Concerns come from the fact that various State legislation frameworks require an in-going payment to be made before a lease/licence of occupancy is permitted and that this payment is prohibited from being rent.
Residents believe this to be a key factor in the ability of an operator to camouflage the full cost of the conditional residential accommodation until exit from the village and protects the operator from market forces such as market driven residential rental costs. One examination ( renting can be cheaper than a retirement village ) has shown that the full weekly cost of accommodation in a retirement village can be almost twice the cost of simply renting a commensurate property within the general community.
The following letter was sent by a village resident to the Retirement Village Residents Association of NSW.
"Interstate* Retirement Village Contracts - Implications.
The definition of a retirement village in the Victorian Retirement Village Act 1986 produces many of the problems your state members have. That definition called for payment of an “ingoing contribution” before a lease would execute. The definition of ingoing contribution calls it a “donation” and in addition requires that the donation “does not include rent”.
Those two definitions together mean that lessees provide an interest free loan of the nominal value of the unit, for the duration of the lease. That is tantamount to buying the unit, but not getting ownership.
Very, very, very few lessees, resident committees, residents’ advocates or legal advisers appreciate the full implications of that combination of definitions. Even the relevant legislative oversight and village resident advocacy bodies in Victoria have struggled understanding the full implications. The main effects are:-
The resulting contracts prevent free market competition because there are so many variables in the costing that it is impossible to compare daily, weekly or monthly rentals between villages
Lease rates vary as the duration of the contract lengthens.
Contracts are so convoluted as to be incomprehensible for lessees, or experience shows, their legal advisers.
Costs are not calculated or disclosed until a couple of months after the contract terminates which shows the Act fails its stated purpose “to clarify and protect the rights of persons who live in, or wish to live in retirement villages”
The market is artificially limited, and restricted by the definitions, by means of the contracts.
The definitions produce contracts that make the Victorian Act not fit for its stated purpose of protecting lessees and prospective lessees. This applies to all Australian states and territories.
The definitions together mean the operators have the remarkable advantage of getting a cost free return on the lessees’ capital.
In the last 14 years, virtually all lessees’ complaints address the symptoms that result from the two definitions in this unique legislation, and the resulting contracts.
All of these issues would be exposed and solved with the cost rate disclosed before entry, and the only way known to do that is by requiring that all contracts must offer conventional residential tenancy with security, only then may other contract forms, such as loan lease be offered. Residential tenancy is the norm for retirement village contracts in the US."
The following graphic details the current definition basis and why the retirement village definition amendment is urged.
Retirement Village Definition Amendment Urged.
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