In May 2015, Aveo launched a new retirement village contract called ‘The Aveo Way’.

You can watch The Aveo Way Intro Video on YouTube here.

Here are the major points:

Deferred Management Fee

Your 35% DMF is incurred over your first 3 years in the village as follows:

Year 1: 7%
Year 2: 14%
Year 3: 14%

Monthly Village Fee

Your monthly village fee is charged according to the Retirement Villages Act. Aveo do not profit from this fee. However, Aveo are now subsidising these fees. Village fees for independent living units will be subsidised by $500 per annum. This amount will increase by 2.5% per annum.

Membership Fee

But, as Aveo gives, it also takes away. A new membership fee, currently $1,500 per year, is now payable. This fee is paid as a lump sum when you leave the retirement village.

I feel it’s unclear exactly what this membership fee covers. The Aveo video says this fee ‘let’s you access flexible services and accommodation’ and provides ‘access to preferred health and well being providers for a wide choice of services’.

Though this is a little vague, it alludes to one of my favourite things about the Aveo retirement village contract. However, I’ll stay on track summarising the contract, and get to that in a minute.

Other Key Points

  • No sales commissions
  • No marketing costs
  • No refurbishment costs
  • No capital gains or losses
  • Guaranteed sale in six months (New South Wales and Tasmania)
  • Guaranteed sale in twelve months (Victoria, South Australia and Queensland)
  • 21 day cooling off period: refund of deposit
  • 90 day cooling off period: no DMF or membership fees (legal fees and village fees still payable)

So, what do I like and what don’t I like?

Let’s start with what I like least.

The 35% DMF is payable over 3 years. 3 years!

The ‘lower’ DMF in year 1 (7%) is designed to allow those who decide they don’t like village life to change their mind. By the time they get to year 2, residents are supposed to be happily committed.

But here’s the problem. The average age of people entering a retirement village is currently somewhere in the late seventies, and it appears to be increasing. This is a time in their lives when things can change, and change fast.

It’s all very well to assume people will have made up their mind to stay by year 2, but what about those who have their mind changed for them. Illness or accidents can commonly occur around this age, necessitating a move to a higher level of care.

It’s common for residents to think, oh, that won’t happen to me. But let’s face it – it does happen. Often. About 80% of those people who move into a retirement village will leave at some point to move to a higher level of care.

At this point in time, they need as much of their money available to them as possible. To have paid out 35% of the value of their home for a 3 year stay in a retirement village is, I believe, unreasonable.

Let’s look at it in dollar terms.

Let’s say a retiree pays $350,000 for a unit. 3 years later they’re diagnosed with something necessitating a move to a higher level of care.

That retiree will have to pay a deferred management fee of $122,500. Or, to look at it another way, they pay the equivalent of $40,833 per year to live in their retirement village as well as their monthly village fees.

Aveo Way Table 1

If that deferred management fee was spread evenly over a 10 year period, at 3.5% per annum, they would only have to pay a deferred management fee of $36,750 after year 3, or the equivalent of $12,250 per annum as well as their monthly village fees.

Aveo Way Table 2

If residents are relying on the money they receive from the sale of their property to fund their next step (and most are), a DMF incurred over such a short timeframe could leave them in a precarious financial position at a very vulnerable time in their lives.

So, now for the good news – what I like most about The Aveo Way.

As I said above, in your late seventies and beyond, things can change, and they can change fast.

Consequently, what I like most about The Aveo Way is the ability to transfer units within the retirement village or to another Aveo village altogether.

The Aveo Way video says:

‘If your circumstances change along the way, we’ll work with you to provide a solution. Easy. If that means moving to another unit or another Aveo retirement village altogether, we’ll work with you to make it happen’.

I think this is a positive and innovative move on Aveo’s part. It recognises that retirees circumstances change and they’re pledging to do what they can to help.

I can think of a couple of circumstances where this could have helped retirees in specific situations I’m aware of.

Having said that, when retirees circumstances change, it far more commonly necessitates moving from the retirement village to a higher level of care.

So, would I enter a village with a 3 year DMF to gain this advantage? No – but I like the way Aveo are thinking with regard to this ‘perk’!

According to The Source, ‘The Aveo Way is their (Aveo’s) new corporate ethos of transparency and fairness. They see it as a role model for the village sector and possible lead for future legislation.’

Would you like to see retirement village contracts look like this in the future? Please tell us what you think in the comments below.

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  • Thanks Deborah. I suppose the full implications of these changes by Aveo will be mainly felt by the present and future Aveo vendors, when a lack of demand puts pressure on prices and their ability to sell their units.
    Like you, I’m not fond of the 3 year DMF change and I would think this may put many potential residents/buyers off. However, with Aveo’s huge market share of these villages (in Victoria especially), there appears to be less and less choice for those interested in such a lifestyle. That said, I’m thinking that the younger you are, the more chance you have of staying there and enjoying the facilities – which are on the whole fantastic – for many years, in which case the 3 year DMF is (hopefully) not going to really affect you. As most of the residents I meet say – “Why didn’t I do it sooner?” My mum has been in one for the past 6 months and loves it!

    • Hi Jennifer. I’m so thrilled to read your comment. As one of my customers it’s great for me to see that you understand the implications. The RetireEase System works! And you’ve understood the benefit of getting in early! As far as your comment about Aveo’s huge market share, you’re right, and it just got bigger with their purchase of Freedom Aged Care which adds another 15 villages to their portfolio. I’m so thrilled you found somewhere for your Mum and that she’s really happy! Congratulations – that’s brilliant news! Deborah

  • we have been in our aveo retirement village unit for approx 15 months and signed up on the old contract in which the DMF is 6% .pa. for a period of 5 years up to a max. of 30% ……….. so this “new aveo way” is monsterously “more expensive than the old way”, and I agree would certainly shy potential buyers away….

    I have noticed during the period that we have been here there seem to have been a significant increase in vacant units – maybe what has been said above is the reason why – ie an unattractive deal to potential buyers …..

    the other thing that occurs in our contract should you intend to sell is that aveo have an option to purchase the unit themselves at a price fixed by their valuer …… not a fair deal here either………. don’t know is this occurs in the new contract..????

  • Hi George, thanks for your comment! The new Aveo contract does indeed say they guarantee you a sale by buying your unit off you if you’re unable to sell it. This is guaranteed by law in NSW and Tasmania and they will buy your unit off you if you haven’t sold within six months. In Queensland, South Australia and Victoria they will buy your unit off you if you haven’t sold within 12 months. When a unit hasn’t sold within these timeframes, nobody wins.

  • the aveo way is a win- win for aveo, but not for its residents……it collects the capital gain from the leasehold properties and also as each strata title resident sells it collects a share of that resident’s money held in the village maintenance and administration accounts….. so after say 10 years (the average stay) all the money in the village admin and maintenance accounts is owned by aveo – the bigger the sum the better …….. residents should check the balance sheets in their annual financial reports …….. the amount of money held in our village funds is enormous, and i’m thinking of proposing a reduction in fees in order to claw some of this money back into the pockets of the residents.

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