What is a deferred management fee?

As people age, many consider downsizing their homes and starting a new chapter of their lives. Retirement villages offer a variety of benefits, including a sense of community, security, social activities, and access to care and support when needed. Not to mention a range of amenities and facilities. However, one aspect of retirement village living that are often misunderstood are the associated costs, particularly the deferred management fee (DMF).

What is a deferred management fee?

Common to nearly all retirement villages – as set out in legislation – is a management fee. The traditional model of the retirement living industry is to defer the management fee until exit – often referred to as a Deferred Management Fee (DMF) or an exit fee.

The DMF model allows greater flexibility with entry prices, which can enable prospective residents to pay less upfront and free up funds from the sale of their biggest asset – the family home – to help fund their retirement and care needs.

The DMF is the only fee that allows operators 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. This helps to ensure that all residents have access to quality facilities and amenities while they’re living in the village.

At RetireAustralia, our independent living residence contract, which is offered in our leasehold and licence villages, allows you to calculate exactly how much you’ll get back based on your entry payment. The deferred management fee will not exceed 35% of your entry price and is accrued during your first three years in the retirement village. There are no further increases after this period, no matter how long you stay. See our an example of how it works below.

In our strata village contracts, the deferred management fee will not exceed 37.5% of the resale value in strata title villages in New South Wales and 35% of the resale value in Queensland. This is charged and deducted from the gross sale proceeds. This way, it’s easy to calculate exactly how much money you’ll receive after you leave.

What is the benefit of having a DMF?

The DMF is a value exchange. The value offered by RetireAustralia retirement villages is the ability to live in a community of people from a similar age group, with a shared history, who want to expand their lives; meet people and join in activities and events. Residents enjoy the facilities and low maintenance living and have peace of mind knowing that there is a safety net of care and support should they ever need it.

The DMF is also the only fee that allows RetireAustralia to reinvest back into the village, through capital replacement works, maintenance of communal facilities, and village upgrades. This not only benefits you during your time in the village but also helps maintain the value of your home, which is important when it comes time to sell.

Charging the management fee on exit keeps also entry prices as competitive as possible, leaving you with more funds to use during your retirement.