Retirement villages: what you need to know

By Retirement Commissioner Diane Maxwell

Home is where the heart is.

It has your memories, maybe the trees you planted, familiarity and the neighbours you know.

But, at some point in life you may look up and decide it is too big for what you need now, it takes too much work, and you start looking at where to next. Where could be your next home?

Diane Maxwell in green on stairs

One of the downsizing choices is a retirement village.

Village residents tell me they started thinking about a village around two years before they actually moved in.

And then usually it was an event that made the final decision for them; a fall, an illness, a security scare.

The second thing they tell me is that there is a lot to take in, and a lot of paperwork.

They're not kidding.

There's your ORA, which is your occupation rights agreement, then the code of practice and code of residents’ rights and the disclosure statement.

You’ll be required to get independent legal advice to help you with all of that before you can become a resident.

We're working with the industry on some simplification of those documents but in the meantime let's list what you need to be thinking about.

ORAs and DMFs

First of all, when you buy into a village you typically buy an ORA (occupation rights agreement) which means the right to live there.

You're not buying the land or the building and you won’t get capital gains.

There are other models out there but that's the most common.

After a period of time, usually between two to five years, you will pay a deferred management fee or a DMF.

This is typically 20-30 per cent of your original capital.

I talk to residents who are happy in the village they're in and see the DMF as the price for being where they want to be.

I talk to others who have had a problem because they decided they wanted to move.

After you've paid the DMF the amount left may not be enough to buy into another village or get back into the property market.

Key Questions

There are some other key questions for you which you will find answered in the ORA and the disclosure statement.

  • Is the weekly fee fixed or will it increase year on year?
  • Will you be able to take your pet?
  • Are all the amenities listed in the sales materials actually built, and there, or still under construction?

Many modern villages have a pool and a gym, some have a cinema, hairdressers, and happy hour in the bar.

Just check what's there and what's still coming.

  • Always check the village is registered
  • and that it is a member of the Retirement Villages Association.

Both of those things offer you protection.

Need to know more?

The Commission is running free seminars for people thinking about living in a retirement village, with the details of where and when on our website.

We are a neutral source of information and it’s a great opportunity to ask questions.

The Retirement Commissioner is carrying out a three-yearly review of retirement income policies and would like to hear from you.

The answers you give to this short survey will feed into the recommendations she makes to the government.

Click here for the survey.

Editor's note: Views expressed by contributors are not necessarily those of the Office for Seniors