20 questions to ask before signing a village contract

20 questions to ask before signing a village contract

The sales tour is designed to make you feel comfortable. The contract is designed to bind you for years. Use these questions on the tour, then verify every answer in writing in the Disclosure Statement (or your state's equivalent) before you sign anything.

Contract structure

1. What is the legal contract type — loan-licence, leasehold, or strata? Ask for the exact wording, then ask your solicitor to confirm.
2. Will I be on the Certificate of Title?
3. Under which Act does this village operate? "Retirement Villages Act" or a land-lease Act — the answer dictates everything else.

Money in

1. What is the entry price for this exact unit, in writing?
2. What does the entry price legally buy — a loan, a lease, a freehold lot?
3. Is stamp duty payable?

Money out

1. What is the DMF — base, rate, cap? Get a worked example for 1, 5, and 10 years of occupancy.
2. Is the DMF based on the entry price or the resale price?
3. Who keeps the capital gain on resale?
4. What refurbishment or reinstatement costs am I responsible for on exit, and is there a cap?
5. What is the maximum total of all deductions in a worst-case exit scenario?
6. How long must I wait for my refund if the unit has not resold?

Recurring costs

1. What is the current weekly fee, the budget that supports it, and the 5-year history of increases?
2. What is included, and what is billed separately? (Water, council rates, building insurance, capital works levies.)
3. How can the fee be increased — CPI, by vote, by what mechanism?
4. Is there a sinking fund, and what is its current balance?

Operations and care

1. If my care needs increase, can I stay in the village? What additional services are available, and at what cost?
2. What happens if I need residential aged care — is there a co-located facility, and what is the actual transition rate of village residents into it in the last 12 months?
3. What is the village's resident-funded committee structure, and what powers do residents have over budget, capital works, and operator decisions?

Operator

1. Who owns the village, what is their financial position, and how long have they operated? A loan-licence resident is an unsecured creditor — operator solvency matters.

What to do with the answers

Take the answers home. Cross-reference each one against the Disclosure Statement, the contract, and the village budget. Anything verbal that is not also in writing does not exist as far as the law is concerned. If the operator declines to put a verbal commitment in the contract, treat that as the answer.

Then take the lot to a solicitor who specialises in retirement village contracts. A 90-minute consultation costs a few hundred dollars and may save you tens of thousands.