More aged-care payment choice will add to complexity and confusion

Why will more aged-care payment choice will add to complexity and confusion? Well, deciding to move into a retirement home or a retirement village may seem a sensible option in a person’s senior years. However, the retirement home industry is a Byzantine one. Worse, it requires many documents to be read and absorbed and decisions to be made involving large sums of money.

Aveo… provides potential residents with nearly 200 pages of paperwork

Ultimately residents (and their families) must understand that they are making a lifestyle decision and not a financial investment when they enter a retirement village.

Operators come under criticism

Retirement village operators have come under criticism recently because of ‘management fees’ that many charge on their units. When a person sells the unit a large percentage of the value of the unit can end up with the operator.

The recent news that big retirement home operators are introducing new payment options for management fees may mean more choice for consumers. However, the changes will doubtless further complicate an already obscure industry.

Up to 200 pages of paperwork simply add to the confusion

Aveo, one of the large players in the retirement village market, provides potential residents with nearly 200 pages of paperwork to work through when they are considering to move into one of its villages. This includes a residence and management contract (56 pages), a personal services agreement (40 pages), a licence deed (46 pages), a user-pays personal services agreement (12 pages), a disclosure statement (10 pages), a fact sheet (10 pages) and a loan agreement (8 pages).

Ownership in the retirement village sector is widespread

Lendlease puts a 48-page residence and management contract in front of all potential residents, in addition to a fact sheet and disclosure statement.

New Payment Options

Now Lendlease is offering three new payment options for residents to pay management fees. These are a prepaid plan, a refundable contribution option or a pay-as-you-go scheme. Another retirement village giant, Stockland, is introducing its own alternative payment option. Meanwhile, Aveo is attempting to ‘simplify’ its payment methods.

Ownership in the retirement village sector is widespread, with the top five operators controlling only 28 per cent of the market. The balance is controlled by community and church-run not-for-profit operators and smaller owner-operators.

Standard contracts may still apply

Lendlease has announced it will still offer its standard contract. Residents can pay to live in a retirement village. Then, when they leave they receive the sale price less a deferred management fee (up to 35 per cent of the sale price). Leanlease will also deduct any reinstatement fees and selling costs.

Lendlease’s prepaid plan gives residents the option of paying management fees upfront (around 18 per cent of the cost of the unit). However, they then receive all capital gains upon leaving, less reinstatement fees and selling costs.

Refundable contribution option and Pay-as-you-go

Under the refundable contribution option, management fees are refunded in full within two months of the resident leaving the village, less a non-refundable establishment fee of 3 per cent, charged upfront.

several state governments announced enquiries into the secto

The pay-as-you-go option – only available on serviced apartments – allows a resident to pay a monthly charge and a security deposit equal to two years’ worth of ‘rent’. The security deposit is refunded within two months of a resident leaving, less an establishment fee equal to three months’ rent.

Governments intervening in the sector may force providers to simplify offerings

Retirement village operators have been under pressure since last year’s expose on Aveo by ABC’s Four Corners and Fairfax Media, which uncovered a raft of problematic actions and practices.

Following this coverage, several state governments announced enquiries into the sector. The results to date have been mixed. For example, in Queensland, legislation was introduced to help safeguard the rights of potential residents. However, the industry has agreed that it needs to simplify things.

4 main types of agreements

Depending on who you are dealing with, people generally have four types of agreements to choose from when trying to select a retirement village: a long-term lease/licence, a strata title, a company title scheme, or a rental agreement.

The lawyers who specialise in this area typically act for the operators, not the consumers

When you commence discussions with a village operator, they are required to provide you with five pieces of information: a copy of the residence contract, a copy of the management contract, the disclosure statement, the village fact sheet, and the village rules and by-laws.

Lendlease states that the three new options offered are meeting the demands of potential residents for more choice and greater certainty. Many argue that this has been a long time coming.

More choice often leads to more confusion

Doubtless more choice will lead to more confusion. A potential resident will now need to be able to compare the financial outcomes of each option and determine what is the best one to meet their needs. Management contracts are already long, complex and difficult to understand if you are not a lawyer.

One of the major problems the industry faces is that it is difficult for someone considering such a move to get good independent advice. The lawyers who specialise in this area typically act for the operators, not the consumers.

There will surely be new residents who will be able to benefit from Lendlease’s proposed new options. It just may be difficult to be sure whether you are one of them.

Call (03) 9043-1717 for advice

Aged Care Weekly can connect you with reputable aged care service providers, facilities and carers Australia-wide. Call (03) 9043- 1717, email


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