Would you sign a contract with the word refurbishment in it?
From the recently held Parliament of Victoria inquiry into the retirement housing sector:
“An ongoing source of contention between retirement village residents and operators is the difference between the terms ‘reinstatement’ and ‘refurbishment’.
‘Reinstatement’ refers to the repairs necessary to bring a unit to the same condition as when the resident moved in; ‘refurbishment’ refers to works that improve the unit beyond that level.
Although retirement village contracts stipulate what residents must do on departure, evidence received by the Committee suggests that many residents do not fully understand this part of their contract.
A view also exists that when residents pay for refurbishment village owners benefit through receiving a percentage of an increased sale price.”
Ms Rachel Lane, Author and Principal of Aged Care Gurus made the following statement to the committee:-
“There tend to be two words that the industry use which sound very similar but have very different connotations. The industry use ‘reinstatement’ and ‘refurbishment’. Reinstatement is what most people think refurbishment is, which is basically put it back the way you found it — so a lick of paint, any damage that you have done repaired and steam cleaning carpets. Refurbishment means bring it up to today’s standard, whatever that standard is. People do not understand that those two words have very, very different connotations…
…for a prospective resident you are talking about a difference in reinstatement of $1500 or $2000, something like that, versus refurbishment, which can easily be $60 000 by the time you pull out all the carpet and put in a new kitchen and a new bathroom. So it is very different.”
Below is a typical clause from a contract presented for signing to a prospective resident, it includes the word ‘refurbishment’, Chattels, and that the resident must pay the cost of this work.
The following is generally included in contracts and details any chattels included on moving in and that on departure could include replacement costs within the total refurbishment costs.
Before signing a contract be sure to understand whether on departure you are responsible for either ‘reinstatement’ costs or the much more extensive and expensive ‘refurbishment’ costs.
The following graph indicates the impact an example $60,000.00 refurbishment cost can have on the outgoing refundable amount due for repayment.
Two points to note are:
- The lower the outgoing refundable amount the higher the percentage the refurbishment cost will take.
- Always remember that your outgoing refundable amount is a fixed amount and will be ravaged over time by inflation, what will the cost of ‘refurbishment’ be when it is your time to leave the village. What will the percentage be of your refundable amount at that time somewhere in the future, it is an almost certainty that the percentage will be higher than when you entered the village due to the ever increasing costs of refurbishment.