Law Talks Episode: Retirement Village Exit Fees – Don’t get caught by surprise!​

Robyn: Good morning and welcome to another edition of 4CRB’s law talks, and today we’re going to be talking about something that has had media attention but still may not be widely known. I’m talking about the unpleasant surprises many people face when trying to leave a retirement village.

To tackle this topic, today, we have joining us from Attwood Marshall Lawyers Wills and Estates Senior Associate and Accredited Aged Care Professional Larisa Kapur. Thanks for being here, Larisa.

Larisa: Thank you for having me, Robyn.

Robyn: For one reason or another, people who live in a retirement village may find it necessary to move out at some stage. Perhaps to move into an aged care facility or something better suited to their changing healthcare needs, but that can come at a significant cost. Isn’t that right, Larisa?

Larisa: That’s right, Robyn. It might be shocking to some but exit fees for retirement villages can be in the 10s of thousands of dollars, which many people might not be prepared to or can afford to, part with.

Robyn: Yeah, that seems excessive. We know that retirement village exit fees have been a point of contention for some time and they’ve been calls for urgent reviews into the legislation and structure regarding these exit fees. But until such time as the laws change to better protect consumers in this space, it’s important for people to understand what it might cost them if their circumstances change after moving into a retirement village.

Larisa, what can you tell us about how exit fees have caused a stir in retirement village communities recently?

Larisa: There are so many stories I could share about unassuming people who have been caught off guard come to the time they need to consider leaving the retirement village, or perhaps the retirement village closes down, and they have no choice but to leave, only to be hit with exuberant fees. One example is the story of Frank and Stella, so this was just a couple who moved into retirement village several years ago. So, Frank and Stella handed over about $326,000 for the privilege to live in a unit at a village on the Sunshine Coast.

So, unfortunately, as the years rolled on, you know the couple’s medical needs have increased and they needed to consider if they could stay at the village or at what point they may need to move into an aged care facility.

So, the fee the couple had paid to enter the facility was basically an interest free loan paid to the village operator rather than a purchase price. So, in addition to the ingoing contribution, Frank and Stella had been paying monthly fees similar to that of a mortgage or a rental, right.

Now, Frank and Stella assumed that they when they left the facility, they would get most of their $326,000 back that they gave in as that ingoing contribution. However, they were told that should they want to ever move out, it would cost them $87,000 in exit fees. In addition to the exit fees the couple would need to pay the cost to return their unit to its original condition, which includes, you know, lifting the floor tiles that they’d put in and restoring carpeted floors. And as you can imagine that also comes at a significant cost, so there’s absolutely needs to be more awareness around these issues as too many residents are getting caught way off guard and do not fully understand these types of issues prior to entering the facility to cause them extreme shock when they exit.

Robyn: Yeah, that’s an astronomical amount to charge someone when they need to exit a village, perhaps to move into aged care, or if the facility is closing down. What advice would you give to someone who might be considering exiting their current retirement village?

Larisa: Well, the most important advice I can give is to get legal advice from someone who understands the retirement villages industry and the complex contracts people sign when entering into a village.

So, retirement village agreements are known as one of the most complex financial contracts in Australia.

They are incredibly long documents and are really difficult to understand. So, an experienced lawyer who works in the space can help you decipher what your obligations are in the contract and what the village can and cannot charge you, ensuring you receive your full exit entitlement if you choose to leave that village.

So, a lawyer can also help you understand the steps you can expect when exiting a retirement village which must comply with the Retirement Villages Act and other relevant, you know, legislations.

So, if a dispute arises between a resident and village, the village they reside in, a lawyer can also represent the resident’s interest and help them resolve these issues efficiently.

So, at the end of the day, I guess what you want to avoid is spending unnecessary money on fees and charges that you shouldn’t have to pay or legal fees if you are embroiled in a dispute that could have otherwise been avoided by just getting that proper advice.

Robyn: Yeah. Larisa, what steps will a lawyer take if you have decided to exit your retirement village and need some guidance.

Larisa: Well, it’s a multiple step approach.

So, step one, the lawyer will review the contract to stipulate the terms and conditions of your residency, including the exit process, fees, and any restrictions. The main focus will be on exit fees, notice periods and refurbishment obligations.

Step 2, your lawyer can assist you in providing formal notice to the village operator of your intention to leave. The notice period can vary, so it is essentially to comply with the terms specified in the contract that you have signed.

Step 3, your lawyer can help you understand any refurbishment obligations you must adhere to and may assist in negotiating these terms with the village operator.

Step 4 would be usually to determine the value of the unit, so this can be done through an independent valuation or by the village operator themselves. Your lawyer will coordinate the valuation and ensure it is fair and accurate, and then oversee the sale commissions and other aspects of the sale to ensure that the process is transparent. Some contracts include pre-emption rights., giving the village operators or other residents the first option to purchase your unit. Your lawyer will ensure that these rights are handled correctly.

Lastly, let’s say once the unit is sold, your lawyer will take care of the settlement process, including ensuring that the exit entitlements are calculated correctly and make sure you receive these entitlements promptly. Again, if disputes arise at any stage during this process, your lawyer will be able to represent you and your interests and advocate on your behalf in negotiations with the village operator.

Robyn: And what’s the final takeaway you want to leave our listeners with to ensure they are informed and prepared, should they be considering leaving their retirement village?

Larisa: Well, don’t discount the need to seek legal advice in these circumstances, particularly on entry and on exit from the retirement village. It’s usually not until you choose to exit a facility and start getting these nasty surprises that you realise what you are up against.

More times than not, all of this is in the contract that you signed when entering the village, but it is incredibly difficult to understand these documents and know if you’re being taken advantage of.

So, engaging a lawyer who’s experienced in the aged care and retirement sector when exiting a retirement village in Queensland will help you navigate the complex legal and financial landscape, and by doing so, I mean a lawyer will ensure that your rights are protected and help you achieve a smooth and fair exit from the retirement village.

Above and beyond all of this, Robyn, my advice would be to get advice before entering a retirement village. Have a lawyer run through the agreement with you thoroughly so that you know what you are agreeing to and what your obligations will be.

Remember, knowledge is power, and you can plan for the future better if you know all the information you need to upfront so that you can make an informed choice to protect your best interests.

Robyn: Yeah, it’s interesting, isn’t it? Nothing ever really stays the same and people circumstances can change, so best to know what you’re going to be up for if and when your circumstances do change.

Larisa: Exactly.

Robyn: Great advice today, Larisa. And I’m sure this particular topic was relevant and extremely helpful to many of our listeners today. Thanks for joining us.

Larisa: Thank you for having me.

Robyn: You’ve been listening to law talks here on 4CRB, which you can hear every Friday morning from 9 o’clock.