Curious about retirement village fees? Read on for an overview of entry costs, exit costs, weekly fees, and other financial considerations.
Please note: Every village will have a unique fee structure. This article is intended as a guide, and all content is for informational purposes only.
To buy into a village, you’re typically required to pay a deposit and a capital sum for an occupation right agreement (ORA). The most common legal title under an ORA is a licence to occupy, which gives you a contractual right to live in a specific property within a village, but no legal ownership of the property itself or the land.
Under a licence to occupy, it’s common for the operator to retain between 20-30% of your initial capital sum; this is usually referred to as a deferred management fee.
A good way to think of the deferred management fee is that it covers the long-term costs of residing at the village, such as maintenance of facilities and communal areas, and the re-licensing and refurbishment of your property after the licence ends.
The deferred management fee typically accrues between the first 2-5 years of residing at the village and is deducted on the re-sale of your licence. The fee is calculated as a percentage (typically between 20-30%) of the initial capital sum and it accrues to the operator over a period of time (usually 2-5 years).
If you paid an initial capital sum of $400,000 for a licence to occupy a unit and the operator of the village had a deferred management fee of 20% accruing at 4% for each year over five years, then:
What the fee covers varies between villages, so it’s important to discuss the details of the fee and how it’s calculated with the sales manager.
Note: Some operators will include costs associated with re-licencing your unit – such as legal, admin and marketing fees – within the deferred management fee. Other villages will have them as separate costs. It’s important to consider this when comparing the deferred management fee percentage between villages.
Depending on the village, the deferred management fee may be known by another term such as:
While you’re living in a village, you’ll be required to pay periodic (usually weekly) fees to cover day-to-day operating costs such as rates, insurance, grounds maintenance, staff wages and village services. The fee amount (and what’s included) varies significantly from village to village, so be sure to ask the sales manager for details.
Fees may increase over time (with appropriate notice from the village), or they may remain the same during your entire occupancy (these are generally marketed as fixed fees).
Every village is different. However, in most cases, you will be required to pay separately for things like contents insurance, phone & internet, household power, and any additional services you choose, such as housekeeping, meals or healthcare.
Some of these costs may be covered in the fee if you live in a serviced apartment. Be sure to ask the village sales manager for a full breakdown of inclusions and exclusions by property type.
Exit costs often depend on the circumstances in which you leave the property. For example, whether you leave the village altogether or transfer to a different property within the village (e.g. from a villa to a serviced apartment).
Some potential leaving costs to be aware of include:
Here are some helpful questions to ask to gain clarity around fees and costs:
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