Understanding Retirement Village Contracts and Exit Fees

For many Australian families, signing a retirement village contract is one of the most significant financial and lifestyle decisions they will ever make. And yet, the contracts themselves are often long, technical, and easy to misunderstand.

Exit fees in particular — sometimes called deferred management fees, departure fees, or DMFs — can come as an unwelcome surprise years down the track if they weren't clearly explained at the start.

Why Retirement Village Contracts Feel So Confusing

Retirement village contracts are different from a standard property purchase. You are usually not buying the land or even the dwelling outright. Instead, you're entering into a long-term arrangement that bundles together your right to occupy a home, your access to shared facilities, the services the operator provides, and the terms under which you eventually leave.

Most contracts will cover:

• the legal structure of your tenure (loan-licence, leasehold, strata, or company title)
• the ingoing contribution you pay to move in
• the ongoing fees you pay while you live there
• the exit fee (deferred management fee) calculated when you leave
• how any capital gain or loss on the unit is shared
• refurbishment and reinstatement obligations
• rules around resale, marketing, and how long refunds may take.

Each of these elements is negotiable in some villages and fixed in others. Understanding which is which is one of the most valuable things a family can do before signing.

The Three Stages of Cost

It helps to think of retirement village costs in three stages: moving in, living there, and moving out.

1. Moving In: The Ingoing Contribution

This is the upfront amount you pay for the right to occupy your unit. It's often similar in size to a property purchase price, but legally it usually isn't a purchase — it's a long-term licence or lease.

Important things to clarify:

• whether the ingoing contribution is refundable when you leave
• how long after you leave the refund is paid
• whether the refund is reduced by exit fees, refurbishment, or marketing costs
• whether any portion is linked to the future resale value of the unit.

2. Living There: Ongoing Fees

Key questions:

• How are ongoing fees calculated, and how often can they increase?
• Is there a cap on annual increases, or are they linked to CPI?
• What exactly is included — and what is billed separately?
• Do fees continue after you leave, until the unit is resold?

3. Moving Out: Exit Fees and Refunds

This is the area that catches most families off guard. The exit fee — also called a deferred management fee — is typically a percentage of either your original ingoing contribution or the eventual resale price, multiplied by the number of years you've lived in the village (up to a cap).

A common structure in the Victorian market might look like:

• 5% per year for the first several years
• capped at around 30% over time
• calculated on either the ingoing contribution or the eventual resale price.

The difference between a percentage of the ingoing price and a percentage of the resale price can be tens of thousands of dollars. It is worth modelling both scenarios before signing.

What's Actually in a Retirement Village Contract

In Victoria, retirement villages are regulated under the Retirement Villages Act 1986. Operators are required to provide a disclosure statement and a contract before you commit. Both documents matter — read them together, not in isolation.

Sections worth reading carefully include:

• tenure type and what it means for your legal rights
• the full schedule of fees, charges, and deposits
• the exit fee formula, with worked examples
• capital gain or capital loss sharing arrangements
• refurbishment, reinstatement, and cleaning obligations on exit
• how the unit will be marketed and resold, and who controls the process
• rules about visitors, pets, alterations, and use of facilities
• dispute resolution and termination clauses.

If anything is unclear, that's a signal to ask — not a signal to keep reading and hope it makes sense later.

Victorian Retirement Village Reforms: What Changed from 1 May 2026

From 1 May 2026, new retirement village reforms came into effect in Victoria designed to strengthen protections for residents and their families. While the reforms do not remove the need for careful independent review, they do introduce clearer requirements around disclosure, transparency, and fairness.

Key changes families should be aware of include:

• stronger disclosure statement requirements, so families receive clearer information upfront before committing
• improved fee transparency, including clearer breakdowns of ongoing charges and what they cover
• extended cooling-off periods, giving families more time to reconsider after signing
• clearer rules around exit entitlements and when refunds must be paid
• more explicit contract information, including plain-language summaries of key terms.

One of the most helpful changes for families is that operators are now required to provide clearer worked examples of exit costs and fee structures. This means long-term financial implications should be easier to understand before signing, rather than becoming a surprise years later.

These reforms are a positive step toward stronger consumer protection, but they do not replace the value of having any contract reviewed by an independent solicitor and financial adviser who specialises in retirement living. Reforms set the floor, not the ceiling — and every family's situation is different.

Common Surprises Families Discover Too Late

Over the years, the same handful of surprises come up again and again:

• exit fees calculated on the resale price rather than the original price
• ongoing fees that continue for months after a resident has moved out or passed away
• refurbishment costs that significantly reduce the final refund
• long delays between leaving the village and receiving the refund
• limited control over how and when the unit is resold
• capital gains shared with the operator, even when the resident bore all the risk.

None of these are necessarily unfair on their own — but they should be understood and modelled in dollar terms before you sign, not discovered later.

Questions Worth Asking Before You Sign

• Can you show me a worked exit fee example based on 1, 5, and 10 years of residence?
• Is the exit fee calculated on the ingoing or outgoing price?
• Who is responsible for capital gains or capital losses on resale?
• How long, on average, does it take to resell a unit here?
• Will I continue paying ongoing fees after I leave, and for how long?
• What refurbishment am I responsible for when I leave?
• Are there any fees that aren't included in the disclosure statement?
• How are fee increases decided, and what is the history of increases over the past five years?
• What happens if my health changes and I need to move into aged care?

Getting Independent Advice

Before signing any retirement village contract, it's strongly recommended that you obtain advice from a solicitor experienced specifically in retirement village law — not just general conveyancing. A financial adviser familiar with retirement living can also help model the long-term impact of exit fees on your estate and your future options.

An independent retirement living advisor can sit alongside you and your family to translate the contract into plain English, compare options across villages, and help you focus on the questions that matter most for your situation.

How This Connects to Downsizing Decisions

Frequently Asked Questions

Are exit fees legal in Australia?

Yes. Deferred management fees are a legitimate and common feature of retirement village contracts in Australia and are regulated at the state level. The issue is rarely whether they're legal — it's whether they're clearly understood before signing.

Can I negotiate a retirement village contract?

Some terms can be negotiated, particularly around fees, refurbishment, and timing of refunds. Others — especially those tied to the village's overall management model — are usually fixed. A solicitor experienced in retirement village contracts can help you identify which is which.

What happens to the contract if my partner or I pass away?

Most contracts include specific provisions about death of a resident, surviving partners, and the estate. These vary considerably between villages, so this is one of the most important areas to review carefully before signing.

How long does it take to get my refund after leaving?

This varies widely. Some contracts pay refunds within a set period after departure regardless of resale; others only pay once the unit is resold. Victorian legislation provides some protections, but the specifics in your contract matter most.

Final Thoughts

A retirement village contract is not just a legal document. It's a long-term agreement that will shape your finances, your lifestyle, and your family's future options. Taking the time to understand it fully — calmly, and with the right support — is one of the best gifts you can give yourself and the people who love you.