Retirement village living: pros and cons
The number of retirement villages is only likely to increase to accommodate our ageing population. Retirement villages are an attractive option because they can offer a good balance between living independently and having access to support and healthcare. Villages comprise independent living options in a townhouse, villa or apartment, and (as needs increase) serviced apartments, care suites, rest homes, hospitals and dementia care units. Village living is becoming increasingly popular with a large percentage of residents reported as being happy with their experience.
Retirement villages are a lifestyle choice not an investment decision. There are many positives to the retirement village option including greater security, companionship, no house maintenance and access to support and healthcare. Downsides include limitations on the use of the unit, no capital gain and a deferred management fee structure. However, for most intending residents, financial considerations usually give way to the lifestyle offered.
The Retirement Villages Act 2003 (‘the Act’) provides that an intending resident must receive independent legal advice from a lawyer before signing an Occupation Right Agreement (‘ORA’).
How does this differ from usual home ownership?
Rather than buying the unit, a person is buying the right to occupy it and to use the facilities and services at the village. The ORA is not an interest in land. The resident does not acquire ownership rights. There are limitations on the use of the unit and who may stay in the unit with the resident. The resident does not have the right to assign their interest or rent out the unit.
How secure is the right to occupy?
All units in registered retirement villages have memorials on the title to the land where the village is situated. That gives the resident security over any individual or company that may have lent the operator money. Practically speaking, if the operator cannot repay the loan, the lender cannot evict the resident and sell the unit to recover their money.