Purchasing an Occupation Right Agreement (ORA) at a retirement village is a big decision, and it can be a daunting task reviewing all the paperwork that villages are required to provide to you. Set out below is a brief overview of the more salient aspects of life within a retirement village.
A retirement village is governed by the Retirement Villages Act 2003 (“the Act”). This Act protects residents and the village by providing a legal framework in respect of financial reporting, regulation and monitoring, oversight provisions and the security and protection of rights. All retirement villages must be registered; you can check that your intending village is registered via the Companies Office website.
Most villages use a contractual licence to occupy, this is not the same as owning a freehold house; you have no legal interest in the village or the land. However, some villages do offer unit title ownership and the usual body corporate rules will apply.
Retirement villages will not allow your family trust to be noted as the owner; you must enter into the licence personally. Where an ORA is held jointly, upon the passing of one owner, the ORA will transfer to the surviving joint owner automatically. That said, if you are a blended family, you may wish to consider how you are going to hold the ORA particularly if there is unequal contribution of funds towards the purchase price of the ORA. Some retirement villages will provide a one-page document of ‘Directions as to Payment’ of the sale proceeds once the ORA has been terminated. This will sit behind the ORA.
All retirement villages will ask that you confirm you have a valid will in place (they do not need to see a copy of this). They will also require you to have an Enduring Power of Attorney in place for both Property and
Personal Care and Welfare (they will need to see copies of these).
Each retirement village has a form of ‘Deferred Management Fee’ which is your contribution to the overall running of the village including management, your villa/unit and the amenities that are provided by the village. This fee is only paid on the termination of your ORA. This means your estimated financial return on termination of your ORA is going to be less the deferred management fee – which can vary from village to village but can be around 25% of the initial purchase price.
By way of an example, if you purchased your ORA for $650,000, and your deferred management fee is a maximum of 25%, the amount you will pay to the village upon termination of your ORA will be $162,500. Some deferred management fees accrue over periods of 2, 3, 5, or even 10 years, each ORA is different and your lawyer will know to carefully review this provision.
On top of the purchase price for your ORA, there will also be weekly fees to pay and/or a service charge fee – depending on what type of care you need.
Once you have met with your lawyer, received legal advice and signed your ORA, you will be provided with a 15 working day cooling off period, which is covered under the Act. This period of time can differ if your unit/villa is still to be built.
