COMMON TERMS IN THE RETIREMENT INDUSTRY
From home care to reinstatement and serviced apartments, here are some commonly used terms in retirement living.
Aged care refers to the support and care services available to older Australians who can no longer live independently or need help to ‘age in place’, either within their own home or their retirement village home. There are generally two categories of aged care services:
- Home care (see separate definition below)
- Residential aged care (see separate definition below).
Also known as a departure fee, exit fee, deferred management fee, deferred fee, retention amount or outgoing payment. This fee is deferred until after the resident leaves the village and, in most cases, until their unit is resold or re-let. The deferred payment is commonly a percentage of either the entry payment or the re-sale price obtained when the unit is later resold or re-let. Generally, it is accrued throughout the resident’s tenure, meaning the resident pays more the longer they stay, but the payment is generally capped after a set period of time has passed.
Also known as a purchase price, entry price, lease premium or ingoing contribution. The entry payment is payable by the resident before the resident/s enters the village. It gives them the right to reside in the dwelling for the duration of their agreement (leasehold and licence villages) or ownership of the dwelling itself (freehold villages).
The exit entitlement is the amount paid or refunded to the resident, or the resident’s estate, after the resident leaves the village and generally after the dwelling is re-sold or re-let. In most instances, the exit entitlement is determined by subtracting the deferred payment, any reinstatement costs, sales and marketing and legal costs from the entry payment, or from the re-sale price.
Home care services are part of broader aged care services available to older Australians. Home care is designed to support seniors to remain in their own home for as long as possible. Home care can be delivered within the individual’s existing home or in their retirement village home. The types of services offered can range from support services like cleaning or meal preparation through to more intensive support like nursing and other clinical care and support. These services are government-subsidised, delivered by registered providers and only available following a formal assessment of needs by the Federal Government’s My Aged Care assessment service.
Independent living units/apartments are suited to independent residents who would like to live as they would in their own home within a secure community environment. Generally, all maintenance of communal buildings and grounds will be looked after by village staff and is covered by the resident’s service charges. Independent living residents are responsible for their own meals, repairs, maintenance and housekeeping, although some villages offer domestic services that can be delivered into independent living units/apartments on a fee-for-service basis.
Also known as over-50s communities, lifestyle communities or manufactured home parks. Like retirement villages, land lease communities are designed to offer active, social lifestyles for retirees. They generally offer a range of communal facilities, social activities and services such as gardening. In a land lease community, the resident makes an entry payment to purchase the dwelling itself while the operator maintains ownership of the land beneath it and all communal facilities. Residents pay a rental fee while living in the village, utilities and may also pay a deferred payment fee upon exiting. Land lease communities are generally governed under specialised state or territory-based legislation, or state or territory-based residential tenancies laws rather than the retirement villages legislation.
Can take the form of a capital fund, capital maintenance fund, sinking fund, maintenance reserve fund, capital works fund, reserve fund or capital replacement fund (depending on the state or territory). Generally, for leasehold or licence villages, a long-term maintenance fund is set up by a village operator and held for the purpose of funding replacement or repair of major items that may be needed on an infrequent or irregular nature, such as major repairs of common areas and village buildings or structures. An owners’ corporation or body corporate of a strata village will set up a similar fund.
This is sometimes also known as rectification. Reinstatement is the process of returning a dwelling to its original state after its occupant has moved out. The extent of this work depends on the age and state of the dwelling as well as how long the resident lived there. Reinstatement may include, but may not be limited to, cleaning, the installation of new carpet or tiles fresh paint, replacement of window furnishings and fixtures and fittings. In leasehold and licence villages, operators usually require the outgoing resident to pay to reinstate dwellings back to the condition they were in when the resident moved in. In freehold villages, the outgoing resident is required to pay for reinstatement, but whether the work is done is generally at the discretion of the outgoing resident. In some states and territories, the retirement villages legislation governs whether and how much reinstatement is to be done, who pays for the reinstatement and which costs are included. It is best to check the legislation in your state or territory for details about what you may be required to pay.
For leasehold or licence villages, the re-sale price is also known as the re-letting price, new entry price or new ingoing contribution. The re-sale price is the price payable by the next resident for a lease or licence of the dwelling in the village and is the entry payment payable by the next resident as set out in their contract. For freehold villages, the re-sale price is the price specified in a resident’s contract for sale of land.
Also known as nursing homes or residential care facilities. Residential aged care facilities are communities occupied by older residents who cannot live independently and require assistance with everyday tasks. Residential aged care facilities are regulated by the Federal Government under the Aged Care Act. These facilities may be government funded or resident funded and may be stand-alone facilities or adjoin an existing retirement village or lifestyle community. To enter a residential aged care facility, residents must first be assessed by an Aged Care Assessment Team (ACAT) to determine the level of care they require and whether they are eligible for financial assistance from the government. The cost of living in an aged care facility will differ based on the individual’s financial means and care needs.
Retirement villages are residential communities primarily designed for retirees. These communities offer a safe, low-maintenance lifestyle among people at the same stage of life, with access to a range of shared facilities and social activities. Retirement villages are best suited to those who can live independently or who require flexible support. Retirement village residents generally make an entry payment for the right to reside in the village, ongoing fees such as service charge, rates and utilities throughout their stay, and a deferred payment when they leave. Unlike other community types, retirement villages are regulated by the Retirement Villages Act, which is state/territory-based legislation that sets out the rights and obligations of both residents and operators of retirement villages, such as disclosure, the form of contract, and terms that can and cannot be included in a resident’s contract.
Service charges are paid by all residents to cover the ongoing costs of operating and managing the village. These costs can include:
- village staff
- maintenance and repair of communal areas
- building and public liability insurance
- cleaning and lighting of communal areas
- monitoring and maintaining an emergency call system
The service charge paid by a resident each year is the resident’s proportion of the village’s annual operating costs. Generally, service charges do not include costs such as rates, electricity, gas, telephone, internet, healthcare and living expenses.
Also known as care apartments. Serviced apartments are suited to residents who are moderately independent but require some assistance with daily tasks. The specific services available may vary between villages, but generally residents will have three main meals and housekeeping provided as either part of the service offering or on a fee-for-service basis. Most serviced apartment residents will have 24-hour access to an emergency call system to assist them in the event of an emergency. Serviced apartment residents also have full access to all communal facilities and social activities offered within the village.
Also known as body corporate fees or owners’ corporation fees. Strata fees are charged in freehold villages to cover the costs of maintenance and repair to common property such as village grounds and roads, insurance, village staff costs and general administration.
Also known as a renovation, refurbishment or improvement. In some cases, an operator or outgoing resident will choose to upgrade the dwelling to a higher standard than its original state. An upgrade will generally make the dwelling more modern and improve its fixtures and fittings and may be completed to attain a higher resale price or to meet market expectations. The operator and the outgoing resident may agree to share the costs of upgrading the home and who will obtain the benefit of any resulting increase in the price of the home when it is re-sold. In some states and territories, the retirement villages legislation governs whether and how much the unit is to be upgraded, who pays for the upgrade and what costs are included. It is best to check the legislation in your state or territory for details about what you may be required to pay.
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