Selling/re-leasing a retirement village unit

The rules governing residents’ departure from a village are largely set out in the contract. The Retirement Villages Act 1986 (RV Act) provides the following limits and guidance:

  • Owner residents can set the sale price for their units and appoint selling agents. The RV Act prevents retirement village operators from doing this.
  • Operators usually add terms to the contract. These make the control non-owner residents have over the sale process similar to owner-residents. If operators add such terms, they do not have to pay a resident’s exit entitlements until the unit is sold. Without such terms, operators must pay exit entitlements within six months of the resident’s departure.

Moving into residential aged care

Residents may move from a retirement village into residential aged care before their unit has been re-leased/licensed. In this situation, the RV Act says the village operator must pay the aged care facility either the resident’s:

  • Refundable Accommodation Deposit (RAD), or
  • Daily Accommodation Payment (DAP). Once the unit has been re-leased, the operator must pay any left-over amount from the exit entitlement to the former resident.

These laws apply regardless of what a contract says.

We would like your views on the role of the RV Act in the sale or re-leasing of retirement village units.

Questions for consideration

  1. Does the RV Act strike the right balance between the interests of residents and operators in the sale or re-leasing of a retirement village unit? Including the appropriateness of the process whereby the prescribed terms are inserted into non-owner residence contracts? If not, what improvements could be made to ensure the right balance?

Reinstatement and refurbishment of retirement village units

The RV Act does not regulate unit reinstatement or renovation when a resident departs a village. Instead, contracts must provide for these requirements, including who should pay.

When residents pay for refurbishment or reinstatement, they may prefer minimal work done. Operators may want more work done, so units being re-sold or re-leased are of a high, uniform standard.

We would like your views on the role of the RV Act in relation to reinstatement and refurbishment obligations when a resident leaves.

Questions for consideration

  1. Does the RV Act strike the right balance between the interests of departing residents and operators? If not, what improvements could be made to ensure the right balance?

Ongoing charges after a resident leaves

The RV Act says that after a resident leaves, operators cannot charge:

  • any resident’s personal services fees for more than 28 days, and
  • non-owner resident’s maintenance fees for more than six months.

Departing residents may have concerns that the ongoing charges:

  • are worth more than the operator provides
  • cannot be linked to actual benefits or services received, and
  • occur without a proper explanation about how the operator will spend them.

Operators may have concerns that:

  • they must continue to pay village operational costs when a resident departs, and
  • operational costs may not change much with the level of village occupancy.

Remaining residents may have concerns about how operating costs are shared between them and departing residents.

Capital gains

Capital gains (or losses) on a unit may be shared between the resident and operator. The RV Act does not regulate these contractual arrangements. Contracts could specify:

  • a 50/50 split
  • all capital gains go to the village owner, or
  • different arrangements.

Many contracts do not take account of any capital improvements the resident may make to the unit.

We would like your views on the role of the RV Act in relation to regulating ongoing charges after a resident leaves and capital gains.

Questions for consideration

  1. In relation to the regulation of ongoing charges when a resident leaves a village, does the RV Act strike the right balance reconciling the interests and needs of departing residents, remaining residents and the retirement village operator? If not, what changes should be considered?
  2. Should the RV Act regulate the way in which any capital gains (and losses) are treated when a retirement village unit is sold or re-leased? If so, how should it be regulated?