Proposed reforms to retirement villages legislation in WA - Consultation Regulatory Impact Statement 2 - Operator management responsibilities

Consultation Regulatory Impact Statement 2 (CRIS 2) looks at possible retirement villages legislation reform regarding operator obligations. It deals with some issues which arise during residence and on departure from a retirement village. 

CRIS 2 is the second of six consultation papers regarding implementation of the outstanding Statutory Review of Retirement Villages Legislation, Final Report, 2010 (Final Report) recommendations for reform of retirement village legislation in WA. Reflecting this, CRIS 2:

  • builds on the matters discussed in Consultation Regulatory Impact Statement 1 (CRIS 1) , which took a ‘back to basics’ approach to consumers misunderstanding the retirement village product and its price; and
  • commences with Part 6 - Exit Entitlements (Part 1 - 5 is covered in CRIS 1). 

Introduction

CRIS 2’s focus is operator obligations to both the village community and individual residents. It builds on the CRIS 1 discussion of why consumers misunderstand the Retirement Village (RV) product and its price, in particular in:

  • considering issues from a ‘whole of product’ and whole of price structure perspective; and
  • having regard to the matters which impede informed decision making.
If you want to refresh your memory of these matters, you can view the Consultation Regulatory Impact Statement 1.  You are welcome to comment on the reforms/questions that CRIS 1 poses (or make a further comment) in light of the further information in CRIS 2. 
 

You can also raise any additional matters that you think should be considered with respect to any reform proposal or make a suggestion for another way to deal with an identified issue.

Part 6 – Exit Entitlements and Recurrent Charges After Leaving a Village

Part 6 looks at issues in exit entitlements not becoming payable until long after a resident has left a village, contracts using different names for exit entitlements, contracts purporting to make an exit entitlement payable by a person who is not a party to the contract and the cap of the time for which recurrent charges are payable by former residents not applying to strata title or purple title residents.
 
In summary, you are asked to provide your views on:
  • the Retirement Villages Act 1992 (RV Act) setting a time limit for exit entitlement payment - details include:  whether the time limit should be 6, 12 or 18 months, whether there should be special provision for payment of daily accommodation fees for residents moving to residential aged care, operator ability to apply to SAT for an extension of time to pay, and how exit entitlements are to be calculated in a unit is not reoccupied before the time limit;
  • ensuring the RV Act protections for premium repayment apply to all exit entitlements; and
  • the 3 and 6 month caps on the time that former lessee residents have to pay recurrent charges on leaving a village also applying to former strata and purple title residents.

Part 7 – Budget Obligations

Part 7 looks at budget issues. In particular, difficulty that residents experience in obtaining the information necessary to determine that budget planning and expenditure is justified. Difficulty in obtaining this information makes it hard for resident to exercise their right to challenge a budget increase in SAT.  Whether SAT powers to resolve budget disputes are too limited is also explored.
 
In summary, you are asked to provide your views on:
  • operators being required to seek resident consent to village budgets, with operators being able to apply to SAT for approval if consent is not given – details include:  whether consent should be a simple majority or special resolution, whether recurrent charges should remain at their current level while a budget is under review and what period of time residents should have to consider a proposed budget;
  • SAT being able to consider line by line budget items, including to order that spending be increased or decreased on specific items; and
  • operators being required to spend money in accord with the approved budget.

Part 8 – Mandatory Reserve Funds and Capital Works  

Part 8 looks at issues in capital works funding, planning for capital works, the use to which reserve funds are put and the information that is provided to residents about these matters. It contains proposals and options for implementing the Final Report recommendations for all villages to have reserve funds, ensuring they contain adequate moneys and for those villages that do not currently have reserve funds to transition to them.
 
In summary, you are asked to provide your views on:
  • all villages being required to have capital works reserve funds and capital works plans and an express obligation for an operator to maintain a village - details include the time operators should have to restructure their financial models, how the minimum amount for a fund should be determined, the time operators should have to reach that minimum amount, where funds are to be held and how interest is to be credited;
  • whether there should be separate capital maintenance, capital replacement and general service funds; 
  • restricting use of the funds to the purposes for which they were provided and SAT jurisdiction over reserve funds; and
  • whether capital works categories should be delineated in the RV legislation and only certain categories funded through recurrent charges.  

Part 9 – Making Refurbishment Obligations Clearer and Fairer

Part 9 looks at reasons for continuation of refurbishment disputes despite stage one reforms. It identifies different stakeholder views in whether the RV legislation contemplates contracts requiring residents to fund improvements through exit fees and, if so, to what extent. It also identifies that these different views arise from different ideas about what is fair, given resident share in upfront payment increase. It applies the CRIS 1 information regarding factors that limit consumers’ ability to make informed decision to their ability to negotiate fair refurbishment provisions in their contracts. It also applies the CRIS 1 discussion of a price structure to identify that residents pay for improvements through the upfront payment/DMF/exit entitlement if they do not pay through a separate exit fee.
 
In summary, you are asked to provide your views on:
  • replacing “refurbishment” with “reinstatement” and “improvement” – details include requiring contract to use these terms, whether fair wear and tear should be excluded from reinstatement and whether the ATO approach to identifying improvements should be adopted;
  • reducing the variety and complexity in contractual refurbishment obligations through the RV legislation requiring all residents to fund reinstatement through an exit fee and restricting improvement funding to the proportion residents share in any upfront payment increase; and
  • operator providing prospective and former residents with property condition reports.

Part 10 – Complex Operating Structures and Redefining “administering body”

Part 10 looks at the issues complex operating and ownership structures pose for identifying the administering body for a village. This Part implements Final Report recommendation 87 to redefine “administering body” and its observation that inclusion of land owners in the definition resulted in some inappropriate obligations. The RV legislation primarily imposes obligations on the entity that administers the village or that has it administered on its behalf.  This Part identifies that degree of control of provision of the RV product may be a more useful way to determine which entity or entities should bear responsibility for ensuring RV legislation obligations are met.
 
In summary, you are asked to provide your views on:
  • replacing the term “administering body” with “operator” “manager” and “land owner”, with operator being the entity or entities that control provision of the RV product – details include a manager being the person or entity having some control over day to day village operation;
  • expressly providing for multiple layer of control though joint and several responsibilities (each operator, manager and landowner is individually responsible, contracts cannot provide that only one is responsible); and
  • allocating appropriate RV legislation obligations to managers and land owners without detracting from overall operator responsibility.

Part 11 – Operator and Resident Conduct Obligations

Part 11 looks at issues in operator conduct and management standards.  It considers the issues underlying Final Report recommendations for increased enforcement options to identify how conduct obligations may be made more enforceable.  It builds on the CRIS 1 discussion of the managed community aspect of the RV product to consider some issues in operators’ ability to deal with problematic resident conduct.  

In summary, you are asked to provide your views on:

  • what additional operator conduct obligations are required – details include having regard to the best interests of residents, to act in good faith and to manage conflicts of interest;
  • what additional obligations residents should have; and
  • whether operators should have a strategy to deal with elder abuse.
Consumer Protection
Consultations / public comment
Last updated 12 Dec 2019

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