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Consultations Retirement Villages

Legislation review and update bulletins

Retirement Home

Consultation status: Closed 15 July 2013 

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Update bulletins

Update March/April 2014

New laws come into place from the beginning of April 2014. The Department of Commerce has been working on changes to the Retirement Villages Act 1992 (RV Act) and Retirement Villages Regulations 1992 (RV regulations) arising from amendments to the RV Act in the Retirement Villages Amendment Act 2012 (Amendment Act).

A number of new provisions in the RV Act required regulations to be drafted and gazetted in order to become operational.  The first set of these, contained in the Retirement Villages (Recurrent Charges, Prescribed Matters and Exemption Certificates) Amendment Regulations 2014 (Amendment Regulations) were gazetted on 21 March 2014 and commenced on 1 April 2014. With the regulations completed the substantive provisions of the Amendment Act also commenced, by proclamation, on 1 April 2014. The table below summarises this first round of changes.

A second set of regulations to prescribe matters and provisions that must or must not be included in residence contracts (under section 14A of the RV Act) are still being drafted, together with a fully revised Fair Trading (Retirement Villages Code) Regulations under the Fair Trading Act 2010. It is expected that both of these will commence later this year. More information about the Code is provided below.

Background

In November 2010 a comprehensive review of retirement village laws recommended a large number of reforms (over 100) to retirement villages’ legislation. Some recommendations relate to the interests of residents living in retirement villages, others work to ensure a better balance between the respective interests of residents and operators (administering bodies) of retirement villages. 
Some of the review’s recommendations have been implemented by non-legislative means (e.g. the Seniors Housing Centre), others require amendments to the Code, the RV regulations or the RV Act itself.
Community and stakeholder expectations for legislative change are high and changes being progressed have been the subject of extensive consultation with both industry and resident stakeholder groups.
The Department continues to work hard to achieve a clear and relevant legislative framework that protects and recognises the reasonable interests of both residents and operators. This is a challenging task as the industry has changed significantly over the last twenty years and prior to the above reforms commencing legislation governing the retirement villages industry has not altered significantly since the 1992.

A discussion paper released in mid-2013 outlined proposed changes to the Code which included meeting Fair Trading Act 2010 requirements, and dealt with a number of issues, such as:

  • the need for village managers to genuinely consult with residents and provide financial and other information about the operations of the village.
  • how budget surpluses will be spent in the village.
  • mandatory auditing of village accounts and the right for residents to collectively opt out of auditing. 
  • the ability for residents to vest the functions of a residents’ committee with an incorporated association. 
  • residents’ rights to negotiate on the refurbishment of their unit when leaving the village.

Work on the Code is progressing with a consultation exposure draft is being prepared for release as soon as possible.

Once the provisions in the Amendment Act have been implemented a second more complex Bill addressing the remaining final report recommendations will be progressed.

Legislation

From 1 April 2014 the retirement villages legislation continues to comprise the:

  • Retirement Villages Act 1992 (as amended by the Amendment Act);
  • Retirement Villages Regulations 1992 (as amended by the Amendment Regulations); and
  • Fair Trading (Retirement Villages Interim Code) Regulations 2014 (the Code).

Sections 13 and 14 amended

Increased disclosure and cooling off periods

Increases the time for prospective residents to consider pre-contractual disclosure information from 5 to 10 working days.

Newly provides that a fee or charge must not be imposed in relation to the provision of pre-contractual disclosure information.

Increases the “cooling-off” period following entry into the residence contract (i.e. the date of signing), during which a resident can rescind the contract without penalty:

  • from 5 to 7 working days where the pre-contractual documents have been given to the prospective resident prior to signing of the contract; and
  • from 10 to 17 working days from the date on which pre-contractual documents are given to the resident where  the required disclosure information was not provided to the resident at least 10 days before the residence contract was signed.
New section 14A

Village contracts - matters that must or must not be included in a residence contract

Creates a head of power in the Retirement Villages Act 1992 (the Act) so that regulations may prescribe certain provisions or matters that must or must not be included in residence contracts. The regulations under this section have not been finalised and will not commence on 1 April 2014.  They are intended to commence at the same time as the Revised Retirement Villages Code of Conduct, later in 2014.

Section 18 amended

Release of premium to the operator from trust

Allows residents’ premium payments to village operators to be released from trust, to the operator, once a resident is entitled to occupy the village unit and the cooling off period has expired, if this occurs before a resident actually takes up occupancy. This amendment addresses a problem for operators, who currently cannot access residents’ paid funds if, for example, a new resident does not immediately take up residence but goes on an extended holiday.

New section 23 and its regulations

Limitation on liability of outgoing non-owner residents to pay recurrent charges

The Amendment Act defines permanent vacation as requiring four elements to be satisfied:

  • the administering body has been given notice of the resident’s intention to vacate the premises, if this notice is required by the residence contract;
  • the goods and belongings of the former resident have been removed from the residential premises;
  • the former resident has ceased to reside in the premises; and
  • the right to exclusively occupy the premises has been given up by the return of the keys to the premises, to the administering body.

Some of these elements may be satisfied by the estate of the former resident, if the resident is deceased.

A former non-owner resident’s liability to pay recurrent charges after they permanently vacate the village, ceases in accordance with the regulations. 

The Retirement Villages (Recurrent Charges, Prescribed Matters and Exemption Certificates) Amendment Regulations 2014 (Amendment Regulations) provide that this will be 6 months for residents on existing contracts and 3 months for residents on new contracts (signed after 1 April 2014), allowing for probate delays if a former resident is deceased.   This means that:

  • For non-owner residents on existing contracts who leave a village on or after 1 April 2014, their liability will cease 6 months after they permanently vacate their premises in the village or, if they are deceased at the time of permanent vacation, 6 months after the administering body being given evidence of the resident’s death  or the premises having been permanently vacated, whichever is later.
  • For non-owner residents who have permanently vacated a village before 1 April 2014 and who are still paying recurrent charges on 1 April, their liability will cease 6 months after 1 April unless they are deceased in which case their liability will cease 6 months after the administering body being given evidence of the resident’s death or the commencement day, whichever is later.
  • For new residence contracts signed after 1 April 2014, the liability of non-owner residents to pay recurrent charges will cease 3 months after they permanently vacate the village or, if they are deceased at the time of permanent vacation, 3 months after the administering body being given evidence of the resident’s or permanent vacation, whichever is later.

In every case though, a former resident’s liability may cease earlier than the 6 months or 3 months, if their contract provides for it, or if their premium is repaid in full or in part, or if a new resident becomes liable to pay those recurrent charges.

Similarly if the State Administrative Tribunal (SAT) makes an order that results in a former resident’s liability ceasing earlier then the resident’s liability will cease in accordance with SAT’s order.

The Amendment Regulations also provide that if the resident dies before the expiry of the relevant 6 or 3 month period, then the relevant period stops expiring to start again when the administering body is given evidence of the grant of probate or letters of administration, or other evidence of death that the administering body accepts.

Once a former resident’s liability ceases, the administering body will have to cover the cost of the recurrent charges and will be prohibited from recovering those costs by increasing recurrent charges or imposing additional operating fees or charges on other residents within the village.

New section 24 and its regulations

Liability for recurrent charges may be paid out of refund entitlement

Provides all non-owner residents with the capacity to defer the payment of recurrent charges incurred after they permanently vacate the village and to have these charges deducted from the repayment of their premium. The Amendment Regulations will prescribe the maximum rate of interest payable on those recurrent charges that have been deferred. The prescribed rate is the rate that applies to unpaid accommodation bonds under the Aged Care Act 1997 at the time of the resident’s election to defer the payment.  A lower rate of interest applies if the resident and the administering body agree, or if the residence contract specifies a lower rate.


The administering body must contribute any recurrent charges that former residents have elected to defer, into the operating budget at the time the former resident would have otherwise been required to pay them, and may charge the former resident interest on the unpaid amounts.

New section 25 and its regulations

Fees and charges not to be included in a village operating budget

Prohibits an administering body demanding or receiving payments (prohibited charges) in respect of matters prescribed in the regulations.  The prohibited charges will apply to all residents and former residents, irrespective of when their contracts were signed.

The matters prescribed in the regulations will be prohibited from 1 April 2014 although existing retirement villages will have a period of grace because the prohibited charges will not take effect until the first day of the next financial year of the retirement village which starts after 1 April 2014.  This means that if prohibited charges are for example included in a retirement village’s operating budget for the 2013/14 financial year, the prohibitions will only commence for that village from 1 July 2014. 

The matters prescribed in the regulations for the purposes of the prohibition relate to matters that should not reasonably be passed onto residents (that were identified in the final report) or for which demanding more than the cost incurred is unreasonable. For example, charging an individual resident more than the costs incurred for refurbishment is unreasonable because it runs counter to the requirements relating to refurbishment in clause 5.8 of the Retirement Villages Code.

Some of the other prohibited charges include charging:

  • an individual former resident a marketing and advertising fee for the residential premises they previously occupied, which is more than any costs incurred in marketing or advertising those individual premises;
  • residents and former residents with management and administration fees which are more than the costs incurred by the administering body in managing and administering that retirement village.  In cases where the village is administered by an administering body on behalf of the village owner, a reasonable fee for that administration and management service may also be charged, in addition to the costs incurred;
  • any more than the resident’s portion of 50% of the membership and accreditation fees which the administering body pays to an industry body representing retirement village operators.  This recognises that some, but not all, of the benefits of industry body membership and accreditation flow to residents.

New section 55

Applications to the State Administrative Tribunal (SAT) in relation to residence contracts’ compliance with regulations under section 14A

Provides the SAT with jurisdiction to hear disputes between the parties to a residence contract as to the contract’s compliance with the regulations made under section 14A.  Either party to the residence contract, or the Commissioner for Consumer Protection, may apply to the SAT in relation to the matter. The SAT may make any orders it considers appropriate and may declare that the orders apply to any residence contracts specified.

Logically, this section will only become operational once regulations proposed under new section 14A commence later in 2014.

Amended section 56

Powers of the Tribunal (SAT) in relation to recreation and entertainment services and amenities

The amendments clarify the current powers of the SAT to deal with disputes about the provision of village amenities, irrespective of whether such amenities are included in a residence contract or a service contract.

Section 57A

Residents appeal to the SAT on recurrent charges or levies

Provides residents with the capacity to apply collectively (via a special resolution of residents) to the SAT regarding a dispute with the administering body about an increase in recurrent charges or the imposition of a levy. The provisions give the SAT the power to make any orders it considers appropriate.

New Part 5A - Section 75A to 75I

Appointment of a statutory manager by the SAT

Provides the Commissioner for Consumer Protection with the capacity to apply to the SAT for the appointment of a statutory manager to manage a village, where the well-being or financial security of residents is at risk.

A range of issues will need to be considered prior to the appointment of a statutory manager. SAT will, therefore, be empowered to determine issues such as:

  • the terms and conditions appropriate to the appointment;
  • the functions to be performed by the statutory manager;
  • the source of funds used to remunerate the statutory manager and meet their expenses; and
  • the extent of the statutory manager’s control of those funds.
New sections 76 and 77A to 77C, and regulations

Certain persons not to be involved in village management

Introduces a prohibition on certain persons being concerned, directly or indirectly, in the administration of a village. An onus is also placed on the employing or engaging authority to ensure that prohibited persons are not employed or engaged and a penalty attaches to a breach of this provision. Prohibited persons may seek an exemption from the prohibition from the Commissioner for Consumer Protection.

The Amendment Regulations prescribe a $700 application fee to accompany an exemption application, include a penalty for providing false or misleading information to the Commissioner in relation to an application for exemption, and set out matters relevant to the Commissioner’s consideration of whether there are special circumstances warranting giving a full or partial refund of the application fee. Note that the refusal of an application is not on its own a special circumstance for which a refund may be granted.

Transitional provisions in the Act deem persons who on 1 April 2014 are directly or indirectly concerned in the administration of a village, and who are prohibited, to have an exemption certificate that is valid for 6 months.  Such persons will however have to apply to the Commissioner for an exemption certificate within the 6 months if they want the exemption to continue. Once an application has been made, the deemed certificate remains valid until such time as their application is decided by the Commissioner one way or the other.

Amended section 80

Extension of time for proceedings

Extends from two to three years, the timeframe within which a person may bring proceedings to court for an offence under the Act.

Amended section 82

Penalties for offences against the regulations

Increases the maximum penalty for offences against the regulations from $500 to $5,000. 

    Further information