Living Life: July 25, 2019
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RETIREMENT<br />
VILLAGES<br />
8<br />
LAW<br />
LIVING<br />
LIFE<br />
Security, freedom from home maintenance<br />
worries, support, companionship and on-site<br />
healthcare are just some of the reasons why<br />
you might be contemplating the move to a<br />
Retirement Village. But the implications of<br />
buying in a Retirement Village are varied and<br />
often seem quite complex.<br />
Retirement Villages typically utilise devices<br />
called Occupation Right Agreements (ORA).<br />
These do not transfer ownership, as such,<br />
but rather, they confer a licence to occupy a<br />
certain unit at the Village until a given event.<br />
Under an ORA, you make an initial payment<br />
for entry into a Retirement Village, often<br />
referred to as the purchase price of the ORA.<br />
From this initial capital payment the Village<br />
will apply a formula for calculating a ‘deferred<br />
management fee’ or ‘village contribution’ that<br />
is deducted from the entry payment when<br />
you end the ORA. This exit fee is usually<br />
between 20% to 30% of your entry payment<br />
and accrues between 2 to 5 years from your<br />
entry date. Be aware that often the balance of<br />
the entry payment will not be repayable on<br />
termination but rather, when the owner<br />
finds a new resident for the unit.<br />
There are three main additional costs<br />
you should consider and compare when<br />
you are looking at Villages. In addition<br />
to the exit fee, there will be a weekly fee<br />
payable to the village owner to cover<br />
the running costs of the village. Some<br />
Villages will fix this fee from the date of<br />
your ORA, others will increase the fee tied to<br />
the consumer price index or the increase in<br />
the National Super rate, and others to account<br />
for the increased cost of services each year.<br />
There is usually another weekly service fee<br />
based on the extra services you require or<br />
opt for. There may also be other costs and<br />
you should carefully view all the Village<br />
documentation before you commit to avoid<br />
any surprises once you’ve settled in.<br />
While it is by far the most common approach,<br />
not all Retirement Villages use the ORA<br />
model. Some use different types of ownership<br />
structures such as unit titles and cross lease<br />
titles. It is important to be informed about<br />
the ownership model of any Village you are<br />
considering, and to get the appropriate legal<br />
and financial advice.<br />
The decision to move into a Retirement<br />
Village is not one you should rush. Think<br />
about the things that are “must haves” for<br />
you and pick a Village that enables you to<br />
achieve these goals. Look at different Villages<br />
and speak to the residents if possible, to<br />
ensure that the Village ticks all your boxes<br />
and involve your family and friends in your<br />
decision making process. At Harmans we<br />
have experience dealing with purchasing in a<br />
Retirement Village. Give Phillipa Shaw a call<br />
on 03 352 2293 to arrange an appointment to<br />
discuss your situation.<br />
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