Retirement villages

While retirement villages offer elderly Australians, particularly those not requiring high levels of care, greater freedom in their older years, the status of the ownership of any property they inhabit or, indeed, already own, can be unclear. As such, potential residents must be absolutely and unequivocally clear as to the conditions under which they are granted a right to occupy any residences within a retirement village and what will happen to that residence should they die.

Introduction to key legislation

All retirement villages in Victoria are subject to the Retirement Villages Act 1986 (Vic) (“RV Act”).

In 2006, the RV Act was significantly amended to protect people who enter into agreements with retirement villages. Since 1 August 2006, such people have received the full protection of the RV Act (as amended); however, most of the 2006 amendments were not retrospective (i.e. the amendments did not change agreements entered into before 1 August 2006).

In 2013, the RV Act was again significantly amended by the:

Retirement Villages Amendment (Information Disclosure) Act 2013 (Vic) (“RVA (ID) Act”);

Retirement Villages Amendment (Records and Notices) Regulations 2013 (Vic) (“RVA (R&N) Regulations”);

Retirement Villages Amendment (Contractual Arrangements) Regulations 2013 (Vic) (“RVA (CA) Regulations”).

These amendments took effect on 1 July 2014.

These 2013 changes place new disclosure obligations on retirement village managers and owners, designate the layout of residence and management agreements, and dictate what must and what cannot be included in these agreements. Although some financial matters must be disclosed in the pre-contract documents, the parties are still largely free to negotiate ingoing and outgoing financial arrangements. However, a prospective resident is better able to compare villages before selecting one, due to the introduction of the fact sheet and the expanded disclosure statement.

The RVA (R&N) Regulations require a village owner or manager to provide a fact sheet to a prospective resident within seven days of an oral or written request. A heavy penalty applies if a fact sheet is not provided when requested. There are 39 different issues that the fact sheet must address.

Also, under the RVA (R&N) Regulations, an expanded disclosure statement must be provided (along with the residence documents) to a prospective resident no less than 21 days before any residence agreements are signed.

A prospective resident can also inspect village documents (specified in reg 11 RVA (R&N) Regulations).

The RVA (CA) Regulations include matters that must and must not be included in the residence and management contracts. The layout of these contracts is also prescribed by the Regulations. It is not permitted to contract out of Regulations 8B, C, E and F. Any provision that does not comply is void and severable from the agreement, but does not make the agreement void.

The 2013 Regulations allow prospective residents to access far more information about retirement villages. However, it is strongly recommended that a lawyer check all the documents before they are signed. Under the RV Act (s 19(i), (ii)), there must be 21 days between the date the prospective resident receives a contract and other residence documents, and the date upon which these are signed.

The RV Act defines what constitutes a retirement village and seeks to protect residents. It requires the land owner to register a retirement village notice on the title to village land before entering into any contract or agreement with a potential resident.

In parts 3 and 5, the RV Act gives additional protection to “non-owner residents” (i.e. those residents who do not hold an estate) in fee simple as registered proprietors; in particular it gives them a charge over the title to the village land to protect their interest.

Leases and other arrangements

Many retirement village owners retain ownership of all land in the village and offer a prospective resident a lease or licence of a unit or apartment for life or for a fixed long-term period, in return for payment of a substantial sum of money, which is often referred to as a loan or ingoing contribution. Most loans are repayable (subject to deductions) after the resident dies or leaves the village. Often repayment is delayed until the resident’s unit is re-sold or re-let.

However, in the case of agreements with “non-owner residents” entered into after 1 August 2006, the village owner or manager must repay the amount due to the resident within six months after the non-owner resident has delivered up vacant possession of their unit (unless schedules 1 or 2 and schedules 3 or 4 of the Retirement Villages (Contractual Arrangements) Regulations 2006 (Vic) (“RV(CA) Regulations 2006”) are incorporated into the agreement). The RV (CA) Regulations 2006 also require a village owner to repay some or all of the loan to a non-owner resident earlier if the money is to be used for an accommodation bond in a residential care facility within the meaning of the AC Act.

In the case of an owner resident, if their agreement has been entered into after 1 August 2006, the village owner must repay the loan within 14 days of settlement of a re-sale or after a new owner takes up residence.

The RV Act requires a potential resident to be given the residence documents at least 21 days before signing, and also provides a three-day cooling-off period after signing.

If it is proven that a person has been given false or misleading information, they may be able to avoid the contract even after they have settled and entered into the village.

Fees and charges

The RV Act restricts the right of a village manager to increase ongoing maintenance charges above the consumer price index unless the increased charge has been approved by a resolution of a majority of the residents or is approved by resolution of the residents’ committee. The Australian Consumer Law and Fair Trading Act 2012 (Vic) applies to services or goods provided under a residence contract and to the acquisition of a residence right irrespective of the amount of the price paid.

Most retirement village agreements provide for the resident to pay a deferred management fee (DMF) on leaving the village. This is usually a percentage of the re-sale or re-letting ingoing or of the original ingoing calculated from the commencement date until a new resident takes up occupation. Sometimes calculations of DMF reach a peak after five years, and others over 10 years. Maximum DMFs usually peak at 25–35 per cent, but this is not always the case.

An outgoing resident must usually pay any repair and refurbishment costs of the unit, which are deducted from the amount they receive when leaving the village. This may include bringing the unit up to a standard so the property fetches the best market price (e.g. replacing bathrooms and kitchens).

Often a contribution to a long-term maintenance fund is required when a resident leaves the village.

The right of the resident to any capital gain upon re-letting of a non-owner resident unit can vary from village to village; it should not be assumed by the resident that this will always be the case.

Village owners are no longer allowed to charge residents for personal services for more than 28 days after the resident vacates the village, and non-owner residents are allowed to be charged maintenance charges only up to a maximum of six months from the date on which the resident leaves the village. However, owner residents are still required to pay maintenance charges until settlement of any re-sale of their unit.

Other charges may involve a commission to the village manager for re-letting the resident’s unit, although in respect of agreements entered into on or after 1 August 2006, non-owner residents can advise the village owner that they wish the premises to be sold through an independent estate agent pursuant to schedules 1 or 2 of the RV(CA) Regulations. Owner residents who entered into contracts after 1 August 2006 are also entitled to use independent estate agents to sell their units, and the village manager is required to cooperate or face resolution of the dispute by VCAT. The incoming resident must agree to sign a management contract.

Annual meetings and reports

The RV Act requires the village manager to convene an annual meeting of residents. The village owner is required to present an annual report, which must be audited unless (at the annual general meeting held in the preceding year) the residents voted by special resolution to dispense with the auditing requirements.


Disputes between residents, or between residents and village owners or managers, are to be dealt with by mediation. Consumer Affairs Victoria is the first point of contact for residents (for CAV’s contact details, seeContacts”).

Village managers are required to set up a dispute resolution and complaints handling system to deal with disputes between residents and complaints against the operator.

Proxies and power of attorney

Proxies are not allowed to be sought or accepted by village operators from residents (unless they are relatives). Any provision in a contract requiring a resident to give a proxy to the village manager or owner is void. Section 40 of the RV Act provides that the enforcement provisions of the Australian Consumer Law and Fair Trading Act 2012 (Vic) apply to retirement villages.

The village operator is not permitted to require a resident to give it power of attorney unless the power of attorney was already given in an agreement signed prior to 1 August 2006.

General laws

The Australian Consumer Law and Fair Trading Act 2012 (Vic) deals with misleading or deceptive or unconscionable practices in trade and commerce (see Consumer protection laws).

Note also that the Australian Competition and Consumer Commission may investigate cases of widespread and significant detriment to consumers.