The Aveo class action came to an abrupt end this week as Levitt Robinson, the lawyers for the plaintiffs, issued an apology and conceded that the “Aveo Way” contracts were legal and not likely to cause any loss.
It brings to a conclusion a case that has damaged the reputation of Aveo, and the wider retirement village industry.
“Levitt Robinson acknowledges that the introduction and implementation by Aveo and its related entities of Aveo Way contracts were lawful, in accordance with industry standards and that we are now satisfied that the Federal Court is not likely to find that its introduction has caused current or former residents of Aveo to suffer any loss. We express regret for any distress or anxiety which Aveo residents and staff have experienced as a result of or incidental to the Aveo class action litigation.”
At the heart of the case was a premise that strata title contracts and contracts that gave residents some (or all) of the capital gain on the sale of their home were inherently more valuable, regardless of the other benefits of the contract. As the case heard, determining the value of a home in a retirement village is about so much more than the type of tenure or a single component of the exit entitlement like capital gain (which it should be noted normally comes with the other side of that coin, capital loss).
The premise of the case is something many people when they are considering moving into a retirement village believe. But it’s so important to examine the contract and crunch the numbers on what it means for you.
Ultimately the role of a contract is to set out what your rights, responsibilities and costs will be. Your job is to work out if the contract represents what you think is a fair balance of those three things. In Downsizing Made Simple we created this exercise which you can download for free that’s designed to help you examine your contract through those three lenses before you move in, while you live there and when you leave.
If you are thinking about moving into a Retirement Village, these are some of the things you should be thinking about:
Before You Move in:
- Is there a deposit or payment instalments that need to be paid? How much is it? Under what circumstances is it refunded?
- Will you need to pay transaction costs such as stamp duty, registration of your lease on the title, contract preparation fees?
- How will the move impact on your pension and other benefits such as rent assistance and home care package costs?
- What are your insurance obligations?
While you live there:
- What, if any, cooling off period is there? Is there a “move in guarantee” where you get your money back if you leave within a certain time?
- What are the ongoing fees? What do they cover? How are they determined? Do you get a say? How are increases managed over time?
- Are there special levies?
- Are there additional services offered, for example cleaning, laundry, meals or care? What are the costs of the services you would be likely to use now and what are the costs if you’re situation was to change?
- Do you have the right to make modifications to your home for aesthetic or care purposes, e.g. install grab rails?
- What will your personal expenses be? How will they change over time? Will your cash flow enable you to meet your expenses?
- Under what circumstances can you be required to leave the village?
- How long after you leave the village do you keep paying the ongoing fees?
- Is there a Deferred Management Fee, how much is it?
- Do you share in capital gain and/or capital loss? What is your share?
- Are you responsible for the costs associated with selling the home, i.e. renovations, marketing costs and sales commissions?
- Is there a guaranteed buyback, what are the terms and time period?
Sometimes people will ask me a question and before they do they say something like “This may be a silly question ..”. The only silly question is the one you didn’t ask. Doing your research is the best thing you can do.
Go to the village and take a tour and if you think it is for you ask if you can join in the next social event so you can get a good feel for the community.
Ask the sales consultant for a Village Guru report so you can clearly see what the costs of the village are together with what the impact is likely to be on your pension and other benefits.
Ask as many questions as you can think of from people who know, ask the people already living in the village what it is like, seek advice from a lawyer about your contract and a specialist financial adviser about your financial situation.
Once you have answers to all your questions you will be able to make the move with confidence and avoid the most common downsizer regret, not making the move sooner.