In response to the Inquiry into the NSW Retirement Village Sector by Kathryn Greiner (Greiner Report) the Retirement Villages Amendment Act 2018 was passed (Amending Act). The provisions of the Amending Act enabling the making of regulations for the reforms commenced on 11 February 2019 and the balance of the provisions (with the exception of Section 101A Asset Management Plans) commenced on 1 July 2019.
We provided a summary of the new provisions in our article “Update on NSW Retirement Villages – Reforms to the Retirement Villages Act 1999 NSW” dated 26 February 2019.
The implementation of the reforms is supported by the Retirement Villages Amendment (Rules of Conduct for Operators) Regulation 2019 (Amending Regulation) which sets out the Rules of Conduct for Operators of Retirement Villages (Rules of Conduct). The Rules of Conduct commenced on 1 July 2019 with the exception of the rules creating an offence which commence on 1 January 2020. This gives operators of retirement villages an opportunity to ensure that their retirement village complies with the new reforms prior to 1 January 2020.
This article summarises:
- The reforms that each retirement village should have in place; and
- The continuing consultation on the proposals to require the operator to buy-back the retirement village units within a certain period.
Implementation of reforms
We summarise the new requirements, practices and procedures as follows:
Safe villages
Emergency Plan
In substitution for the previous requirement for “written safety and emergency procedures” in Section 58A there is now an obligation to prepare and maintain an “emergency plan”. Section 58A(2B) – (2C) provide details of what must be included in the emergency plan. In addition, Guidelines for retirement village operators have been issued “Emergency Plan and Annual Evacuation Exercises“.
Annual Evacuation Exercises
A retirement village operator must carry out an evacuation exercise “at least once each calendar year”: Section 58B. We expect this requires the first evacuation exercise to be conducted prior to 30 December 2019. The Guidelines “Emergency Plan and Annual Evacuation Exercises” provides guidance on resident participation and residents who need assistance.
Key Safety Information
Section 58B and the Guidelines set out what is required to be provided by a village operator. This will be:
- A map of assembly areas, exits and emergency equipment together with general emergency information must be displayed in communal areas; and
- Each resident must be provided with emergency exit maps and emergency information and directions. This must consider the residents individual mobility and the location of the resident’s unit.
The map and safety procedure information will be part of the package of information given to all new residents and their families.
Appointment of auditor
New Sections 118A-118D require operators to obtain the consent of residents each year to the appointment of an auditor for the accounts of the retirement village. The information provided by Fair Trading NSW states that: “For most villages, approval of the auditor will be sought at the same time as the village budget.”
Where residents do not agree to the auditor’s proposal by the operator, they may suggest an alternative. Where the operator does not agree with the alternative auditors suggested by the residents, the operator will need to apply to the Tribunal for an order.
Standard of conduct
The Rules of Conduct set out detailed requirements for operators and their employees with respect to the operation of a retirement village. These include the following:
- Operators must know and understand all relevant laws;
- Operators must have regard to the best interests of all residents;
- Operators must exercise skill, care and diligence;
- Operators must act with honesty, fairness and professionalism;
- Operators must not disclose confidential information about residents or prospective residents.
In addition to the training requirements, operators must “have a structure in place” to oversee and manage their staff, which must be reviewed every 2 years: Rule 35. We expect this will be a human resources performance assessment system.
There is an obligation for operators to avoid a conflict of interest in Part 4 of the Rules of Conduct. This part requires notice be given to residents of any conflict discovered and an obligation to keep records of any conflict of interest.
Further, an operator must prepare and place on the notice board of the retirement village a strategy for the identification and prevention of any elder abuse in the village. The operator must give effect to the strategy and review it every 2 years.
Marketing
Information for external selling agents
In addition to the existing requirement under the Retirement Villages Act, where the resident is a registered interest holder, the Rules of Conduct require the operator to provide within 5 business days of a request, information and documents for the sale of the resident’s premises including:
- General enquiry document and disclosure statement;
- Access to documents to be made available to prospective residents; and
- Contracts the operator may offer to a prospective purchaser.
Representations made by operators
It is an offence for an operator to make representations that are false or misleading in any promotional material for the retirement village or a particular unit within the village.
The Rules of Conduct require warnings to be placed in marketing material such as:
“You may have to pay a departure fee when you leave this village”
“You will have to share any capital gains received with the operator of this village”
The details are set out in Part 3 of the Rules of Conduct.
Internal dispute resolution
The Rules of Conduct generally provide that operators must ensure residents are encouraged to raise concerns and do nothing to discourage a resident from pursuing an internal dispute.
The operator must have in place a written procedure publicly available on the operator’s website posted on the notice board of the retirement village and provided to all residents for:
- The resolution of complaints by residents; and
- The resolution of internal disputes between a resident and the operator or between 2 or more residents.
Operators must keep records of complaints and internal disputes for at least 5 years.
Village contract information meeting
A new Section 69A of the Retirement Villages Act entitles a resident to request a meeting with the operator to provide information on the termination of a village contract including estimated departure fee, recurrent charges, estimated sale price and other information relating to vacating the premises.
The resident may nominate one or more persons to represent the resident at the meeting or attend the meeting with the resident. The operator is not obliged to meet the resident for this meeting more than once each calendar year.
The operator must provide a written summary for the meeting of the current contract information. In the Guidelines “Village Contract Information Meeting” further details are provided together with a checklist and template.
Training
The Rules of Conduct set out obligations on operators for the management and training of retirement village staff. This includes the following:
- Written policies and procedures for the selection, training and ongoing supervision of the operator’s staff; and
- Records of the training and professional development of the operator’s staff to be kept for at least 5 years.
The Rules of Conduct set out detailed requirements for the management policies and procedures and extra requirements where staff are involved in internal dispute resolution.
Consultation on further reforms
In July 2019 the NSW Government published a Discussion Paper on the following reforms:
Buy back obligation
Requiring a village operator to pay an exit entitlement to a resident after the following periods from the date the resident permanently vacates:
- 6 months for a village in the Sydney Metropolitan area; and
- 12 months for villages in other areas.
Currently there is no requirement for the operator to buy-back the premises for registered interest holders, whereas non-registered interest holders must receive their refund after 6 months.
The Discussion Paper considers such issues as defining the Sydney Metropolitan area, determining the commencement of the relevant periods, calculating fair property values and providing for hardship provisions for operators.
Limit on recurrent charges
A 42 day limit on the length of time villages can charge for general services, after a resident permanently vacates.
Currently under Section 152 of the Retirement Villages Act 1999 (NSW) a former resident who is a registered interest holder is liable to pay recurrent charges for general services typically until a new resident moves in.
The Discussion Paper suggests that it would be beneficial if both reforms were introduced simultaneously and it would be beneficial to “grandfather” both reforms rather than to allow them to apply to existing contracts retrospectively.
Conclusion
It is an opportune time for retirement village operators to check to ensure that they have properly put in place all the reforms that have commenced to ensure that their retirement villages comply with the new reforms prior to the commencement of the offences under the Amending Regulations on 1 January 2020.
This article was written by Christopher Conolly, Partner.
