Is it necessary to obtain legal advice before signing a Retirement Village contract?

A prospective resident will notice a statement on the Retirement Village contract documents recommending that legal and financial advice be obtained. This statement must be included to comply with South Australian legislative requirements (Retirement Villages Act, 2016 – s21(2)(c)(iii)).

The statement alludes to the desirability of obtaining advice but the short answer to the question is “No”.

Although not a necessity there are many good reasons why a person should see a lawyer before signing the documents

1.  Retirement Village Contracts are Generally Lengthy and Detailed

The documents presented to a prospective resident will be lengthy and detailed. They will contain legal terms that need to be properly explained, especially the key terms relating to the financial contributions.

The sheer volume of the documents will be overwhelming. A lawyer familiar with retirement village contracts will be able to isolate the main components and explain the effect of the document in plain language.

2.  The Right to Occupy

The right to live in a retirement village unit is a very different right to ownership of a house and land. The ownership of a house and land entails a right to be noted as a registered proprietor on the Certificate of Title. This right enables the registered proprietor to sell the land along with any house erected on it. There is no right to acquire the title of a retirement village unit, rather the right is a right to occupy the unit or to lease the unit for a specified period, usually 99 years or until death.

Although there is no right to acquire a title there is a charge over the land which secures the debt owed by the operator to the resident.

The concept of “ownership” in relation to retirement village units is foreign to most people and a lawyer is able to explain the intricacies of the arrangement.

3.  Searches

Before advising a client a lawyer will carry out two important searches to ensure compliance by the retirement village operator.

The first search is a search of the Office of the Ageing records to confirm the operator is licensed to operate a retirement village.

The second search is a title search to confirm the land on which the retirement village is situated is endorsed for use as a retirement village.

Both searches are relatively easy to obtain however a lawyer is able to interpret the results of the searches and to advise the client of any anomalies and determine further action to be taken.

4.  Financial Contributions

When considering entry to a retirement village a person should take special note of the three categories of financial contributions;

  1. The ingoing contribution;
  2. The ongoing fees (usually described as the “the maintenance fees” or “general service charges”); and
  3. The exit fee (which encompasses a “Deferred Management Fee” and other outstanding charges).

A lawyer, and for that matter an accountant or financial adviser, is able to explain these fees and provide working calculations to the prospective resident detailing amounts required to enter, and continue living in, a retirement village unit.

This is probably the critical component of the contract and needs to be very carefully considered.

5.  The Village Rules

Attached to the Retirement Village contract will be the Village Rules. These rules govern the running of the village and set out the obligations of the operator and the resident. The rules will cover things such as;

  • The keeping of pets;
  • Visitors; and
  • Car parking.

A prospective resident should be aware of the rules before committing to life in a retirement village because the rules may have a substantial impact on a resident’s lifestyle and a breach of one or more of the rules may lead to termination of the contract.

6.  Financial Statements

It is a requirement of the legislation that the operator’s financial statement form part of the contract (Retirement Villages Act, 2016 – s22 (c)(i)). A lawyer, and again an accountant or financial adviser, should be able to advise whether the operator is solvent and whether there were any unusual items of expenditure that need to be questioned.

7.  Minutes of the Last Annual General Meeting

A prospective resident’s lawyer should spend time perusing the minutes of the last Annual General Meeting. This document will form part of the contract and will typically feature discussion on;

  • Increases in the regular maintenance fee;
  • Planned development for the village; and
  • Changes to the services offered to the residents.

Occasionally the minutes will also table questions from the residents and from this one can glean whether there is a happy and content mood among the residents or otherwise.

Conclusion

It is not a requirement to obtain legal advice before signing a retirement village contract but it is preferable.

The operators will encourage prospective residents to seek legal advice because it means they will be dealing with residents that are familiar with their obligations prior to entering the retirement village. Prospective residents will know where they stand in relation to their obligations. Unfortunately it is often the case that a material, and sometimes detrimental, contractual requirement is discovered when the resident is already ensconced in the village.

For further information please contact Mark Lumley on 8362 6400 or email Mark LumleyJoin our mailing list to receive updates and advice on current issues.

  • Mark Lumley

    About the author: Mark Lumley

    Mark is a highly experienced and efficient commercial and property lawyer. Mark makes sure he understands his client, their business and their desired outcome. He then works hard to deliver the very best and most cost effective strategies available.

    Call on 8362 6400 or .

    Full profile