Retirement villages accused of gouging seniors after billing exorbitant fees: ‘It’s grossly unfair’

When it comes to retirement, Australians often seek a place that offers peace, comfort, and a sense of community.

Retirement villages promise just that, with the added allure of worry-free independence, low maintenance, and security.

However, a closer look at the contracts and experiences of some residents suggested that the reality can be far from the idyllic life advertised.



Contracts of dozens of retirement village residents have uncovered a pattern of tight control and complex financial arrangements that can leave retirees significantly out of pocket and with limited freedom.

Imagine not being able to have pets without permission, being banned from smoking in your own home, having visitor limitations, and even needing consent to add garden decorations.

These are just a few examples of the clauses that residents may agree to when they move into some of Australia's retirement villages.


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Retirement village residents have been left out of pocket over exorbitant fees. Credit: RetireAustralia


But it's not just about lifestyle restrictions. The financial implications are perhaps the most concerning aspect.

Residents are often bound by contracts that include a long list of costs, from insuring the workers who trim the hedges to hefty exit fees and compulsory renovations when they leave.

These contracts, which can span up to 149 pages, are not only lengthy but also complex, with some featuring intricate formulas to calculate exit fees based on multiple variables.

Take the case of Helen McPhee, who, according to her brother, signed a contract while suffering from cognitive decline.

‘About page two or three into the contract, there was this algebraic formula that meant that she was losing 35 per cent as an exit fee,’ McPhee's brother, Michael Macnamara, said.

‘My first response was, how does a 70-plus-year-old person make sense of this?’

She lost about $130,000 of the $365,000 she paid to enter the Torrens Grove village in Adelaide. This left her with insufficient funds for the aged care she now requires.



The financial model of these retirement villages often includes a 'deferred management fee' (DMF), which is deducted from the refund residents receive when they leave.

This fee, along with other charges, can significantly reduce the amount returned to the resident, sometimes leaving them with less than they originally invested.

Mcnamara described the contract as ‘morally abhorrent’, saying, ‘She's had to go into an aged care system that costs nearly $500,000 just to get into a not-for-profit.’

‘There's going to be some bridging finance that's got to go on there from her pension, and it's just grossly unfair.’



RetireAustralia, the operator of Torrens Grove, is just one example of a company profiting from this model. Last financial year, they made a profit of $43.1 million from their retirement villages.

In a statement, RetireAustralia admitted the equation ‘may be complex for some’ and was ‘granular in detail’. However, they noted that this was the first time the issue had been raised.

‘We apologise that our explanation of the Deferred Management Fee (DMF) has not met the expectations of Helen McPhee's family,’ it said.

The company added that the $365,000 McPhee paid to get into the village in 2020 was ‘more than 30 per cent less than the local median house price of $531,500’.

‘The DMF in our standard contract is the only fee that allows us to reinvest back into villages through capital replacement works, ongoing maintenance of communal facilities, and village upgrades. It also covers the refurbishment, sales and marketing costs of homes, and the remainder is profit.’


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Helen McPhee’s contract with an algebraic formula of the exit fee. Credit: Helen McPhee


The industry's voluntary code, which recommends contracts be written in ‘plain English’, has seen less than half of the sector sign up, and no breaches have been recorded since its introduction in 2020.

The financial consequences can be dire.

For instance, Colleen Green's mother, a resident in the Tranquil Waters village in Queensland, was told she would lose 79 per cent of her investment, amounting to more than $300,000.

During the same period, property values in the area doubled, highlighting the stark contrast between investing in a retirement village and the real estate market.

The complexity of these contracts is not just a financial issue; it's also about understanding what you're signing up for.



Tim Kyng, an actuary and retired academic, developed a calculator to help retirees and their families compare contracts and understand the true cost of living in a retirement village.

‘People don't really understand what they're signing up for, and they don't think about or understand what will happen to them at the end of the life of the contract,’ he said.

Beyond the financial aspects, some residents feel the contracts are claustrophobic and that management can be patronising or even intimidating.

Complaints about staff behaviour or village management can lead to threats of contract breaches, further exacerbating the power imbalance between residents and operators.



Daniel Gannon from the Retirement Living Council acknowledged the need for simpler contracts but insisted that retirement units are ‘normal homes’.

‘This sector has been around for 60 years, and these homes do provide wonderful communities for a quarter-of-a-million older Australians living around the country right now,’ he said.

‘What we are calling for right around the country, with every state and territory government, is for simpler contracts.’

‘We don't want dissatisfied customers, we don't want unhappy people, we don't want confusion at any time of this process.’
Key Takeaways

  • Retirement village contracts in Australia can be lengthy and complex, often including clauses with rigorous control and financial obligations for residents.
  • Residents can face significant financial losses when leaving retirement villages due to high 'deferred management fees' and other charges that can lead to a substantial reduction in the refund of the initial payment.
  • Some residents have reported feeling patronised and intimidated by retirement village management, with concerns that complaints or disputes can lead to a power imbalance.
  • The Retirement Living Council admits that contracts can be complicated and is advocating for simpler contracts and greater regulation of the industry, however, more needs to be done to ensure transparency and fairness for retirees.
What do you think of this story members? Share your thoughts and experiences with us in the comments below!
 
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Try Windsor Country Village in terms of gouging, the are past masters at it....
 
That is one real dreaded thought of expences. All of the "Life Style" retirement village advertisements we are swamped with on the idiot box, probably don't come cheap. So, I suppose residents pay for that as well, in their fees.
My "Life Style" is where we live, hopefully for many more moons well into the future.
 
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Another reason WHY I will never go into a Retirement home or village or anything like it.
BETTER TO DIE. I know the owners of the one my mother was in are raking in over a million dollars each. Meanwhile, some of the basic needs promised when she first went in are non-existent.... like a live-in nurse.
 
BETTER TO DIE. I know the owners of the one my mother was in are raking in over a million dollars each. Meanwhile, some of the basic needs promised when she first went in are non-existent.... like a live-in nurse.
Fully understand, just like the Resident Home (now known as an Aged Facility/Nursing Home) my mum went in back in the early 2000's. So much wanted to go to this place when the time came, but not now as it is more about the business and not about the residents. But lucky the Staff are still great and try their best for everyone there.
 
There are plenty around that don't have exit fees !The" five star" resort that i live in on the mid North Coast of NSW, for instance. There are new homes being built currently that are going for high 900's to over a million, yet you don't own the land and currently fees are $472 p/f. They charge 3.5 % of the sale price when you sell, slightly higher than an outside agency, but certainly more effective for a good result. The homes are all modern, with media rooms, two beds and two bathrooms etc. Pays to shop around!
 
There are plenty around that don't have exit fees !The" five star" resort that i live in on the mid North Coast of NSW, for instance. There are new homes being built currently that are going for high 900's to over a million, yet you don't own the land and currently fees are $472 p/f. They charge 3.5 % of the sale price when you sell, slightly higher than an outside agency, but certainly more effective for a good result. The homes are all modern, with media rooms, two beds and two bathrooms etc. Pays to shop around!
i will be staying put in my home with a super view, no expenses and i think media rooms are stupid.
 
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Oh yes. Our lease for life in my Retirement Village. We have to ask permission for everything. Just ridiculous. I am in Perth.
 
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Oh yes. Our lease for life in my Retirement Village. We have to ask permission for everything. Just ridiculous. I am in Perth.
I had no idea they could be so controlling. It’s understandable if the resident is a danger to themselves or others. In that instance, I assume they’d be in aged care. But for the “average” resident, the whole permission thing is appalling and degrading.
 
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I left my job in a retirement village because it had been sold and unfair fees applied. I advised all prospective purchasers to seek legal advice before signing a contract. Knew they would sack me soon for giving this advice anyway!
 
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i will be staying put in my home with a super view, no expenses and i think media rooms are stupid.
That's entirely your opinion. We just put ours on the market anyway, hubby wants a proper backyard.
 
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Yes, I looked at retirement homes attracted by the the very cheap price but there are catches. Just watch the ABC 4Corners report on ABC iview to see how bad it is.

There are some exceptions but get a property lawyer to read the terms OR get stung with 30% exit fees, Sometimes, this reduces your capital so much, you can't pay for aged care when you get sick and then you rely on the government who pay all the bills. Not the sort of thing you want when you are very old and just want a peaceful time...
 
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Money is the root of all evil. Unfortunately this is the reality of our world today. People were much happier years ago because life was much simpler way of life. Not saying it was easy but people worked hard and saved for what they needed.
 
i will be staying put in my home with a super view, no expenses and i think media rooms are stupid.
I upsized in my fifties, am now in my 70s , still work part-time despite serious health issues, and will never leave my house, which is on a bush block. I love walking around looking at native plants, birds, and seeing animals at night. My son and his wife live here too, and help a lot, but I'd rather draw from my super and pay for help than give my money to a retirement village, where I would have to live under a set of rules! Friends of mine went into one and left as they hated it, as no one talked to them, the activities advertised were not supplied, and so on. However, my Mum was in a great nursing home, as she was immobile and unable to care for herself, and I must say they looked after her well. We received about 85% of her bond when she passed away at 91. I had no complaints about that place, although the owner did drive a Maserati!.
 

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