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Although they are complicated, confusing and controversial, departure fees (which are sometimes called "exit fees", "deferred management fees" or "DMFs") have a sound historical rationale and they're not all bad, provided you understand what they are for and take them into account when deciding whether a particular home offers overall fair value compared to similar homes in other retirement villages and in other similar property situations, such as strata title or community title developments that are not retirement villages. Historically, departure fees allowed retirement village operators to: take responsibility for the depreciation and eventual replacement of capital items sell, lease or license homes for an entry price below the fair market value of the home. This suited ...

Retirement village departure fees, which are also sometimes called "exit fees", "deferred management fees" or "DMFs", are usually calculated as a percentage of either: the entry price, with a separate arrangement regarding the apportionment of any actual or notional capital gain that may accrue when the home is sold, leased or licensed to a new resident the re-sale price when the home is sold, leased or licensed to a new resident, which necessarily takes into account any actual or notional capital gain that may accrue. The percentage usually accrues over time at a rate that may be fixed or variable. For example, it could accrue at a fixed rate of 2.5% per annum or it could accrue at 5% per annum for the first 2 years and 2.5% per annum thereafter. The percentage may be subjec...

Retirement village residents may be required to pay: an initial entry price when they move in recurring charges or rent during their stay and perhaps beyond a fee called a "departure fee", "deferred management fee", "DMF" or "exit fee" when they leave. The form of the initial entry price depends on the particular legal structure. For example, it may be the purchase price of a freehold property or security, or it could be described as a loan, premium or prepayment of rent. In manufactured home villages it is the purchase price of the home, but not the site that the home occupies. No initial entry price is payable in rental villages. The recurring charges are for the general services that are provided by the operator for the benefit of all residents. These services vary from...

Retirement villages are potentially a very attractive accommodation alternative for seniors in Australia because retirement living can provide a number of real benefits, by far the most important of which is community. However, retirement villages are also complicated, they can be confusing and they are somewhat controversial, so you need to fully understand what they are and what they involve before you sign on the dotted line. Wishful thinking is not an option and is sure to lead to surprises at best and serious disappointment and financial stress at worst. A major contributor to the complexity is the range of different legal structures that have developed over time and which now exist together. The different structures are largely the product of the slow historical commercializati...

A retirement village is essentially a managed community for seniors, although the term is something of a misnomer because you don't necessarily have to be retired at all. Entry is generally restricted to people who are over 55 years of age or have retired from full-time employment, and their spouses. Each Australian State and Territory has enacted specific retirement villages legislation that defines what is and what is not a retirement village for the purposes of the legislation and regulates many aspects of the relationship between retirement village operators and their residents and prospective residents. Manufactured home villages for those over 50 and rental villages for those over 50 are also managed communities for seniors, even though they generally don't fall within the tech...