Retirement village contracts are a bit like marriage – they are a little bit harder to get out of than to get into.
There is a variety of what are compositely called “exit fees” that will apply when leaving the village.
These fees are uniquely applicable to retirement village contracts. They are not found in more “normal” contracts for the purchase and sale of residential homes, and as such often catch people by surprise.
For the most part the fees are non-intuitive – they don’t seem to make a lot of sense. For example, in almost all retirement village contracts there will be what is usually called a deferred management fee. This fee is usually expressed to be a fixed percentage per annum of occupation. The deferred management fee might be, for instance, 3% per annum for a maximum of 10 years. Using this example, if you were in occupancy for 10 years you would have 30% deducted from your initial ingoing purchase price.
One would be forgiven for questioning the fairness, or sense, of this, given that there are also weekly or monthly service fees to be paid during the entire period of the occupation.
There can be a variety of other exit fees. One sees contracts with up to five separate categories of exit fee. One of the other common exit fees is the refurbishment costs.
Most of these fees can be calculated precisely at the time of signing the occupancy contracts. It is this firm’s practice to provide potential purchasers with a spreadsheet showing, as far as possible, what will be involved in terms of exit fees when the purchaser leaves the village. This often causes some significant surprises. But it is best to be forewarned.
A person entering a retirement village should have in mind that they could lose up to 30% or more of their initial ingoing purchase price in exit fees.
It is all there in the contractual documentation, often buried in fine print, and often very difficult to decipher even for solicitors.
It is best at the very start to know what it is going to cost to get out.