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Changes to the Retirement Village legislation – a precursor to the Royal Commission into Aged Care

In November 2018, the NSW parliament passed a bill which is set to amend the Retirement Villages Act 1999 No 81 (‘the Act’).  These changes were made as a result of the initial inquiry into the retirement village sector, and aim to both extend the rights of residents and increase transparency with regard to village operators.  

These sweeping changes to the Act are both necessary and important.  There have been minimal changes to the legislation since it was brought in almost 20 years ago, and it is crucial that the law keeps up with current expectations with regard to behaviour and the need for transparency between organisations and the people they care for.

The changes will come into effect on 1 July 2019, and can be summarised as follows:

Annual meetings between residents and operators

One of the major complaints from both residents and their family members has been that whilst, generally speaking, they were initially aware of what they are signing up for, this certainty would often dissipate over time, resulting in them slowly losing their understanding of what they would likely lose after leaving the retirement village, or what their estate is likely to receive once they pass away.

As a result of these complaints, legislation will be changed meaning that residents and their families will have the ability to take part in annual meetings with village operators, where they will be given the opportunity to run through necessary costs, allowing for an increased level of transparency and in turn a more in-depth understanding for residents and their families.

At these meetings, the operator will be required to provide the resident with both verbal and written advice concerning:

  1. Their rights as they pertain to leaving the village; 
  2. The estimated departure fee (this is the most significant loss for residents, and is vitally important); 
  3. Whether or not there are any charges surrounding the sale of a unit (i.e. returning the unit to its original condition, and whether agency fees are payable); 
  4. Whether the resident is entitled to any capital gain; and
  5. An overall estimate of what the resident (or their estate) is likely to receive once they have paid all the fees and charges.

New conduct rules for operators

Whilst there are currently rules in place that specify how operators and their employees must conduct themselves, they have been regarded as simply too broad.  The change to the Act brings in more specific rules, such as ones requiring:

  1. All operators and their employees to receive more training with regard to the workings of the Retirement Villages Act 1999 No 81, the strata laws that apply to retirement villages and any other laws that are relevant to their behaviour and conduct; 
  2. More specific rules surrounding how to deal with prospective and current residents; 
  3. Higher levels of transparency surrounding the marketing of retirement villages – and similarly, requiring service providers to be more upfront about the fees and charges; and
  4. The implementation of more specific measures to help resolve disputes between residents and operators.

Significant penalties will now be enforced if these new rules are not followed.

Asset management plans

Another significant complaint commonly received from residents is that operators don’t look after the capital items in the village, and similarly, that items are not replaced when they pass their useable life.

To rectify this, from 1 July 2019, operators will be required to maintain asset management plans, and to make these plans available to all residents, both prospective and current.  These plans must include the following information:

  1. Costs associated with maintaining and replacing the capital item(s); 
  2. Reasons for any increases/decreases in costs in maintain the item(s); and
  3. The items’ expected lifespan.  

These new requirements are still being considered, and will be further developed by the time the updated legislation is released.

Appointment of village auditor

Previously, village auditors were appointed by the village operator in order to review the books and ensure that the village was complying with accepted accounting practices.  The residents had no say in this.  Under these new reforms to legislation, residents’ consent is required prior to the appointment of a village operator, and if this consent is not forthcoming, the residents will be able to suggest an alternative.  This allows the residents to have a say in who is examining the books – and similarly allows them a clear understanding of how their recurrent charges are being spent.

If you are a current resident, or you are starting to look into whether a retirement village is right for either yourself or a family member, it is important to be aware that these new changes will look to ensure that residents are looked after better, and that complete transparency is maintained – not just as residents move into the village, but throughout their time living within the village as well.

If you have a query relating to anything in this article, or you would like to speak with a member of Coleman Greig’s Commercial Property team with regard to what the incoming changes to the Retirement Villages Act 1999 No 81 means for you, please don’t hesitate to get in touch:

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