Retirement Villages NSW

Retirement Villages NSW

A Retirement Village (Village) is a managed community for seniors. Retirement Villages (NSW) What is a Retirement Village? A Retirement Village (Village) is a managed community for seniors. Each Australian State and Territory has enacted specific laws which establish and regulate the relationship between Village operators (Operator) and their Residents and prospective Residents (Residents). In New South Wales: retirement village is defined in the Retirement Villages Act 1999 (Act) as a complex containing residential premises that are, or intended to be, predominantly or exclusively occupied by retired persons who have entered into village contracts with an operator of the complex; and retired person means a person aged 55 years or who has retired from full-time employment. However, the Act excludes certain complexes from the Act, such as nursing homes, caravan parks and manufactured home estates to name a few. It is an important distinction to make that just because a complex advertises as an over 55 s village, this does not necessarily mean that it is a retirement village under the Act. The Retirement Village Contract For a Village to be covered by the Act, Residents must enter into a contract with the Operator either in respect of living in the Village and/or receiving certain additional services offered by the Operator, such as medical support and meals. 1

Each Australian State and Territory has enacted specific laws. There are many different types of contracts that a resident may be asked to sign before moving in to a Village in New South Wales. The most common are: Retirement Village Contract; Loan and License Agreements; Long term leases; and Services and Facilities agreements. Village contracts differ from Village to Village and it is important for residents to obtain legal advice about all of the contracts they are asked to sign before they pay any money to an Operator of a Village or sign any contract. Disclosure to Prospective Residents The Act requires that an Operator provide a prospective Resident (or a person acting on the resident s behalf), with a disclosure statement before signing a contract (Disclosure Statement). The purpose of the Disclosure Statement is to provide prospective residents with a general understanding of the features and financial arrangements of the Village. It must contain details of the fees and charges that will be payable by the Resident both upon entry to the Village and during the time the Resident resides in the Village. Residents cannot enter into a Contract with the operator until at least 14 days after receiving the Disclosure Statement. Operators are also required to make available for inspection, or provide free of charge, other information about the Village such as a site plan, statements of proposed expenditure and audit accounts. Settling in Period The Act provides for a 90 day settling in period for new Residents. Residents who vacate the Village within 90 days of moving in will only be required to pay to the Operator a fair market rent for their stay, plus a reasonable administration fee, with that fee capped under the Act. Repairs and Maintenance 2

There are some circumstances in which you may be unable to make decisions about matters that concern you. The Act makes provision for who is responsible for the repairs and maintenance of the various items within a Village. The Operator has an obligation to ensure that all items of capital are maintained in a reasonable state of repair having regard to certain factors such as the age of the Village, the amount of ingoing contributions paid by Residents and the amount of money available for maintenance allocated by the Village. The following table is a summary of which items Residents and Operators are responsible for: Item Item of capital Type of repair or replacement Repair or replacement Who is respnsible? Operator Example Hot water system Item of capital Maintenance Resident Carpet cleaning/ Re-painting apartment Item owned by resident Item damaged by the resident or a visitor Repair or replacement Repair or replacement Resident Resident Item of capital Urgent repairs Resident can arrange and Operator must reimburse Resident Fridge Any item Blocked/ broken toilet 3

Fees and Charges There are many different fees and charges that a Resident may be required to pay when entering a retirement village. The Operator of the village is required by law to provide information about the entry costs (and ongoing fees throughout the course of residence in the Village) in the Disclosure Statement. The table below provides a brief summary of typical entry costs and ongoing fees and charges: Retirement Village fees and charges Type of fee When is fee payable Comments Rights of resident Waiting List Fee When a prospective Resident wishes to be placed on the waiting list for a village Maximum $200 Village must provide written waiting list policy Fee is fully refundable Village must refund the fee within 14 days of receiving a written request to do so or deduct the fee paid from the ingoing contribution Holding Deposit When a prospective Resident wishes the village to reserve a particular premises Can only be required or accepted on vacant or new premises, or when the outgoing Resident has already given notice to vacate Village must refund the fee within 14 days of receiving a written notice that prospective resident does not wish to proceed. Deposit When a Resident enters into a village contract Must be held in a solicitor s trust account on trust in accordance with the Act. Deposit is fully refundable if a resident decides not to proceed within the cooling-off period. Legal Costs When the village contract is prepared, the resident and the village Operator share the costs (usually payable upon entering the Contract) the maximum amount payable by a resident in most cases is $200 The village operator must provide the Resident with evidence of the legal expenses incurred (such as a copy of the tax invoice). Ingoing Contribution A fee for a long term lease or license. This is used when a resident is not going to own the premises. Payable on settlement (on entering the premises) Refund entitlements for unregistered interests of residents are now protected and are given priority over certain other creditors in the event that the village becomes insolvent. A set amount of the ingoing contribution is normally non-refundable, or it will depreciate each year according to a schedule in the Village contract. A resident may be able to delay payment of the ingoing contribution and/or pay the contribution by instalments. Often a village will charge interest on the unpaid portion of the contribution; however, the maximum rate of interest is set by the regulations to the Act. 4

Retirement Village fees and charges Type of fee When is fee payable Comments Rights of resident Recurrent Charges Payable by the residents to cover the cost of running the village, usually payable weekly, fortnightly or monthly throughout the entire course of the Resident s occupation in the Village. Check the village contract for the method of varying recurrent charges, however they will usually increase annually in line with the Consumer Price Index (CPI) The operator must comply with the legislation in respect of these charges Residents must be given notice (usually 60 days) of any variation in the recurrent charges. Less notice is required if charges are increased by less than CPI General consent of residents is required when variation is by other than a fixed formula Departure Fee / Deferred Management Fee An amount deducted by the village from the ingoing contribution fee paid by the resident, payable when the resident vacates Usually this fee is calculated as a percentage per year of the ingoing contribution/purchase price for a maximum period Check the Village contract Fee is payable from the ingoing contribution or proceeds of sale Capital Loss/ Capital Gain If the village contract provides, the resident and the operator may share any capital loss or capital gain on the premises at the time the resident leaves the village A capital gain means any increase between the amount that the resident paid for the premises and the amount that the next resident pays for the same premises Check the Village contract as this varies from Village to Village Release of funds upon termination of contract:- The operator of a Village has an obligation with respect to paying monies to Residents (or their Estate) when the Resident vacates the Village this is known as the Departure (or Exit) fee. The release of funds to the Resident (or their Estate) will be dependent on the Village contract and whether the resident owns or leases the premises. Further, the Resident may also be entitled to share in the capital gain. However, in general (and as noted in the table above) upon termination of the Village contract, the Departure Fee is deducted from the ingoing contribution. The balance is then refunded to the Resident or their Estate. The Act provides for strict time limits with respect to payment of those amounts. Residents, their attorneys or legal personal representatives should carefully check the particular terms of their Village contract and make sure that they understand their rights with regard to recovering monies paid to a retirement village Operator when they vacate the premises. For more information, please contact (07) 5536 9777 or email info@attwoodmarshall.com.au. 5

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