Before buying an apartment in a retirement village, it’s a requirement under the Retirement Villages Act 2003 to secure independent legal advice – a reflection of the fact that there are pros and cons that need to be carefully weighed before signing on the dotted line.
Warkworth lawyer Ben Lupton, of Insight Legal, says retirement villages offer people a certain kind of lifestyle and whether or not buying into one is the right decision depends very much on the individual and their circumstances.
For the person who feels overwhelmed by trying to maintain their existing home and would appreciate the security of a gated community, the companionship of like-minded individuals, plenty of social activities, and ready help should they get into difficulties, then an apartment in a retirement village might well be an excellent choice.
Moreover, villages can be great for giving residents and their relatives’ peace of mind. Residents who go away on holiday can be sure that their home is secure, their mail taken care of and perhaps even their plants will be watered.
Furthermore, a resident will have fewer worries about how their surviving spouse will cope should they die. Meanwhile, residents’ children, who may live far away or even overseas, have the comfort of knowing mum and dad are in a safe place.
Assuming all this is appealing, Ben advises clients that they should also think about what happens if they suddenly become less mobile and more dependent. Does the village offer long-term residential or hospital care?
Other pertinent questions to ask about are the village’s facilities and policies relating to pets, parking and visitors. Is the resident allowed to have grandchildren to stay?
Ben also recommends shopping around. Different villages have different fee structures and some operators allow intending residents to move in for 90 days and then move out if they don’t like it. But, he says there are often strict rules around exercising these kinds of rights and it pays to get advice first.
On the other side of the coin, Ben says that as a rule, residents never actually own the apartment they buy, even though they have the right to live in it. This means if the value of the apartment rises over time then the resident does not benefit from any capital gain.
When residents vacate their apartment – either through death or other circumstances – then they or their estate will receive back from the village operator only what they paid for the apartment, less any outstanding management fees, and these fees can typically be 20 to 30 per cent of the value of the apartment.
Ben says some seniors are concerned that this will mean they will have less money to leave to their children. If that is the case, then it would be worth having a family conference to discuss the implications before making a decision.