It is now increasingly common for retirement village developers to present captivating promotional material to prospective residents for a village while construction is still underway. If a resident agrees to purchase or lease a unit before it is built, this is known as ‘buying off the plan’.
However, much like purchasing property off the plan, there are a number of things that buyers should keep in mind before they make their decision.
Purchasing something that you haven’t seen
One obvious consequence of entering contracts for an off the plan retirement village is that you will not have an opportunity to inspect the property before signing the contract.
Often prospective residents are left to rely on architectural drawings, designer impressions and advertising material to get a sense of what they are getting into.
Unexpected changes
But what happens when things don’t go according to plan? Whether the issue relates to changes in design, defective work, or late completion, it is important to ensure that you have the proper protections under your contract.
Every contract is different. Some examples of features that we have observed in retirement village contracts include:
- a clause restricting the village owner from making changes to the plans and specifications unless they are directed to do so by a building authority, or the changes do not materially affect you;
- a common clause which prevents the size of the unit changing by more than 5%;
- the inclusion of a defect liability period for a short period after you become a resident;
- a special condition which renders the contract conditional upon any sale of home that you may be relying upon to fund your entry; and
- if the construction project is significantly delayed or the village owner lacks the finances to continue, a sunset clause allowing you to withdraw and recover any deposit that you have paid.
Staged construction
Another matter to consider is whether the retirement village will be completed in stages. Sometimes, a retirement village may offer units for purchase or lease before construction of the village as a whole is complete. In those circumstances, it will be important to keep in mind that:
- whilst your unit may be complete, there might be several common facilities which will not be available to use at the time you move in;
- your service fees should reflect the proportion of common facilities available.
Who covers the shortfall?
When a new village is getting started, it may take time for the owner to find residents for each unit. Whilst the owner is selling down homes, it is often the case that the village will incur a shortfall with respect to its operating account as the operating costs are greater than the service fees paid by residents. We like to see off the plan contracts include a clause that the owner will cover the shortfall until the village is fully or nearly fully occupied.
How we can help
Retirement village law is a complex and niche area. If you would like the assistance of specialist lawyers to review your documentation and help mitigate the risks outlined above, please do not hesitate to contact us.
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Disclaimer: This article provides general information only and is not intended to constitute legal advice. You should seek legal advice regarding the application of the law to you or your organisation.