Collecting and managing residents' fees in retirement villages
As an operator of a retirement village, you can charge residents for services and facilities. These charges must be explained in the residence contract, village comparison document and prospective costs document.
For residents who moved in before 1 February 2019, the public information document (PID) (PDF, 244KB) sets the amount you can charge a resident for general services and how charges are calculated. You cannot charge more than indicated in the PID.
Village comparison document
As a registered retirement village scheme operator, you must provide a village comparison document (VCD) (Form 3) (DOC, 116KB) to any prospective resident who is interested in purchasing a unit in a retirement village. This document will help prospective residents to compare other villages before they make a purchase. This document must be prominently displayed on your retirement village website.
The VCD must include information about:
- the ingoing contribution
- other entry costs
- exit fees
- general service charges
- maintenance reserve fund contribution
- body corporate fees (if applicable)
- ongoing or occasional costs for repair, maintenance and replacement of items.
A scheme operator must, within 28 days of amending a village comparison document because of a material change to any of the information in the document, give to the chief executive, a written notice of the amendment and a copy of the amended village comparison document.
Prospective costs document
A prospective costs document provides a prospective resident of a retirement village, a summary of the estimated costs of moving into, living in and leaving the retirement village.
If a prospective resident asks a scheme operator for a prospective costs document (PCD) (Form 4) (DOC, 245KB), the retirement village operator must provide one within 7 days of the request. This document relates to costs of a specific unit in the village. You may have several PCDs depending on the types of accommodation provided.
The PCD must include:
- costs of the ingoing contribution and other entry costs
- current ongoing costs of living in the village
- personal service charges
- the estimated exit fees
- the percentage of capital gain that the resident is entitled to when a unit is sold
- the percentage of capital loss that the resident will be responsible for when a unit is sold.
The ingoing contribution is a one-off payment that secures a resident's right to reside in the retirement village.
Personal services charge
The personal services charge covers optional personal services that residents may use such as meals, cleaning and laundry services. You negotiate personal services as part of the contract with each resident.
Residents may have to pay this charge for up to 1 month after they give you notice that they are vacating or for up to 2 months if you have given the resident notice to leave.
Fees and charges when residents leave
Residents may have to pay the general services charge and maintenance reserve fund contribution in full for up to 90 days after they vacate the unit unless the unit sells earlier.
After the 90 days, you and the resident share the cost of the general services charge and maintenance reserve fund contribution in the same proportion as you will share the gross ingoing contribution from the unit resale. More information about how to calculate the proportion of costs payable, can be found in the guideline calculation of proportionate costs (PDF, 288KB).
The resident is required to pay their proportionate share of these costs from the date which is 3 months after they vacate their unit until the date which is 9 months after they vacate or until the unit is sold, whichever comes first.
If the resident's unit has not been sold within 90 days from the date they vacated the unit, you may accrue the resident's proportion of the general services charge and maintenance reserve fund contribution as a book debt and deduct it from the amount you pay in exit entitlements. You are not allowed to charge interest on the accrued amount.
If a unit remains vacant longer than 9 months after the former resident vacated the unit, you must pay the general services charge and maintenance reserve fund contribution that relates to the unit.
Exit fees are usually set as a percentage of the ingoing contribution. A resident may have to pay this amount to you when they leave the village or when the right to reside is sold.
In addition to the exit fee, a resident may have to pay additional charges including:
- general service charges
- maintenance reserve fund contributions
- personal services charges
- selling costs.
These are deductions that determine the exit entitlement.
A resident can request an exit entitlement statement to see what they may be entitled to if they were to terminate their right to reside. You must give the resident an exit entitlement statement that outlines their total fees and charges, within 14 days of their request. More information about details which should be provided in an exit entitlement statement can be found in the exit entitlements guideline (PDF, 460KB).
The exit fee is calculated on the day the resident vacates the unit.
For residence contracts entered into before 1 March 2012, the exit fee is calculated on a daily basis unless the contract provides for a way of working out the exit fee that is not on a daily basis.
Example: If the resident resides in the unit for 1 year and 14 days and the first years exit fee is based on 5% and the second year is based on 6% the exit fee is calculated as below:
- the exit fee is 5% of the ingoing contribution payable under the contract for the first year of residence plus 14/365 of 1% of the ingoing contribution payable under the contract for the 14 days of the second year of residence.
If a contract is entered into on or after the 1 March 2012, the exit fee must be worked out on a daily basis.