The Victorian government will become the first state to force retirement village operators to sign up to a mandatory code of conduct as part of a crackdown on the sector that also includes more transparency on how fees are calculated.

The overhaul follows an ABC investigation into the sector that exposed some operators gouging residents by charging exit fees of as much as 60 per cent of the home's purchase price plus the cost of refurbishing the villa when they sell up.

Some draw up punitive contracts that contain clauses such as mandatory medical examinations, no pets without permission and compulsory renovations when a resident leaves or dies.

There is currently a voluntary code of conduct, set up in 2020 by the powerful Property Council's Retirement Living Council, but less than half of the multi-billion-dollar sector has signed up to it and the ABC's investigation revealed that it hasn't sanctioned a single operator in the four years it has been in force.

State Consumer Affairs Minister Gabrielle Williams said the package of changes would result in village residents getting "some of the strongest protections in the country".

She introduced legislation overhauling regulation of the sector to parliament on Wednesday and the government plans to develop the new code separately next year.

Ms Williams's bill aims to standardise contracts and provide more information to would-be residents before they enter a village, but stops short of capping exit fees that in some cases seen by the ABC have resulted in residents being charged hundreds of thousands of dollars on the sale of their home when they leave the village.

The bill is the end result of a parliamentary inquiry held in 2016, and a subsequent consultation process that has dragged on for several years.

It is part of a raft of legislation the Victorian government is bringing into the parliament this week, the last sitting week of the year.

Ms Williams said it represented the most comprehensive reform to the law governing retirement villages "since it was introduced in the 80s".

She said the proposed code "goes hand in glove with the new dispute resolution processes that form part of this bill as well, because part of the code of practice is requiring retirement village operators to participate in those dispute resolution processes in good faith".

"We know that this is a sector that has caused some concern for many retirement village residents across our state for a variety of different reasons, many of which are addressed in the bill that has just been entered into the parliament."

Housing for the Aged Action Group (HAAG) executive officer Fiona York, which has helped many retirees battling retirement village operators welcomed standardised contracts, saying ambiguous and confusing documents have "made it difficult for people to compare villages or understand their real costs", and said a mandatory code would send a strong message to the industry.

"We have seen shocking mistreatment of our clients in retirement villages by unscrupulous operators, caused by a lack of adequate consumer protections and regulation," she said.

"The mandatory code of conduct has the potential to provide stronger consumer protection and a better experience for residents."

But she said HAAG was concerned the bill would allow some of the industry's worst practices to continue.

"It doesn't go far enough in regulating exit fees that can incentivise villages to 'churn' or evict residents for increased profits, and trap unhappy residents in villages that no longer suit them," she said.

"The worst operators we see use eviction threats to harass residents to manipulate exit payments and extract windfall profits."

Retirement Living Council executive director Daniel Gannon said the industry had "long called for and supported" villages being required to buy back units within 12 months of a resident leaving.

"Many of the proposed changes in Victoria appear sensible and reasonable, especially as they relate to the provision of more information to prospective residents and higher standards," he said.

"This is the same sentiment that has driven recent consumer-focused reforms in both WA and SA, while also striking a sensible balance for operators.

"We have made clear from the outset that industry is motivated by a desire to increase consumer and investor confidence, raise industry standards, and pursue better regulation. 

"Residents and prospective residents are the real winners when we hit these targets.

"Given historic criticism about contract complexity, we've worked with state governments across the country to inject more transparency, clarity and certainty into this part of the process, including in Victoria."

The new Victorian bill does not cap exit fees, also known as deferred management fees, which the ABC's investigation found can sometimes be calculated according to complex algebraic formulas that can be confusing and difficult to understand.

"What we have done is outline the way that deferred management fees need to be calculated," Ms Williams said.

"Deferred management fees were one of those areas that residents told us often came as a shock to them when they were moving through various different stages of their time in the retirement village, including exit.

"So that is a very important reform to make sure there is clarity and consistency about how they're calculated."