People leave villages for a variety of reasons, including family, health or, sadly, death. Whatever the reason, leaving a village is an important time in a resident’s retirement village journey. It can have significant financial implications, and it can also be incredibly confusing – all at a time when your focus is really on the move itself (or mourning for a loved one). We know this because at DSL Law, we receive more questions about leaving a retirement village than we do about entering one. What is clear is that it can be easy to fall foul of the legal requirements, or to fail to understand the full extent of your obligations and, importantly, your entitlements. This article is designed to help residents and their families understand what the leaving process looks like and to assist them in preparing for it by pointing out some of the key requirements and issues.
Terminating your Residence Contract
You may terminate the arrangements with the retirement village operator by providing 1 month’s written notice to the operator of the village. This ‘termination’ is the trigger for calculating your repayment and for many of the operator’s obligation under your residence contract (i.e. your lease, licence or service contract). To avoid any future issues, this termination should be in writing, properly signed, given to the operator and acknowledged by the operator. Many people rely on a conversation they have with the village manager in the office. This is understandable, but it may not give you the protection you want or need.
Vacating the unit?
When vacating your unit, ensure that you remove all possessions and hand the keys back to the operator as soon as possible. This is important for two main reasons. First, unlike other property, the selling process will not start until you leave the unit. Second, the exit fee will continue to accrue until “the day the resident ceases to reside in the accommodation unit…”.
Some residence contracts require you to obtain probate when a former resident has passed away. This is an expensive and time-consuming process. To avoid any delays, this should be verified early. Even if the contract does require it, some operators will waive this requirement. It is always worth checking.
Setting and updating the Resale Price
Within 30 days after the date your contract is terminated, you are required negotiate and agree on a price for your unit to be marketed at. Some residents think that doesn’t matter because they are not getting capital gain. However, the price has a direct impact on the timing of the resale which means all residents should take an active part in this process. If an agreement can’t be reached, the scheme operator must obtain a valuation within a further 14 days. This process is repeated every three months.
Who can sell the Retirement Village Unit?
The operator has the exclusive right to sell your unit for 6 months following the termination date. After this, you can appoint anyone you wish to sell the unit.
In our experience, operators have the infrastructure and skills in place to sell your unit, and are typically best placed to do so. At a very practical level, they can explain the operation of the village in a way a third party real estate agent cannot. However, every case needs to be looked at on its merits.
The sales process
Residents are entitled to be kept informed and up to date in relation to the sales process. That means, at a minimum, being given details of each offer to purchase. In addition, if you ask, you are entitled to a monthly report showing all sales inquiries relating to the right to reside, the steps the operator is taking to promote the sale of the right to reside, and details of other units for sale in the village. Most good operators will give this type of report as part of their usual sales process. If your unit is on the market and you aren’t being kept up to date, we recommend sending a written request to the operator.
Residents have an obligation to reinstate their unit. However, because of changes to the Act, the obligations of reinstatement depend on the date of your contract.
Under the current Act, reinstatement means the work required to put your unit back in the condition it was when you moved in, apart from fair wear and tear or any renovations or approved alterations. If you are a resident under the current Act, you have the right to do your own reinstatement work prior to leaving. If you don’t the operator can elect to do the work and recover the costs from your exit entitlement.
Renovation and Refurbishment
The cost of renovation work is to be shared in the same percentage as the parties share capital gain.
Exit Condition Report
From 1 February 2019, an Exit Condition Report is required to be completed by an operator within 14 days from the date of termination and given to the resident. You have an obligation to sign the report and identify the parts of the report that are not agreed. The operator has an obligation to give you a copy of the report.
Where you entered into your contract after 1 February 2019, you can refer to the Entry Condition Report to assist in ascertaining and agreeing on the required works when completing the Exit Condition Report.
Exit fees are to be calculated on a daily basis up to the termination date. It is important to check the calculation to ensure it is in accordance with the terms of the original residence contract.
Other payments may also be deducted from your exit entitlement, such as registration costs for the surrender of a lease and the legal fees of the operator.
Timing of repayment
As a general principal, if your unit has not sold after 18 months, the operator is required to buy it back. This rule is currently under review.
In summary, it is crystal clear is that there is a lot to think about when leaving your retirement village unit – whether it is you or a family member. Getting great advice from a law firm that has a retirement living focus is incredibly important. The information above is general advice only and it is based on the Retirement Villages Act in Queensland as it stands today. There can be variations depending on your situation, and what your contract says. If you require more detailed advice, we welcome you to get in touch.