This article was first published on the iSeniority blog.
Retirement village residents may be required to pay:
- an initial entry price when they move in
- recurring charges or rent during their stay and perhaps beyond
- a fee called a “departure fee”, “deferred management fee”, “DMF” or “exit fee” when they leave.
The form of the initial entry price depends on the particular legal structure. For example, it may be the purchase price of a freehold property or security, or it could be described as a loan, premium or prepayment of rent. In manufactured home villages it is the purchase price of the home, but not the site that the home occupies. No initial entry price is payable in rental villages.
The recurring charges are for the general services that are provided by the operator for the benefit of all residents. These services vary from village to village, but include the general management and administration of the village as a retirement village and the maintenance and repair of the common areas and facilities. Other general services may include things like arranging activities and excursions; providing, operating and maintaining a village bus for excursions and regular shopping trips; and emergency call system monitoring. Additional personal services, such as meals, cleaning, laundry and personal care may also be provided or offered to residents on a user-pays basis, usually at commercial rates. In manufactured home villages the recurring charges include a component of rent for the site that the home occupies. In rental villages the recurring charges are for rent, general services and any additional user pays services.
Departure fees are one of the most important, difficult and least understood aspects of retirement villages. They are payable when a resident leaves the retirement village and are generally deducted from the amount the resident would otherwise be entitled to receive when the home is sold, leased or licensed to a new resident. There are many different structures and they can produce very different financial outcomes. No departure fees are payable in rental villages and many manufactured home villages and they should be lower in strata title and community title villages, which also have a sinking fund.