Do you live in a retirement village unit? Did you know that…

By Brian Herd, Partner at CRH Law, our Lead Legal Professionals at Heather Hill Pathways.

In the ongoing litany of legal myths initially revealed in our last Alert concerning the effect of separation on your Will, here’s a sequel – another expose on a little sleeping myth, ripe for busting.

It relates to an increasing trend in our later lifestyles – older people, usually widowed, arranging for one of their adult children to move in with them.  This is, legally speaking, an ‘issue’ in itself.  It is even more of an ‘issue’ when it involves a retirement village (RV).

At this point, at least in Queensland, it is important to understand some basic law about ownership of a RV unit.  The most common form of tenure or ownership for a resident in an RV is via a 99 year lease.  When you pay for your new retirement village unit, you usually obtain a leasehold interest not a freehold interest.  Further, when 2 or more people hold a leasehold interest in an RV unit, the law says they hold it as joint tenants not as tenants in common.  And, as you may know, if you are a joint tenant of an interest and you die, your interest goes automatically to the survivor and does not depend on what your Will may say.

Here is a recent example that came across my desk of a family blissfully unaware of this law:

• Doris, aged 86, lived alone in a retirement village unit having lost her husband some years ago;
• She had two children, Robert and Bronwyn, both of whom were retired and single;
• Concerned about Doris’ increasing frailty, Bronwyn suggested she move in with Doris in her unit to look after her;
• As was required, the village operator agreed to the proposal provided Doris and Bronwyn signed up to a new lease of the unit together.  Bronwyn didn’t pay anything to Doris for her right to live in the unit with her and to become a co-lessee; and
• Doris had made a conventional Will giving everything to Robert and Bronwyn equally.

Doris died recently and it came time to assess what her estate consisted of.  The controversy arose in relation to Doris’ interest in the retirement village unit.  Robert, the son, thought the unit would be sold and he would receive half the proceeds as an equal beneficiary under his mum’s Will with Bronwyn.  He was in for a rude shock.

As indicated above, the law regarded Doris and Bronwyn as joint tenants and, as a result, on the death of Doris, Bronwyn was entitled to become the sole lessee (owner) of the unit by law.  Doris’ Will was irrelevant.  Consequently, his sister would be, effectively, the sole beneficiary of the unit. Robert was not a happy chappy for five reasons:

1. He was not aware that Bronwyn had become a joint lessee with his mum and thought she had just moved in to look after Doris;
2. As things started to unravel and Robert was told that they were both lessees of the unit, he thought, briefly, that at least he would get one half of Doris’s one half interest in the unit under her Will;
3. It was not what his mum intended to happen (and somewhat bizarrely, probably not what Bronwyn intended either);
4. Bronwyn had no intention of selling and moving out and was quite happy to stay in the unit until the forces of nature took her to another place; and
5. At its last valuation, the unit was worth just over $400,000.

Robert’s brief expectation of sharing at least in the proceeds from Doris’ one half interest quickly evaporated when confronted by the harsh legal reality.  He wouldn’t receive anything in relation to the unit.  Bronwyn, on the other hand, couldn’t believe her luck.

Sad to say but another ‘ho-hum’ moment for we lawyers – Doris had failed to obtain legal advice when she so gratefully accepted her daughter’s offer of help.  Why would she? – after all, it was family business and lawyers are only family disruptors with all their ‘what ifs’ and ‘but did you knows’.

If Doris is looking down from above now, she may rue the legacy of her lethargy.  Instead of sharing her wealth with her two children, she has left for them, a recipe for implosion.

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