Will Exit Fees Payable at the End of a Retirement Village Lease Affect the Inheritance Available to My Children

Will Exit Fees Payable at the End of a Retirement Village Lease Affect the Inheritance Available to My Children

Queensland’s weather and lifestyle make it a popular, preferred destination for retirees in Australia, meaning the place of retirement villages as a living option for seniors is an important consideration once working life has ended.

There are different arrangements by which residents secure a ‘right to reside’ in Queensland retirement villages, including loan and license agreements, leasehold agreements and freehold strata title, each with implications for a retiree’s financial obligations. In this article, however, we’ll focus on retirement village leases and, specifically, how fees payable at the end of a lease have implications for both residents and their beneficiaries.

More on leasehold agreements in retirement villages

In Queensland, retirement village leasehold agreements typically grant residents exclusive use of a unit for a defined period, which can be up to 99 years. Residents pay an ingoing contribution under a residence contract and also face exit fees. This usage is a right to reside in the unit under the residence contract, rather than a property interest. The lease with the retirement village operator is registered with the Queensland Land Registry with the prospective resident paying costs incurred by the lessor and any applicable government charges.

The lease itself may be sold or assigned but not transferred to the resident’s children or other beneficiaries in a will. Only the residual value of the lease (after the deduction of exit fees, legal fees and reinstatement costs are met) can form part of a deceased person’s estate. This makes the issue of exit fees and other end-of-lease costs a concern for beneficiaries in determining what their inheritance might be.

Sale proceeds and exit fees

When the retirement village lease comes to an end, the leaseholder and the village scheme’s operator agree on a resale value for the right to reside. The new resident then pays that value for the right to reside, ending the former leaseholder’s right to reside along with any other rights under the contract.

Exit fees, sometimes also known as departure fees or deferred management fees, are perhaps the most significant financial consideration when leaving a retirement village. These fees are usually either a percentage of the initial ingoing contribution or its re-sale value, and may accrue annually. Exit fees can represent a significant amount of money as they are generally calculated based on the length of occupancy.

Departing residents may also be asked to pay:

  • any outstanding general service charges or maintenance reserve fund contributions;
  • any outstanding personal services charges;
  • a share of expenses from reselling the unit;
  • costs associated with reinstating and/or renovating the accommodation unit;
  • any other costs covered in the residence contract.

In some cases, capital gains tax may be applicable upon the sale of a unit in a retirement village, depending on the individual’s circumstances. Some retirement village schemes may also charge a fee based on any capital gains made on the sale of the unit.

It’s important to note that in Queensland, the resident is responsible for on-going charges for the first 90 days of leaving a retirement village if the right to reside is not sold. In the six months after that period, the costs are split between the resident and the resort.

A retirement village operator must give a departing resident an estimated exit entitlement statement with total fees and charges within 14 days of an initial request. The exit entitlement is the amount remaining after the deductions from the ingoing contribution. The exit fee is calculated as at the day you leave the village.

The costs outlined above – plus ongoing costs and service charges incurred while living in the village – all have the potential to diminish the estate available to child beneficiaries of the resident.

Can the impact on inheritance be minimised?

Residents and their children should be fully cognisant of the terms of the residence contract before signing, including all potential fees and charges. The advice of a legal professional with experience in retirement village contracts is essential at this stage.

Some residents may be able to negotiate exit fees as part of their contract. Discussing this with the village management before signing can be beneficial. Residents should consider their financial situation and plan accordingly. This might include setting aside funds to cover exit fees or exploring financial products that can mitigate their impact.

Residents should also periodically review their lease agreement to ensure it remains favourable. Legal advice may be necessary to understand any changes in legislation or village management policies.

Contact our expert team

Our experienced professionals at Big Law regularly advise clients on retirement village residence contracts, including discussions about how exit fees and other charges at the end of a leasehold arrangement may impact the resident’s estate.  By understanding the different fees involved, negotiating where possible, and seeking professional advice, retirees can better manage their finances to ensure a comfortable retirement while preserving their legacy for their loved ones.

How We Can Help

Big Law Lawyers Strathpine offers you the same comprehensive suite of legal services that you would expect to only find in the city.

We are a successful well-established legal practice based in Strathpine, Brisbane. We have earned a reputation for providing trustworthy, practical legal advice to a diverse range of clients, in both Brisbane and regional Queensland.

Things to Read

The Presumption of Revocation of a Will in Queensland: Understanding Its Implications and Prevention

In estate planning and succession law, few concepts carry as much weight and potential consequence as the presumption of revocation of a Will. This legal principle can significantly impact the distribution of a deceased person's assets and the fulfilment of their final wishes. As such, both testators (those making a Will) and potential beneficiaries mustRead More »The Presumption of Revocation of a Will in Queensland: Understanding Its Implications and Prevention

Property Owners: Are You Aware of the New QLD Minimum Housing Standards?

As a property owner in Queensland, it’s crucial to stay updated on the latest regulations impacting your investment. Recently, the Queensland government has introduced new minimum housing standards designed to enhance living conditions for renters and clarify property maintenance requirements. In effect, these standards represent a substantial change in rental property management, ensuring that allRead More »Property Owners: Are You Aware of the New QLD Minimum Housing Standards?

What You Need to Know About Changes to Superannuation Tax Concessions and Their Impact on Estate Planning

The Australian superannuation system, a cornerstone of retirement planning, can be reshaped by the Superannuation (Better Targeted Superannuation Concessions) Imposition Bill 2023. These changes in Division 296 tax introduce significant alterations to tax concessions, which affect individuals with a Total Superannuation Balance (TSB) exceeding $3 million. This article examines the impact of these changes onRead More »What You Need to Know About Changes to Superannuation Tax Concessions and Their Impact on Estate Planning

Stamp Duty Relief for Queensland: What it Means for You

In the event of a change of government, Queensland may have changes coming to the stamp duty landscape, making it more accessible for first-time homebuyers to enter the property market. These updates may be a game-changer, given the continuing rise of house prices. In fact, from January 2023 to March 2024, there has been aRead More »Stamp Duty Relief for Queensland: What it Means for You

Podcasts to Listen to

Selling property? Have you got these certificates ready?

Getting your residential property ready for sale is all about ticking the numerous boxes to ensure that once you have an interested buyer, the transaction goes smoothly and hopefully without delay. Crucial to this, of course, is ensuring that you have all the requisite certificates up to date. In this context, as you would expectRead More »Selling property? Have you got these certificates ready?

What You Need to Know About Commercial Leases in Queensland

If you're a business owner navigating the commercial lease market, maybe about the sign on the dotted line or just want to understand the basics of a commercial lease, this podcast is for you. In this podcast, Big Law director, Sylvia Lopez, talks about all things to do with commercial leasing in Queensland. Transcript AtRead More »What You Need to Know About Commercial Leases in Queensland

Can Stepchildren Contest a Will?

It probably comes as no surprise, that in the context of estate administration, people who may be beneficiaries, or those that think they should be, may want to contest the Will. This can often concern stepchildren. In Queensland, this process is often referred to as a family provision claim. To learn more about this growingRead More »Can Stepchildren Contest a Will?

How can an Executor be removed?

One of the most important aspects of estate planning is of course, making sure you have the right executor. But what happens if things don't work out or circumstances change and you want another executor. In this podcast, Estate Planning Lawyer, Elise Jacques discusses the matter. Elise Jaques Solicitor Make an appointment