Retirement Villages v Aged Care Facilities

Getting older is a fact of life, and there may come a point where our living arrangements will have to change to accommodate lifestyle or healthcare needs. Before moving into a retirement village or an aged care facility, prospective residents will be given an agreement which sets out the rights and obligations of the resident and the provider. There are many things that need to be considered including the type of care required, and how you will pay either the Village or Aged Care Facility.

Which Act governs the Agreement?

Each agreement is governed by a different Act. The Retirement Villages Act 1999 (Qld) was enacted to promote consumer protection and fair trading practices in operating retirement villages and in supplying services to residents.

Aged care agreements are governed by the Aged Care Act 1997 (Cth) which aims to provide funding of aged care, a high quality of care and accommodation for the recipients of aged care that meets the needs of the individuals and to protect the health and wellbeing of the recipients of aged care services.

What is the difference between a retirement village and an aged care facility?

While the two may seem similar, there is a clear distinction between a retirement village and an aged care facility.

Generally, a Retirement Village consists of multi-unit complexes for those aged 55 years or older and offers services including recreational and health facilities. Retirement Village residents usually live independently and this type of living arrangement is more a lifestyle choice, as opposed to a health care choice. On the other hand, an Aged Care Facility is typically open to the elderly and provides personal care and assistance services for those who can no longer live independently in their own home. A resident entering an Aged Care Facility will be assessed by a government-appointed Aged Care Assessment Team and a determination will be made as to whether a prospective resident qualifies for residential Aged Care.

The Nature of Ownership

For those who move into a Retirement Village, you will be given a licence which is essentially only a right to live in the unit, meaning you will not have ownership of the unit.

For residents looking to move into an Aged Care Facility, you can either ‘buy’ or ‘rent’ the room and pay a daily fee for care which is lower if you buy and higher if you rent.

What fees will I have to pay upon entry?

Before moving into the Retirement Village, the Village Operator may ask for a deposit to hold your place in the Village. Upon entry into a Retirement Village, residents will be required to pay an ‘ingoing contribution’ which is essentially the purchase price. You can negotiate the ingoing contribution with the Village Operator. You should ask around to see if the price is fair.

An Aged Care Facility Agreement usually provides that a resident must pay fees to cover accommodation and care. The accommodation fees can be paid by a Refundable Accommodation Deposit (“RAD”), a Daily Accommodation Payment (“DAP”) or a combination of the RAD and a DAP. Non-supported care residents will generally be asked to pay a RAD which is a lump sum for accommodation at the Facility which is refundable (less any agreed deductions) on departure or death. Alternatively, a resident can elect to pay the RAD by DAP. A DAP is a non-refundable payment. If a resident chooses to pay a DAP, they will pay interest on this payment in accordance with the agreement, being the maximum permissible interest rate allowed under the Aged Care Act. If you decide to pay a combination of a RAC and DAP then you can also elect to have the DAP payments and deducted from the RAD. This means that the RAD will reduce over time an as a result a larger DAP will be required.

Are there any ongoing fees?

Both Retirement Villages and Aged Care Facilities charge ongoing fees.

Aged Care Facilities charge a basic daily care fee. This fee is applied from the day you enter care to the day you leave care, and is used for day-to-day living costs such as meals, cleaning and laundry. As at 20 March 2019, the maximum basic daily care fee prescribed by the Australian government Department of Health is $51.21.

For residents living in a Retirement Village, the Village Operator will generally charge ongoing fees which include a General Services Charge (“GSC”) and Maintenance Reserve Fund Contribution (“MRFC”). These ongoing fees are like ‘levy charges’ in a Body Corporate. The Village Operator will use the GSC to pay for things such as:

• Management and administration;
• Gardening and minor maintenance; and
• Recreation or entertainment facilities.

The MRF is used to repair and maintain capital items in the Village, but will not replace them.

In addition to the ongoing fees, residents will also be responsible for some personal expenses including:

• other maintenance costs for internal and external fixtures and fittings of the unit;
• personal services charges residents may use including meals, cleaning and laundry; and
• Contents insurance.

It is important to read the fine print so you know what you’ll be up for financially while living in a Village or Facility. These fees may be payable weekly, fortnightly or monthly, so you may have to consider whether this is feasible for your particular circumstances.  

Do I have to pay a fee when I leave?

After you leave the Village, you (or your estate as the case may be) will need to pay an exit fee as well as:

• Any outstanding GSC;
• Any outstanding personal services charges;
• A share of expenses from reselling the Unit;
• Your costs associated with reinstating the Unit; and
• Any other costs covered in the Retirement Village Agreement

The Village Operator will provide a statement that outlines the total fees and charges when exiting the Village and the exit fee will be calculated in accordance with the Residential Village Agreement.

The Aged Care Act provides that, the RAD will generally be refunded to you (or your estate) within 14 days from the day of the departure from the facility. Interest will accrue from the day you leave the Facility or death until either the day the RAD balance is refunded or 14 days has passed, whichever is sooner, at the Base Interest Rate. If the Facility fails to pay by that date, the refund interest will accrue at the MPIR until the Facility releases the balance of the funds being held.

The calculations can be tricky so it’s best to get advice on what you can expect to receive back and what interest you may pay.

Conclusion

It is important to obtain legal and financial advice specific to your agreement before making the move to a Retirement Village or Aged Care Facility. Health care and financial contributions are probably two of the biggest deciding factors, however there are many other things to consider such as whether you may need to sell you primary place of residence to afford the upfront fee and whether you need to structure your estate planning in a way to contemplate your living arrangements. You must also consider your options if the care you require changes.

Contact us to discuss your options before moving into a Retirement Village or Aged Care Facility.