Retirement Village Contract Advice (Hervey Bay)

An example of what (almost) went wrong for one client.

I had a client who thought he was buying into a retirement village. It was advertised and marketed as a retirement lifestyle resort. He had identified a block that he liked and was about to sign contracts to occupy the block and pay for the building of his new residence. He was excited about the location, the resort atmosphere and even spoke to a couple of new owners who had already commenced their build. He was pleased that his house would be free standing on a concrete slab rather than a semi detached dwelling or a  townhouse. The total cost would be just over $2M to build, but the managing director had given him a $400K discount, so his would ‘only’ cost $1,700.00. He thought he was getting a good deal.

On reading his contracts, it turns out that this was not a retirement village at all but zoned as a caravan park. He would not own the land, only lease it. The lease could be terminated at any time after 3 years. He would have to pay ‘site fees’ of just under $500 a fortnight .

If the lease was terminated by the owner, he was required to vacate the site and remove all structures. He was horrified to learn that that he only had a right to occupy the site for only three years – as long as he continued to pay site fees. The owner of the land could terminate his lease after the three year period was up.

His horror compounded when I explained that he would be required to pay for the removal of his structure. This being a house on a concrete slab would incur a substantial cost to demolish (there was no hope of moving it). He had already put down a ‘holding deposit’ of a few thousand dollars which he was happy to walk away from, knowing he had just avoided a potentially catastrophic decision.

He asked me: is this legal?

I answered him: On paper, yes it is. Morally, in my view, no.

Some unscrupulous operators are skirting around the law. In this case their contract was a ‘Residential Site Agreement’ which is different from a retirement village and regulated by different laws. Not the same thing. I told him I was willing to bet that in a few years after the last lot is sold and the last new home is built, the entire complex could be sold to someone else. If that new owner wished to redevelop the site, they could evict all current occupants. For sure, the company that ran the ‘resort’ would be nowhere to be found, wound up and liquidated. The money would be spend and untraceable. A story on ‘A Current Affair’, crying residents and then….nothing. None of the residents would have any money left to fight what was going on. Even if they did, their contract allowed it. The promoters know all this.

The author Eric Kalde is principal solicitor at KALDE LEGAL.