Advances in medicine, technology and lifestyle choices meaning Australians are living longer.
As a result, the proportion of the population aged 65 or over has increased and is forecast to continue to increase. In 2017 3.8 million Australians, or 15 per cent of the population, were aged 65 or over.
One of the implications of this trend is the growth in aged care facilities such as nursing homes, residential retirement villages and over-55 ‘lifestyle communities’.
There are different types of agreement covering these facilities, as well as different legislative rules. We’ll provide an outline of each below but if you need more information or guidance when considering an agreement, contact Felicio Law Firm. We have a proud track record advising our clients in this area.
Retirement village agreements
All retirement village contracts in NSW are regulated under the Retirement Villages Act (NSW) 1999 (‘the Act’).
Before a person can move into a retirement village, a written contract must exist with the village operator unless the prospective resident is moving in with an existing resident, or is signing a residential tenancy agreement under the residential tenancy laws.
A contract with a village can encompass a residence contract or a service contract, or a combination of both. Prospective residents must be given a copy of their proposed contract at least 14 days before signing it and a cooling-off period generally applies allowing a person time to back out of the contract.
The standard contract in the Retirement Village Regulation 2017 and applying to contracts agreed to after 1 October 2013 sets out the details of each party’s rights and obligations, including costs, services, facilities, alterations and additions, repairs and maintenance, and sharing of capital gains.
Additional terms can be added to the contract provided they do not contradict the standard terms, the legislation or any other law.
Certain documents must be attached to the contract including a copy of the disclosure statement provided to the resident; the residence condition report; details on the village’s services and facilities, and the village rules (if any).
A standard form is not required if the resident is signing a sale of land contract where the person buys a strata or community scheme unit, or an agreement to buy company title shares. A service contract, however, is still required.
Key types of retirement village contracts include:
Loan and licence arrangements: The resident pays an initial contribution in the form of an interest-free loan, or a non-refundable deposit that is deemed part of the loan.
This contract provides entitlement for the resident to reside at the village along with termination provisions. If the loan agreement is in combination with another type of contract such as a licence or a lease, it should make reference to the entitlement to reside in that document.
Under this agreement, recurrent charges will be payable on a fortnightly or monthly basis.
Leasehold arrangements: A resident enters into lease with the village operator/owner. The resident becomes a registered interest holder where they enter into a long-term lease that includes a provision that entitles the person to at least 50% of any capital gain.
Depending on its terms, the lease may provide for entitlement to the whole, or a share, of the capital gain to the lease-holder, as well as be liable for the whole (or a share) of the capital loss upon the sale of the interest.
Strata and community schemes: The resident becomes the registered proprietor of a lot within the strata or community scheme via a contract for sale.
In this situation the resident becomes a member of the owners’ corporation or association and so must pay strata/community levies.
The owners’ corporation is also responsible for maintenance of common property.
The resident will generally also sign a service contract with the retirement village operator, including detailing the Ingoing Contribution, the requirement to pay departure fees and whether a capital gain/loss on the lot is shared with the operator.
Rental arrangements: This arrangement looks like a normal tenancy arrangement, including payment of a bond, but with no Ingoing Contribution or departure fees.
Company title schemes: The prospective resident purchases shares in the company which is the registered proprietor of the retirement village. These shares provide the right to reside on one of the premises. A services contract is generally required providing for when departure fees are payable. A bond to the company may also be possible, refundable upon the sale of the shares.
Over-50s lifestyle communities
These types of communities are governed by similar provisions to retirement villages though more closely resemble tenancy agreements.
Covered by the Residential Parks Act 1988, there are applicable rules for the conduct of operators and residents, contractual cooling-off periods, maintenance of grounds and facilities, and terms about departures.
A key distinction with this type of establishment is that residents own the building and pay rent on the site hosting the building. This means they are stamp duty exempt and the resident may also be able to apply for rent assistance.
Nursing home agreements apply to those who are reaching the stage where they need to live close to emergency and constant care.
There are a number of agreements related to nursing homes, and sometimes they are combined into one.
The resident agreement details the services and level of care to be provided as well as its cost. It also provides details on supporting the resident as needs change, as well as exit arrangements and how to move to another aged care home.
The accommodation agreement covers the type of room to be provided, any other conditions on the accommodation and the cost. This includes a means assessment to work out whether the resident may be eligible for government assistance with the costs of nursing home care. The agreement will also outline options for payment, from regular rent to lump sum payment.
Discuss your needs with us
In any of the agreements outlined above, independent legal advice should be sought before entering into one to ensure you are fully aware of your rights and responsibilities.
At Felicio Law Firm we regularly advice people on these important life decisions. Choosing the right residential option for your later years is not only a large financial commitment but a decision you want to make without stress or complication.
Estate Planning Lawyers Central Coast can help you achieve that outcome with considered, understanding legal guidance.