The Victorian Government, in consultation with key stakeholders has been working on a major revision of the Retirement Villages Act 1986 (Vic). On Saturday 8 October 2022 the Retirement Villages Amendment Bill 2022 (Vic) Exposure Draft was released. The Bill is a lengthy document and significantly re-writes the Act and the proposed changes are much broader than those discussed as part of the initial industry consultation and Options Paper. If enacted, there will be significant changes for operators across all facets of the operation and management of a village, and the resident’s experience.
Major changes have been proposed to contract requirements, operational matters and financial structures and requirements which will increase the obligations of operators and the rights of residents.
There is an initial consultation period until 28 October 2022 when the Government will go into caretaker mode before the State Election. The next steps will depend on the outcome of the election.
Further details of the proposed major changes are set out below for your consideration. If you predict that the changes will impact you, we suggest that you make a submission to the Victorian Government regarding the proposed changes.
General Overview
There is no reference as to whether or not the proposed changes will have a prospective or retrospective application.
The Bill appears to have incorporated many of the Regulations into the Act itself.
The proposed Regulations have not been released, and we suspect that much of the operational provisions and prescribed rules will be contained in the Regulations and will also have a significant impact.
There is a significant shift in purpose to the protection of residents.
There is a change in definition of many common terms (such as owner to proprietor, manager to operator) without any clear justification.
Contracts
- Pre-contract disclosure will move from a Factsheet and Disclosure Statement to an Information Statement. This Information Statement will be required to be published on the operator’s website and be provided to residents and prospective residents as stipulated, including on provision of targeted promotional material. The Information Statement is likely to be more general in nature, and not unit specific. There are no changes to the 21 day disclosure period.
- Provisions regarding a ‘settling in period’ have been included but it does not appear to be mandated that a ‘settling in period’ be provided.
Financial Impacts
- Entry payments from a new resident in a greenfield village would have to be held in trust until the occupancy permits for the unit and common facilities have issued, which may create issues if the common facilities are to be built in a later stage.
- The Bill requires the calculation of the deferred management fee to be a percentage of the ingoing contribution only and ceasing on the vacant possession date. There is also a provision purporting to cap deferred management fees for transferring residents within the village however the section is unclear as to what is actually capped.
- Restrictions on the increase of maintenance charges, requiring increases beyond CPI to be approved by special resolution of residents and not the majority. Maintenance charges will cease on vacant possession for both non-owner and owner residents.
- Operators will be liable for any budget deficit and will not be able to recover this by special levy or increase in maintenance charges in later years. Any surplus must be rolled over.
- Operators will not be able to use capital maintenance funds or maintenance charges for replacement of capital items, only repair and maintenance. Different rules will apply to common property of an Owners Corporation. The funding of renovation of vacant units is expressly prohibited.
- Residents are only liable for reinstatement for works beyond ‘fair, wear and tear’. Renovation agreements are permitted provided the costs are shared in the same proportion as the capital gains.
- Residents have the right to perform the reinstatement works before they deliver up vacant possession. If the resident fails to leave the unit in the required condition, the operator may give notice of the reinstatement works required and their costs to undertake the works within the specified time frame (subject to the resident’s right to object). There is a carve out for these requirements if the parties enter into a Renovation Agreement.
- Operators can no longer require residents on exit to ‘make good’ any approved alterations and additions, or recover the cost of doing so, provided the alterations and additions are in the same condition as when they were made (‘fair, wear and tear’ excepted).
- Operators can’t unreasonably refuse a request for an alteration and addition.
- There is a sunset date for payment of exit entitlements of 12 months from vacant possession.
- The requirement to repay the resident a portion of their exit entitlement for aged care accommodation has been expanded beyond just daily accommodation payments to include any prescribed payment under the Aged Care Act 1997 (Cth) and for alternative accommodation payments that are made to meet the reasonable costs of caring for a resident in place that is not a retirement village or residential care facility.
Administration
There will be increased administration including:
- a requirement for the operator to provide a ‘Contract Check’ (which will include information about selling the unit, a reasonable estimate of fees, charges, costs and liabilities, sale price, capital gain/loss) at least once per annum for each resident at no charge. The Contract Check would be written and also discussed in a meeting, if requested by the resident;
- condition reports to be included on entry and exit;
- increased reporting of matters to residents and regulatory body;
- more prescriptive requirements regarding meetings of residents and resident committees; and
- a requirement to have and maintain a capital maintenance plan, emergency plan and safety inspections.
Dispute Resolution
Broader dispute resolution provisions for management and resident disputes, together with the introduction of a Chief Disputes Resolutions Officer with powers as prescribed including delegation, ability to make binding decisions (up to $100,000), the making of guidelines for disputes and referral of matters to VCAT.
Please do not hesitate to reach out to either Steven Smith or Louisa Dawson if you wish to discuss the proposed changes to the Act and the Exposure Draft Bill.
This article was written by Steven Smith, Partner and Louisa Dawson, Special Counsel.
