Retirement villages play a vital role in helping older Australians live safely and independently. Understanding how exit fees work and what happens if a village closes is key to making confident, informed decisions, writes Attwood Marshall Lawyers Wills and Estates and Aged Care Partner and Accredited Aged Care Professional Debbie Sage.
Retirement villages have become an important part of Australia’s aged care landscape, offering residents independence, security, and social connection within a supportive community environment.
While most residents enjoy long and fulfilling years in their villages, challenges can arise when it comes time to leave – especially when complex financial arrangements such as exit fees are not fully understood from the outset.
In rare cases, village closures can create unexpected financial and emotional stress for residents. The key issue isn’t that the model is unfair, but that many people enter these agreements without obtaining proper legal or financial advice to help them understand all possible scenarios.
Understanding exit fees
When someone moves into a retirement village, they usually pay what’s known as an ingoing contribution. This doesn’t always mean you own the property; it’s typically a right to reside in the unit and to enjoy the village’s services and amenities.
Exit fees (sometimes called deferred management fees or exit entitlements) are standard across the industry.
There are three main contract types: Later, Now, and Bond. The “Later” option is often the most popular, offering a lower upfront cost but a higher deferred management fee when the agreement ends.
For a detailed breakdown of how these models differ, read more here: Retirement Village Agreements.
Residents should also be aware of other potential costs, such as general services charges which cover the ongoing costs of management, maintenance and utilities, and refurbishment fees when vacating their unit. These requirements ensure the accommodation remains in excellent condition for future residents but can still come as a surprise if not clearly understood at the start.
Why informed advice matters
A recent example shared by Aged Care Senior Associate Larisa Kapur during a radio interview, highlights the importance of getting clear advice from the start. In this example, Frank and Stella, a Sunshine Coast couple, paid over $326,000 to enter their retirement village. When their health later required a move to aged care, they learned that exit fees and refurbishment costs would reduce their return by more than $87,000.
Their situation underscores not a failure of the village, but rather the need for residents to seek guidance before signing any agreements, and again before exiting – to ensure they fully understand the financial implications of their contract.
When a village closes
Although uncommon, retirement village closures can have a major impact on residents. Current legislation allows operators to charge exit fees when agreements end, even when the closure was beyond a resident’s control.
This issue has been in the spotlight over the years, with legislative change yet to unfold.
The Retirement Villages Association recommended as far back as 2012 that the government work with the aged care sector and residents to make sure the legislation clarifies the extent of a resident’s financial obligations in the event of closure.
A 2017 ministerial review of the Retirement Villages Act 1999 also recommended legislative changes to ensure residents were better protected when a village closes.
In the same report, National Seniors Australia and the Association of Residents of QLD Retirement Villages pushed for government regulation, noting that village closures fall outside the control of residents and can significantly impact their ability to afford future housing.
This is why ongoing discussions about consistent national standards are so important.
What aged care and health professionals can do
If a resident or patient mentions they’re thinking of entering or leaving a retirement village, encourage them to review the terms of their contract and seek expert legal and financial advice. These contracts are lengthy and complex, and every village operates under slightly different financial models.
An Accredited Aged Care Professional can help residents understand:
- What fees or refunds apply if they leave voluntarily or due to health reasons;
- What happens in the rare event of a facility closure; and
- How to negotiate fair refurbishment or administrative costs.
Having this advice early can help avoid financial surprises and support smoother transitions to the next stage of care.
Knowledge is power, and in the case of retirement village exit fees, it can mean the difference between financial security and hardship in the final chapter of someone’s life.
Built-in protections for residents
Retirement village agreements include several consumer protections, such as:
- A three-month settling-in period, allowing residents to change their mind shortly after moving in;
- A six-month move-in guarantee, providing further flexibility if the community isn’t the right fit; and
- The right to terminate a contract if the information provided before signing was false or misleading.
These safeguards reflect the sector’s commitment to fairness and transparency.
The takeaway
Retirement villages enhance the lives of older Australians by offering safety, community, and connection. The key to a positive experience is entering with eyes wide open, understanding how exit fees work, what might happen in the event of a closure, and how to protect your financial interests.
With the right guidance, residents can enjoy all the benefits of retirement village living with peace of mind for the future.
Attwood Marshall Lawyers – helping people at every stage of life
Our experienced Aged Care and Property Law teams can assist with all facets of the transition to retirement living. We can help individuals with selling their home once it becomes too much to manage, right through to relocating to a retirement village or aged care facility, and updating their estate planning documents, to ensure their best interests are always protected.
If you would like to speak to our dedicated elder law team, please get in touch with our Wills and Estates and Aged Care Department Manager, Donna Tolley, on direct line 07 5506 8241, email dtolley@attwoodmarshall.com.au or book an appointment online instantly by clicking here.
