Retirement villages can offer a vibrant lifestyle, social connection, and a sense of security that many people value as they age. However, the legal and financial arrangements behind these communities are very different from standard residential property purchases.
Before signing a contract, it’s essential to understand how these arrangements work and how they may affect your rights, your estate, and your long‑term financial position.
1. Types of Agreements
Retirement villages operate under several different tenure models, and each one gives you a different level of control, responsibility, and legal protection. The most common structures are:
- Loan-Lease/Loan-Licence: You receive a long‑term lease or licence giving you the right to occupy the unit, however you do not own the freehold title to the property. Lease terms can vary widely, and your rights will be governed by the agreement and village rules and the operator often controls the resale process; and
- Strata Title (Freehold Ownership): Freehold ownership gives you title to the property. However, even with ownership, you are still bound by village rules, service fees, and contractual obligations that differ from standard residential ownership.
Other types of structures include company title, unit trust and periodic tenancy contractual arrangements.
Whatever the tenure model, you will effectively be agreeing to advance an amount of money, being the ingoing contribution to the village, in exchange for the right to reside in your chosen residence and to use the facilities and common areas of the retirement village. This right generally extends for a term of between 49 and 99 years, and you will also be required to pay ongoing service fees for the duration of your occupation.
Understanding the tenure model is crucial because it affects your legal rights, shapes your estate planning options, and affects what happens when you leave and when you can expect to receive your ingoing contribution back after you leave. The structure also influences how your investment is treated when you exit the village.
Irrespective of the type of tenure, most retirement village purchases will include a Residence and Management Agreement. This agreement governs the relationship between you (the purchaser) and the retirement village operator, setting out key obligations, rights, and responsibilities for both parties. It’s essential to review this agreement carefully, as it often covers matters such as service fees, maintenance obligations, dispute resolution, and exit arrangements.
2. Fees
The financial arrangements in Residence and Management Agreements can be complex and are often misunderstood. Beyond any upfront payment, you may encounter:
- Ongoing service and maintenance fees
- Deferred management fees
- Capital gain sharing arrangements
- Refurbishment or reinstatement costs
- Exit or departure fees
- Refund timelines and conditions
These fees can significantly reduce the amount you or your estate receive when you leave the village. Some agreements require refurbishment (upgrading or improving the condition of the premises beyond its original state) or reinstatement (returning the premises to its original state) of the residence before resale, while others allow the operator to deduct a percentage of the capital gain. Refunds may also be delayed until the unit is re‑occupied.
It is essential to understand not only what you pay when you enter the village but also costs throughout your occupancy and what you will receive on exit and the timing of how quickly you will receive your money.
3. Joint Tenancy Risks
Many couples enter retirement villages as joint tenants, often without realising the estate planning implications. Under a joint tenancy, your interest automatically passes to the surviving joint owner, regardless of what your will states.
This can unintentionally override your estate planning intentions, particularly in blended families or situations where each partner wishes to leave their share to different beneficiaries. In these cases, if the contract arrangement allows for it, tenants in common may be a more appropriate structure, as it allows each person to control the distribution of their share through their will.
Choosing the right ownership structure at the outset can prevent disputes and ensure your wishes are respected.
4. Moving into Aged Care
The current regulations offer limited protections if you need to move into aged care. Villages are currently only required to contribute toward your daily aged care fees, not return your full ingoing contribution. These payments may be deducted from your contribution, meaning the longer it takes to find a new resident, the less money may be left to support your aged care needs.
If you are a couple, this right may only apply if both of you vacate the unit, even if only one partner needs aged care. That’s because both individuals are usually considered the resident under the agreement.
It is therefore also important to understand the terms of your residence agreement and how long you might have to wait for repayment of any ingoing contribution in order to plan for any future aged care needs after you or your partner leave the Village.
5. Contract Review
Residence and Management Agreements are typically lengthy, technical, and filled with obligations that differ significantly from standard residential property contracts. They often include:
- Ongoing service and maintenance fees
- Village rules and behavioural expectations
- Responsibilities for repairs and upkeep
- Exit and resale procedures
- Dispute resolution processes
Because of their complexity, obtaining independent legal advice is essential. A lawyer experienced in retirement village law can help you understand your rights, identify potential risks, and ensure the contract aligns with your long‑term financial and personal goals. This step is especially important because once you sign, your ability to renegotiate terms is extremely limited.
6. Upcoming changes to Retirement Village Laws in Victoria (effective 1 May 2026)
The Retirement Villages Amendment Bill 2024, passed by the Victorian Parliament on 28 May 2025, introduces the most substantial reforms to the Retirement Villages Act 1986 (Vic) in more than two decades. These changes aim to strengthen transparency, fairness and resident protections across the sector. Among other reforms, operators will be required to repay ingoing contributions within 12 months of a resident giving vacant possession; operators will no longer be permitted to pass on the costs of renovations or upgrades when a resident leaves; and service fees will no longer be able to be charged after a resident has passed away.
These amendments are scheduled to commence in May 2026 and will not apply to agreements entered into before that date. It is therefore important to ensure you understand your rights and obligations at the time you sign your agreement.
Key Takeaways
Retirement villages can provide an excellent lifestyle, but in a highly regulated industry, the legal and financial arrangements behind them are far from simple. Before signing any agreement, take the time to understand the tenure model, the financial implications, and how the contract interacts with your estate planning. Independent legal and financial advice is essential to ensure the arrangement supports your long‑term goals, protects your interests, and meets your future care needs.
