For those living in retirement villages, amendments to the retirement villages legislation and regulations have resulted in several changes, some of which include:
Changes to the timing of exit entitlement payments;
Payments to aged care facilities when moving from a retirement village to an aged care facility;
A cap on recurrent charges;
Changes to the disclosure requirements; and
Asset Management Plans by operators of retirement villages.
Payment of exit entitlements
This change only applies to those who are registered interest holders in a retirement village i.e. those who have a registered long term lease (at least 50 years) which entitles the resident to at least 50% of any capital gain.
The timing of the payment of exit entitlements is now more certain. Previously, the retirement village operator could specify in their agreements when a resident would receive their exit entitlement. Some agreements stating the date being 5 years from the date the resident vacates the premises, unless their premises are re-leased before this time, then 14 days after the new resident pays the operator or moves into the premises, whichever is the first to occur. Therefore, potentially payment of the exit entitlement may not occur for a period of 5 years from the date the premises is vacated, making it very difficult for the resident moving forward.
There is now the ability for a resident to apply to the operator for payment of their exit entitlement, the value of which can be determine by agreement between the resident and the operator or, if agreement cannot be reached, then by an independent valuer (agreed to by both parties or if no agreement, appointed by the President of the New South Wales Division of the Australian Property Institute). The value will then determine the exit entitlement, regardless of what the premises is eventually sold for.
If the operator then unreasonably delays the payment of the exit entitlement and a prescribed period has lapsed, an application to the Secretary of the Department of Customer Service can be made by the resident to order the operator to pay the exit entitlement. The prescribed period is 6 months for villages located in Sydney metropolitan areas, the cities of The Blue Mountains, Wollongong and Newcastle and 12 months for all other areas in New South Wales.
The commencement of the prescribed period occurs 40 days after the premises is listed for sale, the resident vacates the property or written notice is given to the operator that the resident will remain in occupation during the sale period, whichever occurs first.
If an exit entitlement order is made, the operator has 30 days to pay the exit entitlement to the resident.
Payments to aged care facilities
From 1 January 2021, when moving from a retirement village to an approved aged care facility, it is now possible for the resident to request the retirement village pay the daily accommodation payment for the aged care facility, while the resident is waiting for payment of their exit entitlement. This again, is only possible for registered interest holders as referred to above.
The operator must pay the daily accommodation payment to the aged care facility at least 28 days before the resident proposes to enter the aged care facility or 28 days after the resident requests they attend to this payment, if they are already in the aged care facility.
The payment to the aged care facility continues until either the premises within the retirement village is sold, the resident dies or moves out of the aged care facility or 85% of the exit entitlement is reached (this does not include any capital gains or losses).
This does not apply where the premises in the retirement village is a unit in a strata title or community title scheme.
Changes to Recurrent charges
When vacating premises in a retirement village, previously the recurrent charges (these are for general services) were payable by the resident for 42 days after vacating the premises and thereafter payable by the resident and the operator in proportion to their capital gains entitlements, until the premises is re-leased.
Now, if you are a registered interest holder, you only pay the recurrent charges for a maximum period of 42 days after permanently vacating the premises.
The General inquiry document and disclosure statement, which must be provided by a retirement village operator to a prospective resident within a prescribed period, must now include a copy of the village rules and the “Moving into a retirement village?” publication of NSW Fair Trading.
Asset Management Plans
Operators of retirement villages are now required to prepare an assets management plan every 10 years, the first of which must be prepared by the commencement of the next financial year of the retirement village.
This plan must be available to all residents in the retirement village and must contain a maintenance schedule which refers to capital maintenance and capital replacement of each item of capital (both major items and shared major items) and an asset register. The maintenance schedule must contain the proposed dates for capital replacement and an estimate of the costs involved.
The retirement village has an obligation to keep this plan up to date.
When moving into a retirement village or an aged care facility it is important you obtain both legal and financial advice to ensure the move is right for you and you understand all your rights and obligations.
If this article raises any questions, please don’t hesitate to contact our team.