest issue for our ageing population. Retirement villages go a long way towards solving that issue for its residents. The residents are part of a community, they probably get some supports (like general maintenance of the common areas and some social activities) and they feel safe. The residents are also able to continue to live independently. These things are priceless and can make for a happy old age.
Retirement villages are usually independent living, so stories about how a person was left in their unit after a medical event and not found for several days can happen because the resident chose to remain independent. Whilst many retirement villages are equipped with emergency all buttons, sometimes things happen which mean that button cannot be activated. Some retirement villages are using technology to detect these events without the need to activate a call button.
It does become confusing because some retirement villages offer care services which the resident generally has to agree to and pay for additionally. In that case, if the resident had agreed to those care services and they had not been delivered, it would wrong for a person to be left undetected for a period of time.
Retirement Villages can be very expensive
Retirement village agreements are contract based so the residents get what the contract says they will get and the resident pays what the contract says they will pay. Most retirement village contracts do require payment of a deferred management fee and other costs when the resident leaves and it is not unusual in our experience for a resident to pay around 40% to 50% of the amount the the unit sells for and often the resident is paying outgoings and monthly fees for quite a while after they have left the village. In our experience, retirement village units are generally less expensive to acquire than a similar freehold property in the same geographic location but, in our experience, do not appreciate as rapidly as other property. There is no doubt they are not a sound financial investment. They are a lifestyle investment.
Understand what you are buying
In terms of the resident entitlements, residents should look closely at the agreement (and get legal advice) about what exactly they are entitled to under the contract. The contract may specify social events or services and it is important to understand what exactly the village is agreeing to provide. The resident is not entitled to anything other than what is in the agreement (so, for example, if the resident is told there are free drinks for residents every Friday night, that might not be in the contract and, if it does say that in the contract, there is probably another clause that says that can change). Contracts will not say you will have a fabulous time in our village because of course that cannot be guaranteed. As residents usually go to a village for the community, it is really important that potential residents ensure they will fit in with the community before they move in. It will not work if everyone else in the village speaks Swahili and you do not. Most villages will give you an opportunity to meet other residents before signing up and we think that is one of the most important things to do before committing. This can be a risk if the unit is being sold off the plan.
So, in summary, living in a retirement village can be great and might be the right choice for you. They are expensive and you need to understand what you are getting and what you will be paying. You should get legal advice before you sign the contract. If you would like expert legal advice, call us on 1800 744 676.
Until next time
Sara and Margaret