Comprehensive changes to the Retirement Villages Act were unveiled through the Housing Legislation (Building Better Futures) Amendment Act 2017, which came into effect in November 2017. That Act saw some initial amendments (including the mandatory buy backs), but it also foreshadowed further changes – which we now know will be introduced in three waves. 1 February 2019 has been announced as the ‘Go Date’ for the first wave of changes. The changes will have a big impact for operators – especially to the sales, marketing and operational teams. Importantly, these changes will also impact on the experience of residents choosing, living in and leaving villages.
This article answers the top three questions we are being asked – When exactly do the next wave of changes start, and how long to the next wave? What are the changes? What should operators, residents and prospective residents be doing to prepare?
Question 1: Tell me about timing
The date for the first wave of changes is 1 February 2019. Full compliance is required by this date. The following wave is expected to occur later in 2019, with the exact dates yet to be announced.
Question 2 – What are the changes?
The changes are best described with reference to a resident’s journey through the village – choosing, living in and leaving the village.
Choosing the village
- Disclosure is now a two-step process. The ‘public information document’ that many residents and operators have come to know and love is retiring (pardon the pun), and being replaced by a village comparison document and a prospective costs document. A resident cannot enter into a contract until they have had the prescribed disclosure material for at least 21 days. However, a resident can waive the disclosure period if they want to.
- The village comparison document is intended to give general information about a retirement village scheme. It must be published on the scheme operator’s website (including each page of the website that contains marketing information). As a side note, the legislation requires a village to have a website!
- The prospective costs document is designed to provide more specific information about the intended unit.
- Resident contracts are now required to contain information about the funds a scheme operator is required to keep; the retirement village facilities; the retirement village land and information about capital gain sharing (even if the parties are not sharing in capital gain). The contract that is given to residents must also include details prescribed by regulations, or be in a form prescribed by regulations. Although there are currently no such regulations, this change is certainly opening the doors to future mandatory content and form.
- Condition reports are mandatory at the start of occupation in Queensland, and there are strict timeframes to be complied with.
Living in the village:
- Access to operational documents mentioned in regulations is granted to prospective residents and residents (provided the same request is not made in a 30-day period).
- A regulation may impose a requirement about the provision of equipment in a retirement village for public safety. This may include defibrillators in the future, which will raise interesting questions about appropriate training for residents and staff.
Leaving the village:
There is a greater focus on the leaving process, including reinstatement, renovations and valuations after a resident leaves.
- Reinstatement Work is work required to put the unit back into the same condition it was in when the resident started living in it (excluding any fair, wear and tear, or agreed renovations/alterations). Generally, it is to be completed within 90 days from the date of vacant possession.
- Renovation work is work other than reinstatement work, and it is to be completed on a date to be agreed between the resident and the operator. The use of third party contractors will expose operators to risk relating to delays that are beyond their control.
- The resale value of a unit is to be updated every 3 months. Where the resident and the operator can’t agree on the price, the operator must obtain a valuation which will become the resale value (unless the valuation is less than the previously agreed resale value).
- If the operator and the resident can’t agree on a valuation, the operator must obtain a valuation from a valuer within the 14 day period before payment is due.
- The valuation process is starkly different to what operators might be used to. The valuer is required to advise the resident and the operator they he or she is valuing the right to reside, and ask each party for submissions. The parties can then prepare a submission, and must give copies to the valuer and each other. There is also an opportunity to give a written response to the submission from the other side.
- The valuer is entitled to request information from the operator, which must be provided.
- The valuer must take into account the submissions, as well as the amount of the exit fee and the capital gain sharing arrangements. There are likely to be a myriad of additional relevant factors to be taken into account such as the external housing market and sales within the village.
- Condition reports are required on termination. Within 14 days of termination, the operator must complete a report and give it to the resident. The resident must then either sign the report or dispute the condition. The operator has an obligation to maintain the report for 2 years.
Question 3: What should residents and operators do to get ready for this wave of changes?
Perhaps the biggest tip is for residents and operators alike is to KNOW. YOUR. RIGHTS (and obligations). Get informed. Get help and get it early.
Specific preparation really depends on whether you are an operator, resident or prospective resident. More information will be provided in the future, but in the meantime, the following checklists might be useful:
- Make preparations for disclosure packs containing the new prescribed documents and information (including an acknowledgement from residents) so that 21 day ‘disclosure period’ can commence as soon as possible. Also consider a precedent Waiver Form so it is ready for residents who wish to waive the disclosure period.
- Consider whether existing resident contracts include the required information (e.g. details of capital gain sharing, village land etc). If they don’t, update them NOW.
- Change processes to include sufficient time and resources to draft submissions to valuers, provide information requested by valuers and prepare responses to resident submissions regarding value.
- Start updating your website to make provision for the village comparison document (and a link to that document on each page where marketing is contained).
- Ensure exit and entry condition reports templates are prepared, and staff are trained on their use. Implement a system for diarising timeframes, and for storing (and retrieving) resident forms/feedback.
Residents and perspective residents don’t need to take any action, but they do need to adjust their expectations. Other than the potential to provide a submission on your thoughts of value on resale, get ready for more information, and more access to information.