LegislationRetirement Villages

Retirement Village Legislators and Regulators

Retirement Village Legislators and Regulators should have an strong understanding of the issue upon which they are about to make or amend laws. It is doubtful this is the case when it comes to retirement village laws given the grossly different financial outcomes for each party and the current high level of angst among residents, advocates and professional advisors at this time.

Few retirement village  legislators and regulators understand the chart below, they are unable to fully grasp the financial destiny of the two parties in a retirement village, the operator and the resident. This destiny for each party is determined by legislation and business models sanctioned and encouraged by successive federal and state governments. It is easy to lay blame at private enterprise but they can only operate within a commercial environment permitted by laws that are made by governments.

“Any Retirement Village Legislator or Regulator with an understanding of the financial outcomes and how they occur for both the Operator and the Resident could not earnestly write or support the meager changes to the laws proposed” RETVILLDOTNET

It needs to be noted here that in the general residential rental market the return to a landlord is generally in the order of a 5% rental return plus any capital gain. There can be limited security of tenure for the resident although laws in Victoria have just been changed to improve this situation. The house/unit/complex in which the rental accommodation is provided as in the case of  a retirement village may have recreational facilities, the resident may or may not use these recreational facilities.

For a retiree wishing to enter the general residential rental market the cost of the accommodation is known up front and the process and market dynamics are well understood by both the retiree and their professional advisors. The retiree in the residential rental market DOES NOT have to pay a substantial in-going amount equal or near the value of the property, pay monthly maintenance and administration fees, pay refurbishment and administration costs on leaving the property nor have inflation decimate the present day value of any capital base of the retiree on executing an occupancy agreement. Any capital base held by the retiree on entering this type of accommodation contract is retained by the retiree and can be invested for a financial return.

However for a retiree wishing to enter a retirement village the full cost of the accommodation is not always known up front and the process and market dynamics are not always well understood by the retiree or their professional advisors. The retiree wishing to obtain residential accommodation in a retirement village DOES have to pay a substantial in-going amount equal to or near to the value of the property, pay a non-refundable fee in the order of 35% of the in-going amount charged, loan to the operator the remaining 65% of the in-going amount at 0% interest  not to be repaid until the retiree leaves the village, pay monthly maintenance and administration fees, pay refurbishment and administration costs on leaving the property, suffer the impact of inflation over the duration of occupancy on the present day value of the 0% loan amount.

The table below show the financial destiny of the two parties in a retirement village occupancy agreement. With an in-going charge of $850,000.00 and given the general parameters as described above the financial destinies of the operator and the resident after 7 years is:-

  • $1,990,697.00 for the operator (Deferred Management Fee 35% of entry price – 100% of the capital gain)
  • $    242,773.00 for the resident (Deferred Management Fee 35% of entry price – 0% of the capital gain)

Retirement Village Legislators and Regulators

Any Retirement Village Legislator or Regulator with an understanding of the financial outcomes and how they occur for both the Operator and the Resident could not earnestly write or support the meager changes to the laws proposed.

Retirement Village Legislators and Regulators.

Retirement Village Legislators and Regulators

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