With the aging population of Australia continuing its rapid growth, the demand for products, services, and accommodation that caters to these communities is increasing.

This trend presents tremendous opportunities for investors, and overseas organisations are increasingly interested in exploring business opportunities in the seniors market. But, the legislation regulating this market is complex and it can be difficult to identify which industry is most suitable. Different sectors are subject to different legal requirements and present different asset and profit opportunities.

The industries with arguably the greatest potential for commercial success are the Retirement Villages industry and Aged Care industry. While both industries are primed to provide enormous investment opportunities to overseas investors, it is essential that any individual or organisation contemplating investment understand the key features of each industry. Not only are they very different in how their products, services, and accommodation are designed and marketed to the seniors community, each industry is regulated with vastly different sets of legal rights and obligations which can impact an organisations ability take full advantage of the opportunities arising in this market.

This article outlines the key features that overseas investors should be aware of when first considering whether to you invest in the Retirement Villages or Aged Care industries in Australia.

What is a Retirement Village?

Retirement Villages are residential communities that are designed to be predominantly or exclusively occupied by either people over the age of 55 or those who have retired from full-time employment.

From a residents perspective, the decision the move into a Retirement Village is generally based the aspirations of a particular lifestyle, as opposed to healthcare motivations.   While some residents of Retirement Villages may pay for and receive additional assistance (such as cleaning services), the majority of residents are able to independently with relatively little reliance on village staff.

Retirement Villages also offer a number of social and leisure services, as well as providing various shared common areas and amenities, such as club houses, garden areas, libraries, pools, and bowling greens.

How do residents access accommodation in Retirement Village?

Owners of Retirement Villages (referred to as the ‘Operator’) are able to choose from a number of different models of tenure for residents. Each type of tenure attracts different fee structures, as well as providing a different set of rights and obligations that regulate a residents right to occupy their premises within the village.

It will be very important that any investor fully understands the rights and obligations provided by each type of tenure in Retirement Villages when choosing a structure. Investors should also consider the practical effects of the types of tenure available to them, and which of these would be best suited for their desired business model.

 What is an Aged Care Facility?

Aged Care Facilities (also commonly referred to as ‘Nursing Homes’) are traditionally smaller facilities that offer a broader range of specialised services and supported living. In comparison to residents of Retirement Village, the residents of Aged Care Facilities are typically seniors that are no longer able to live independently within their own home and now require a greater level of care and daily personal assistance. Typically, their care needs are so great that moving into an Aged Care Facility is either  necessary or is substantially cheaper than arranging for multiple providers to provide services to the person in their own home.

The higher level of care offered by Aged Care Facilities is generally tailored toward an individual residents’ specific needs, and may include personal care, such as showering, dressing, and eating; health care, including nursing and physiotherapy; as well as everyday living services, such as shopping, cleaning, and laundry.

How do residents access accommodation in Aged Care Facilities?

The entry into an Aged Care Facility is comparatively more restricted than that of Retirement Villages. The services and accommodation provided by Aged Care Facilities are specifically designated to seniors who have been professionally assessed by an Aged Care Assessment Team (ACAT) as eligible to receive them. These assessments take into consideration the capacity of the individuals mental or physical health, as well identify the specific needs and types of care each individual requires.

Can I receive government funding?

It is important to note that, unlike Retirement Villages, the care received by residents of Aged Care Facilities is subsidised by the Australian Federal Government. This government funding provides a means of affordable accommodation for residents based on the assessment the residents need and financial circumstances. It also provides a base level cash flow for approved providers who own and operate Aged Care Facilities, in addition to the amounts they charge residents for care and accommodation services. However, organisations can only receive the subsidies in limited circumstances and only if they are an approved provider. The application process for becoming an approved provider is rigorous.

How is each industry regulated?

Both Retirement Villages and Aged Care facilities are heavily regulated by complex legislation that restricts how organisations may operate within their respective industries, especially in regard to residents rights to safe and secure living environment and a high level of care.

Aged Care Facilities are regulated by federal legislation; namely, the Aged Care Act 1997 (Cth), as well as a range of secondary legislation operating in conjunction with this Act. A key feature of this legislation is the provision of government funding of for aged care and the conditions imposed upon Aged Care Facilities that require them to operate their facility to a certain standard for the benefit of their residents.

Retirement Villages are regulated by State and Territory legislation (the relevant legislation for NSW, for example, being the Retirement Villages Act 1999 No 81 (NSW)). Each of the states and territories legislation have overarching laws in respect of the rights and obligations of both Retirement Village Operators and village residents, including quality standards, tenancy contract requirements, and village registrations. However, the laws can be very different between jurisdictions. An investor needs to ensure they know the laws that apply to the State or Territory they plan on building or buying a Retirement Village.

These strict regulations can provide significant barriers to investors and new operators to enter into either industry.

Key takeaways

As the seniors market continues to grow, there will remain and abundance of commercial opportunities in Australia for overseas investors to take advantage of within these aged care industries.

However, it is very important for any organisation entering this market to have a clear and comprehensive understanding of distinct features, structures, and regulations of both Retirement Villages and Aged Care Facilities, in order to have the best chance of success in this market.

Some key factors for overseas investors to consider include:

• Which demographic of the seniors market does your organisation plan to target?

• Do you want to offer a service that is a lifestyle purchase or an essential purchase?

• Do you want to provide services that involve a higher of lower standard of care?

• Which jurisdiction do you plan to operate in?

• Do you want to collect government subsidies, and if so are you willing to become an approved provider?

• Do you want to own the underlying property? If so, what type of property do you want to own?

• Do you have the ability to generate resident occupancy and rental growth?

• Do you have the experience and know-how to provide services in compliance with the relevant legislation?

• Are there any alternative types of accommodation or services within the seniors market that you would be better suited to provide outside these two sectors, such as caravan parks or manufactured home villages?

Do you need help?

If you have any questions or require legal advice about investment opportunities into Aged Care and Retirement Village Law, please call us on 02 9199 4563.  We are recognised experts in aged care law with a wealth of experience in assisting businesses respond to the challenges and opportunities that arise in this constantly evolving area of law.

This blog post does not constitute legal advice and should not be relied upon as such. It is a general commentary on matters that may be of interest to you. Formal legal or other professional advice should be sought before acting or relying on any matter arising from this communication.