Retirement Village Exit Fees in Victoria, and How the Deferred Management Fee Works

A retirement village exit fee in Victoria is almost always the deferred management fee, or DMF, which is a percentage of what you paid to move in that the operator keeps when you leave. It builds up for each year you live there, commonly around 3% to 5% a year, and stops at a cap that is often somewhere between 25% and 40%. You never pay it while you live there. It is taken out of the money that comes back to you at the end.

That is why it catches families out. The entry payment is on the brochure. The monthly maintenance fee turns up on a statement. The DMF sits quietly in the contract for six or eight years and then arrives as a very large number at the worst possible moment, usually when someone is moving into aged care and the family is trying to work out what they can afford.

This page explains how the fee is worked out, what else can be taken off at exit, what changed under the Victorian reforms that started on 1 May 2026, and how the condition of the unit affects what an operator is allowed to deduct. We inspect units, we do not give legal advice, so we have flagged clearly below where you need a solicitor.

What a deferred management fee actually is

Think of it as the operator's charge for the village, spread across your whole stay and collected in one go at the end. Charging it that way keeps the entry payment lower than it would otherwise be, which is the trade-off you are agreeing to when you sign.

• The rate. A percentage for every year you live in the unit. Around 3% to 5% a year is common.
• The cap. The year the fee stops growing. Once you hit the cap it does not matter whether you stay another two years or another twenty.
• The base. What the percentage is applied to. This is the part that used to vary the most between contracts, and it is the part that has changed.

Since 1 May 2026 in Victoria, the deferred fee can only be calculated on the entry payment you made and the length of time you lived there. It can no longer be worked out on what the unit sells for to the next resident. In a market that has gone up, that is a meaningful difference in your favour. Operators also cannot charge a deferred fee if you leave inside a settling-in period, and if you move from one unit to another in the same village, only one deferred fee applies.

A worked example, so you can see the mechanics

These figures are made up to show how the sum works. They are not a quote and they are not typical of any particular village. Your own contract is the only thing that tells you your numbers.

Say an entry payment of $600,000, a fee of 5% for each year of residence capped at 35%, six years of residence, and the unit resells for $660,000 with capital gain shared equally.

The other deductions, and why the condition of the unit is one of them

The DMF is the big one, but it is not the only thing that comes off. Outstanding recurrent charges, agreed selling costs, and the cost of putting the unit back to the condition it was in when you moved in can all be taken out of what you get back.

That last one is where a lot of money quietly disappears, and it is also the one you have the most control over. In Victoria a resident's obligation is to leave the premises reasonably clean and in the same condition as when they moved in, allowing for fair wear and tear. Fair wear and tear means the ordinary ageing that happens from living in a place normally. You cannot be charged for it.

You are also not required to renovate or upgrade the unit so the operator can sell it to the next person. Renovation is a separate thing you can agree to share the cost of in writing if you want to, and you do not have to.

The process at the end runs on short clocks, so it pays to know them:

• The operator completes an outgoing condition report within 10 business days of you leaving, and it is better if you or a family member are there when they do it.
• Any reinstatement notice has to be served within 21 days of you leaving. Served late, it is unenforceable.
• You then have 21 days to put your disagreement in writing if you think the work is not needed, the cost is too high, or you already met your obligations. Once you do, the operator cannot carry out the work until the dispute is sorted.

Twenty-one days is not long when a family is dealing with a move into care. Having your evidence already sitting in a folder is the difference between disagreeing properly and paying whatever is on the invoice.

What changed on 1 May 2026, and what changes on 1 September

The Retirement Villages Amendment Act 2025 reforms commenced on 1 May 2026. Right now Victoria is inside a grace period that runs until 31 August 2026, where operators may still use their existing contracts with certain amendments. From 1 September 2026 the new mandatory standard form contract has to be used for all new residence and management contracts.

An important caveat about existing contracts

If your mother or father has been in a village since 2016, do not assume every one of these changes rewrites their agreement. Broadly, the operational and dispute provisions reach across to existing contracts, while a number of the financial provisions apply going forward. Which of the new rules apply to a contract signed years ago is a legal question about that specific document, and it is exactly the sort of thing a solicitor should answer rather than an inspector. Consumer Affairs Victoria runs a free service, VicAssist, for village disputes, and VCAT hears matters that cannot be resolved.

Why an independent entry condition report protects the exit entitlement

The operator now has to give a non-owner resident a condition report in the prescribed form before they move in. That is a genuine improvement and it is worth having. It is also the operator's own document, filled in by the operator's own staff, usually on a busy day, often as a set of ticks next to words like "good" and "fair".

Six or eight years later, a tick next to "kitchen, good" settles nothing. A dated photograph of the chipped benchtop, the marked architrave and the scratched shower screen settles it immediately.

An independent entry condition report gives the resident their own evidence, held by the family rather than the village:

• Room by room, photographed, dated, covering the surfaces and fittings that actually get argued about at the end.
• Written for the resident, so nobody is later relying on the other side's record of what things looked like.
• Useful where the unit is owned rather than leased, and the statutory report may not apply.
• Handed over as a file the family can email to a solicitor in one minute when a reinstatement notice lands.

It costs $295 inc. GST. Set against a reinstatement bill that can run to several thousand dollars, or a disagreement you cannot support with anything, it is cheap insurance against paying for wear you did not cause.

Who is doing the inspection

Nathan Maries has 23 years in construction, including nine as a project manager. He ran his own building company for ten years doing renovations, extensions and fit-outs, then spent his project management years delivering work inside occupied retirement villages, including 20 or more Keyton and Lendlease villages across Melbourne, around six Stockland and Levande villages, and two Aveo villages. He has walked through a lot of these units with an operator's maintenance schedule in his hand, so he knows what gets called wear and tear and what gets called damage.

Reports are prepared with reference to AS 4349.1. Melba Building Inspections covers Greensborough, Eltham, Diamond Creek, Montmorency, Ivanhoe, Watsonia, Bundoora, Heidelberg, Rosanna, Macleod, Hurstbridge and Doreen. Nathan is working towards builder registration and is not yet a registered builder.

If you would like a hand, give us a call on 1300 489 150 or email nathan@melbabuildinginspections.com.au. Happy to talk it through before you book anything.

Where you need a solicitor, not an inspector

We can tell you the condition of a unit and put it on paper in a way that holds up. We cannot tell you what your contract means, and we will not try.

Get a solicitor to read the residence contract and the management contract before you sign, ideally well inside the seven business day cooling-off period. Ask them specifically about the deferred fee rate and cap, how capital gain and loss are shared, when the exit entitlement is payable, who pays for what at the end, and which of the 2026 changes apply to that particular document. A financial adviser who works in this area is also worth the money, because the DMF interacts with aged care fees and the pension in ways that sit well outside what a building inspector should be commenting on.

Common questions

Related

• retirement village inspections
• entry condition report
• Melba Building Inspections