Dealing with a Retirement Village Property after Death

When the resident of a retirement village property dies, a question for the executor may be “How does the property form part of the estate?”  It is important for the executor to clearly identify the rights and obligations that the estate has in the retirement village property. 

One mistake the executor might make is to treat the retirement village property the same way you would an interest in real estate.  Rarely, if ever, would a retirement village resident have a legal claim to the land. The most common structure for retirement villages is for the operator to own the land and lease the unit to the resident. The resident pays a lump sum ingoing contribution (or “purchase price”) in the form of an interest-free loan to the operator, which is refunded when the resident leaves the village or on the resident’s death.

Loan Refund

If the resident paid a loan to the operator on moving into the village, a key concern for the executor will be when the loan is to be repaid to the estate.

This will depend on the terms of the village contracts. Under some contracts, the refund won’t be paid until after a new resident has paid the ingoing contribution for the property. 

Under other contracts, the refund is payable within 6 months from the date the property was vacated, if it is not sold before then.

Departure Fee

Some village operators offer different payment plans for residents. It is important for the executor to clarify what payment plan applies to the property in question.

Residents (or their estate) may be required to pay a departure fee on vacating the village. This is deducted from the loan refund before it is paid to the outgoing resident or their estate.

The departure fee will be based on a formula or calculation that is set out in the village contract. For example, it may be a deduction of 3% to 15% of the ingoing contribution per year up to a maximum of 20% to 35%.

The departure fee will be calculated on a daily basis and will cease to accrue from the date that vacant possession of the property is returned to the village operator. The executor should give vacant possession to the operator as soon as possible, to avoid the departure fee increasing.

Retirement village contracts can be complicated and difficult to understand, and knowledge of the retirement village laws and regulations may be required to determine the rights and responsibilities of the estate in relation to the deceased’s interest in a retirement village property. 

Our experienced elder law team are available to review village contracts, provide advice to executors and assist in the administration of the estate, including dealing with the retirement village property.

*please note that the information provided in this article is NSW specific.

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