- What type of contracts are residents asked to enter into?
The type of contract a resident will be asked to enter into to live in a village will vary from village to village. However, the most common financial structure in retirement villages is the loan/lease arrangement. Under this arrangement, a resident is required to enter into any one or more of the following:
A residence contract such as a registrable lease or a licence
This document sets out the terms and conditions on which a resident will occupy premises within the village. It will set out the key terms of the agreement and deal with financial matters such as the entry payment, calculation of a departure fee and payment for recurrent charges. If the contract takes the form of a lease, it will be registered with Land Titles, ACT.
A loan agreement
This generally takes the form of a simple loan agreement under which the entry payment is loaned to the operator with an obligation to repay the loan within a specified period. No interest is payable on the loan.
A service agreement
This is usually only required when a separate entity is providing services to residents at a village. This document will set out the services to be provided and the amount of recurrent charges payable by residents to the service provider.
A resident may also be required to enter into a separate agreement for the use of a garage or parking space.
A village contract must include certain details that are set out the Retirement Villages Act 2012 (ACT) and the Retirement Villages Regulation 2013 (ACT).
- How is the entry payment paid?
- The resident will first pay a reservation deposit to reserve a unit in a village. This is often a small amount in the order of $1,000. This amount to be paid to a solicitor or agent to hold in trust. A reservation deposit must be refunded to a resident on demand until such time as the resident enters into a village contract.
- When a resident signs a village contract, the documents are returned to the operator’s solicitor with the balance of the deposit. The signed documents must be returned no earlier than 14 days after the resident received them. The balance of the deposit is also held in trust until the full entry payment is paid by the resident. It is fully refundable until that time.
- When the premises are ready for occupation, the balance of the entry payment is paid and the resident is given occupation on that day.
- What is a registered interest holder and non-registered interest holder?
A registered interest holder must have a registered long term lease (being 50 years or longer) and be entitled to at least 50% of any capital gain on the re-lease of the premises. A non-registered interest holder is any other resident who does not meet this criteria.
- What security does a resident have under the retirement village laws?
Prior to entering into a village contract, the operator must lodge a notice with Land Titles, ACT that the land comprising the retirement village is used as a retirement village. Once this notice is registered, a charge is created over the land securing any amount owed to non-registered interest holders under a village contract. Registered interest holders have security in the form of a registered lease.