Retirement villages have hit the news quite a bit recently in relation to the contract that they have with their residents. So what's the deal?
The deal is that the intending resident purchases an Occupation Right Agreement (ORA) which gives them a licence to occupy a villa or unit in the retirement village. They pay an agreed sum of money, usually now well in excess of $500,000. The resident gets to enjoy the security, companionship and facilities of the retirement village and in return the village will deduct between 25% and 30% of the price paid for the ORA over a period of years.
The controversy around this is that when a resident terminates an ORA they usually get no benefit from any increase in value of the unit since they purchased it. Often this is only a problem for the family of the resident when the resident has passed away. However it can also be a problem for a resident who decides they want to move to another retirement village but finds that they have insufficient funds.
Importantly, an ORA requires the intending resident have independent legal advice. Our job is to explain the ins and outs of the ORA, make sure that the intending resident understands what they are signing up to before they get locked in.
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