Retirement Village Contracts Explained: Common Clauses and Common Mistakes

Occupancy Rights

The occupancy clause tells you what you are actually buying. In a leasehold village it grants a long-term lease — often 99 years — over a specific unit. In a licence village it grants only a personal right to occupy. In a strata-title village it transfers registered ownership of the unit. The clause should be read together with the village plan that identifies the unit and the shared facilities.

Common mistake: assuming that paying a large in-going contribution gives you ownership. In most Victorian villages it does not. It buys an occupancy right that will end at some point, and most of the money (subject to the deductions discussed below) is intended to come back at exit.

Maintenance Obligations

The contract divides maintenance into resident responsibility (typically inside the unit) and operator responsibility (the building structure, shared areas and major capital items). Capital works are usually funded from a long-term maintenance fund built up from a portion of recurrent charges.

Common mistake: not understanding what "inside the unit" includes. Items such as hot water services, air conditioners and kitchen appliances can fall on either side of the line depending on the wording.

Recurrent Charges

The recurrent charge is the regular service fee paid by the resident. The contract should state what is included, how the charge is calculated, when it can be increased, and what consultation is required before any increase.

Common mistake: focusing on the current monthly figure and not asking how it has moved over the past five years or how it is expected to move in future. Recurrent charges typically rise faster than CPI as a village ages and capital works increase.

Operator Rights

The operator clause sets out what the operator can do — access the unit in an emergency, enforce the rules, manage the resale process, retain certain records, and charge management fees. Many operators reserve broad discretions to amend rules, change service providers and make management decisions without consultation beyond the statutory minimum.

Common mistake: overlooking the breadth of operator discretions. Even where the operator is cooperative today, the contract typically remains in force long after the original management team has moved on.

Resident Obligations

Residents typically agree to:

• pay the recurrent charge on time;
• comply with the village rules;
• not damage the unit beyond reasonable wear and tear;
• maintain insurance for personal contents;
• notify the operator of certain events; and
• obtain independent legal advice before signing.

Common mistake: assuming the village rules are static. They can be amended, sometimes significantly, after a resident moves in. The statutory consultation process is the resident's main protection.

Capital Gains Provisions

The contract should specify how any uplift between the in-going contribution and the resale price is divided. Models vary widely:

• resident keeps all capital gain;
• operator and resident share the gain 50/50;
• operator takes the lion's share of the gain; or
• the resident only ever receives the original in-going contribution back (less the DMF), with no share of any gain at all.

The same range applies to capital losses where the resale price is lower than the in-going contribution.

Common mistake: assuming residential property "always goes up". Retirement village units do not behave like ordinary residential real estate. Resale markets are narrower, marketing is usually controlled by the operator, and stock turnover affects price.

Exit Provisions

The exit provisions are the heart of the contract. They cover:

• the notice period required to leave;
• refurbishment standards and responsibility;
• the deferred management fee formula and cap;
• the resale process and who controls pricing;
• the maximum period before the operator must pay out the exit entitlement; and
• what continues to be payable between departure and resale.

We discuss exits in more depth in our article on leaving a retirement village.

Common mistake: focusing on the entry cost and ignoring the exit cost. Two contracts with identical headline entry contributions can produce very different exit results.

Dispute Resolution Clauses

The Act requires villages to have an internal dispute resolution process. The contract typically mandates that process as the first step, followed by mediation through the Dispute Settlement Centre of Victoria, and finally VCAT. Some contracts also include arbitration or expert determination for specific issues such as refurbishment valuations.

Common mistake: ignoring the dispute clause until a dispute arises. Knowing the process in advance — and putting any complaint in writing from the outset — makes it far easier to use the resident's statutory rights effectively.

Common Misunderstandings

In our practice, the same misunderstandings come up year after year:

• "I own my unit." In most Victorian villages, you don't. You hold an occupancy right.
• "My family will get my contribution back." They will get something back, but rarely the full amount. The DMF, refurbishment and other charges reduce the figure.
• "The recurrent charge is fixed." It is not. It is reviewed annually and almost always increases.
• "Probate isn't needed because I leave it to my children." The exit entitlement is an estate asset and usually requires probate before it can be paid. See our guide to probate in Victoria.
• "The contract is the same as every other village." It is not. Headline structures look similar; the detail is highly variable.

Why Independent Legal Advice Matters

A retirement village contract typically governs the largest single asset a resident has, for the rest of their life, with consequences that flow on to their estate and family. The cost of advice before signing is modest. The cost of misunderstanding the contract years later is anything but.

Independent legal advice should, at minimum:

• translate the contract into plain English on the issues that actually matter;
• model the financial outcome at exit;
• identify any unusual or one-sided clauses;
• cross-check the contract against the disclosure statement;
• flag interaction with the resident's broader estate plan and powers of attorney; and
• record any clarifications or variations agreed with the operator.

How We Help

We act for prospective residents, current residents and estates throughout Victoria. Our work ranges from fixed-fee pre-signing contract reviews to ongoing advice during residence and dispute resolution at exit. Where necessary, we run matters in VCAT.

Related Reading

• Retirement Villages in Victoria: A Practical Guide
• What Should You Check Before Signing a Retirement Village Agreement?
• Leaving a Retirement Village: Exit Fees and Resident Rights
• Litigation & Dispute Resolution

Frequently Asked Questions