Some people who consider living in an aged care facility are often concerned when they hear about deferred management fees. They don't see why they should pay them. National Seniors Association Chairman, Everald Compton, says that without deferred management fees, the operator may walk away from the community as there would be no incentive for him to stay and take the responsibility of managing the community because no profit is permitted by law to accrue from month-to-month general service charges. This would leave the residents of the community in the position where they would have to manage the community themselves when most don't want that responsibility. It would bring internal power struggles and unnecessary worries for residents.
Mr Compton says that, by virtue of the operator remaining involved with the community long term, the residents are relieved of the responsibilities associated with management and a less stressful and healthier environment is created. This is one of the main reasons for living in a community compared with living in an individual residence or being part of a body corporate situation in an apartment building. Naturally, if the operator remains involved, he must receive some compensation - i.e. deferred management fees (DMF). It is true that weekly service charges pay for day-to-day management. The wages of staff and operating expenses are paid by the residents, but responsibility for the community management and finance remains with the operator. The Retirement Community Act forbids the operator from taking a profit from service charges. The alternative would be for residents to appoint and manage the staff themselves. This requires them to form a management committee and be involved on a day-to-day basis. People are trying to avoid that by buying into a community
managed by professionals.
The residents of the community would be left in the position where they would have to manage the community when they don't want that responsibility at all. This is even more relevant in the case of a Supported Living Community such as Pinevale Villas where a large staff is required to provide care and nursing services.
Mr Compton said that operators do not make a large initial profit from a community.
Deferred management fees vary from community to community and are charged by all retirement villages, including those owned by non profit organisations such as Church grounds and the R.S.L. Fees are generally very standard but can be as high as 50% of the purchase price alone. No community can claim to offer the best real estate investment in the world. It simply offers a lifestyle investment, a sound investment in a new environment for seniors which provides a secure and worry-free lifestyle when people need it most.
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