True cost of retirement housing

Moving home can be a stressful and costly experience at any stage of life, but nothing compares to the complexity of navigating the retirement housing landscape, according to Consumer Action Law Centre’s Gerard Brody.

Moving into a retirement home can be very rewarding, but it can also be verystressful when trying to understand your legal rights and obligations. The contracts are often very complex, so it’s essential that you seek independent advice before signing. Not all lawyers will have expertise in these types of contracts, so ask around to ensure that you get the right expert advice.

In many cases, even after reading the contract and getting advice, you still won’t know the total dollar amountthat you’ll need toeventually pay when you put pen to paper.Someretirement housing residents move in and then feel trapped in contracts that are expensive and confusing. You should shop around – never feel hurried or pressured to sign a contract.

The majority of complaints we receive relate to fees. There are typically three main fees residents must pay – entry fees, ongoing fees and exit fees.The entry fee is the purchase price foryour unit, sometimes called ‘ingoing contributions’. Ongoing fees are typically charged weekly or fortnightly and cover ongoing management and maintenance costs. An exit fee may be a set amount, but more often are a percentage of the value of the unit.

The most common exit fees are Deferred Management Fees (DMFs), which are calculated as a percentage per year of thevalue of your unit. For example, your DMF may be calculated asthree per cent per year, up to a maximum of 30 per cent of the sale price. This means that if you move out after five years, the retirement home operator will receive 15 per cent of the sale price of your unit.

This system means that residents can paythree times over for shared facilities, such as pools or gymnasiums. Impressive facilities may encourage a resident to pay more upfront. The cost of the shared facilities ispaid for again through the DMF, and the maintenance of shared facilities is paid for through ongoingcharges.

On top of these fees, there are other costs for which to look out. You may be required to sell your home through the operator and pay them a commission. Some contracts even assign 100 per cent of any capital gain to the operator. You may also continue to be charged fees while you wait for your home to be sold.

Some states are making a big effort to help residents avoid getting trapped in these unfair contracts. Western Australia and South Australia recently completed comprehensive reviews of retirement housing legislation in their states, and are implementing important reforms to help residents. However, Victoriais lagging behind others in terms of protections for residents. We think older Victorians should have access to safe, affordable and fair retirement housing too.  That’s why we’ve called for a comprehensive overhaul of Victoria’s legislation to ensure we have strong protections for retirees in retirement housing.

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YourLifeChoices Writers
YourLifeChoices Writers
YourLifeChoices' team of writers specialise in content that helps Australian over-50s make better decisions about wealth, health, travel and life. It's all in the name. For 22 years, we've been helping older Australians live their best lives.
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