Exit fees, refurbishment costs, and what comes out of your sale

Exit fees, refurbishment costs, and what comes out of your sale

The number that matters when you exit a retirement village is not the resale price. It is the net refund — what actually lands in your or your estate's bank account after every contractual deduction.

What gets deducted

A typical loan-licence or leasehold contract deducts the following from the gross resale or refund amount:

1. Deferred Management Fee (DMF). The largest deduction, typically 25% to 40% of the entry or resale price.
2. Refurbishment / reinstatement. The cost of restoring the unit for the next resident — paint, carpet, kitchen, sometimes full renovation. Can be $20,000 to $80,000+ depending on the contract.
3. Marketing and resale commission. Often 1.5% to 3% of resale price, sometimes capped.
4. Capital gain share. In some contracts the operator takes a share (often 50%) of any capital gain on resale.
5. Outstanding service fees. Weekly fees continue to accrue between the time you leave and the time the unit is resold — sometimes capped, often not.
6. Body corporate or sinking fund contributions. In strata structures.
7. Solicitor and discharge fees. Smaller line items, but real.

Worked example

Entry price $500,000. Resale price $550,000 after 5 years.

• DMF (5% × 5 years on entry price) = $125,000
• Refurbishment = $45,000
• Marketing commission (2% of resale) = $11,000
• Capital gain share (50% of $50,000 gain) = $25,000
• Net to resident: $344,000

The resident paid $500,000 to enter, and after 5 years receives $344,000. The unit "increased in value" but the resident's net position decreased by $156,000.

What state law requires

Each state's Retirement Villages Act imposes consumer protections:

• NSW. Operators must pay out the refund within a maximum buyback period (6 months in many cases for non-registered interest holders; longer for registered holders), and continue to pay weekly fees beyond a "no-fault" period (currently 42 days from permanent vacation, then progressively transferred to the operator).
• VIC. The Retirement Villages Act 1986 and subsequent reforms require disclosure and cap certain ongoing charges after vacation.
• QLD. The Retirement Villages Act 1999 requires the operator to buy back the unit within 18 months in some cases, depending on tenure type.
• WA, SA, Tas, ACT, NT. Each has its own buyback and ongoing-fee rules.

These rules vary by state and have been amended multiple times. Always check the current legislation, or have a solicitor confirm.

What to ask before signing

• What is the total of all deductions in a worst-case scenario?
• Who pays weekly fees while the unit is unsold?
• Is refurbishment capped, itemised, or open-ended?
• Does the operator share in capital gain — and how is "capital gain" defined?
• What is the buyback obligation if the unit does not sell?