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Investigation of Aveo Highlights Transition to Care Issues


Elderly Should Obtain Proper Legal and Financial Planning Advice Before Signing Retirement Village Contracts

The recent exposé of AVEO by the Four Corners program and the Fairfax Media has highlighted the importance for retirement age people to obtain proper legal and financial advice before entering into retirement village or nursing home contracts.  Wills and Estates partner Angela Harry discusses some of these issues.

The issues identified in the Four Corners program concerning AVEO Retirement Villages are nothing new.  Despite the introduction of specific legislation in both Queensland and New South Wales in order to protect elderly couples and singles when they enter into contracts with companies running retirement villages, this has not prevented the apparent exploitation of retirement village residents by introducing onerous terms and conditions in their agreements.  Quite often these agreements contain the following:-

  • “Exit Fees” of between 25-40% of the initial purchase price (known as the “ingoing contribution””) for the retirement village unit from the date of entering into the agreement until it is sold;
  • Payment to the village of 50% of any capital gain (however the resident is usually responsible for 100% of any capital loss);
  • “Refurbishment Fees” are charged to the resident which effectively passes on the cost of a complete refurbishment of the unit (sometimes this can be as high as $40,000.00);
  • Legal Fees incurred by the retirement village operator which can amount to thousands of dollars;
  • Having a virtual monopoly with respect to the sale of any unit in the complex by banning external real estate agents. In this way they regulate to whom and for how much exiting residents can sell the unit. There is also a sales fee (usually a further % on the value of the property).

Unfortunately the % figures in the agreements are often complex and difficult to understand. In most instances the resident who has purchased the retirement village unit will live there until they pass away and it is only when the family members sell the unit that the actual cost is realised. We have had a number of estates of late where the exit fees have been in excess of $100,000 for residents who have lived in the unit for only 2 or 3 years!

These are just the highlighted terms and conditions that are included in many of the agreements that residents enter into when they agree to move to a retirement village or similar nursing home complex.  In many cases the agreements are leasehold and not freehold.  This means that the resident only has a lease of the unit (usually whilst they are alive) and the transfer of the lease is subject to the consent of the retirement village operator.  There can be issues when the company that is the retirement village operator goes into liquidation or is insolvent.  Although the legislation protects the interests of the residents if this occurs, there is still a lot of red tape associated with selling or transferring the leasehold interest to a new owner.  If the retirement village operator does go into liquidation or enters into some form of financial administration, this is a clear disincentive for any “new buyers” of the units.

The transition from owning your own home or unit to moving into a retirement village is a very complex one.  Not only are there lengthy agreements and legal notices that you need to sign in relation to the retirement village, there are also potential issues with selling your home and how this affects your Centrelink benefits.  This is particularly relevant if the value of your family home exceeds the bond or leasehold amount that you are paying for your retirement village unit.  It could well be that by doing this you would impact your entitlement to Centrelink benefits either totally or partially.  It is very important that you obtain legal advice and financial planning advice from professionals who specialise in this particular area so that you can ensure that your interests are properly protected both from a legal stand point and financially.  We have advised many clients who have entered into agreements with retirement villages and have paid significant amounts by way of a bond or leasehold lump sum without obtaining any legal advice as to the agreements that they have signed or obtaining any financial planning advice with respect to their ongoing taxation and Centrelink benefits. On many occasions the Retirement Villages urged the clients to sign agreements without appropriate legal advice indicating the documents simply require a lawyer to ‘witness’!

It is very important that all people who are looking to move into a retirement village “shop around” and compare the various retirement villages and other care facilities that are available in the market.  Once again, having an experienced legal practitioner, accountant and/or financial planner who deals in this area regularly will assist you in investigating which is the best option for you both from a physical care perspective and ensuring that this is also the best financial solution for you. The exit fees and other amounts payable are triggered after certain time periods and only after you leave or pass away. It is very important that you properly understand these critical issues before entering into these agreements.

Many clients do not understand the difference between freehold title and leasehold. Most people have owned their properties as freehold land with a title deed. The majority of retirement villages are leasehold arrangements.

Fortunately, there has been a marked increase in the number of different retirement villages and care facilities that are available on the open market which has led to greater competition in the industry with lower exit fees and more generous terms and conditions.  The market on the Gold Coast and Northern New South Wales area is particularly competitive and the opening of new facilities with surplus rooms has further led to a reduction in these terms and conditions.

Like most things, people need to undertake appropriate enquiries and due diligence with respect to the retirement village that they wish to reside in, quite often for the rest of their lives.  This is a very important decision and equally important that residents take the time to carefully weigh up their options and obtain the correct advice.  We reiterate that people considering the transition to care should obtain proper legal and financial planning advice from professionals who have experience in this complicated area before they sign or agree to any terms and conditions.  Attwood Marshall has a long history of acting for retirement clients and advising them in relation to these issues.  We also have accounting and financial planning professionals who specialise in this area and can assist with all relevant issues involving a transition to care.

On the 7th July 2017, the Queensland Government announced it will be introducing legislation to further regulate retirement villages in that state. Premier Anastacia Palaszczuk issued a statement that a bill will be introduced into Parliament ‘soon’ to give clear and stringent protection to seniors living in retirement villages and aged care complexes in Queensland.

My government consulted widely over the past 18 months and it’s very clear that the rights of people who live in retirement villages just aren’t in line with the expectations of the community,” Premier Palaszczuk says.

We intend to put in place a new staged pre-contractual disclosure process, limits on rent increases and minimum behavioural standards for park owners, staff and home owners,” she says.

This gives some hope to Queensland residents that there will be some relief in sight. It remains to be seen if NSW takes the same approach.

Contact Details

You are welcome to contact our office with any enquiries concerning Retirement Village Agreements, transition to care arrangements and estate planning advice. Please contact our Wills and Estates Department Manager, Donna Tolley on direct line 07 5506 8241, email or free call 1800 621 071 to book your free 30 minutes estate planning review appointment with one of our dedicated Estate Planning lawyers.

We have a dedicated Wills and Estates team that practices exclusively in this complicated area. Please click here to access our team brochure with details of our professional staff.

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Angela Harry

Angela Harry

  • Partner
  • Wills and Estates
  • Direct line: 07 5506 8211
  • Mobile: 0423 773 686