Amendments clear up retirement village confusion

The Queensland Government’s new legislation aims to give a new retirement village resident greater clarity about the agreement they are entering into, writes Julie McStay.

Confusion over the rights and responsibilities of retirement village residents and operators has been at the heart of recent media controversies in the aged care sector. In Queensland, the State Government has taken steps to bring some clarity to the situation.

In a move to minimise the likelihood of misinterpretations occurring between new residents and operators of retirement villages, the government has adopted new legislation that significantly amends the Retirement Villages Act 1999.

The intention is to give a potential resident greater clarity about the agreement they are entering into with a village operator and the obligations that exist on both sides of the agreement.

While the new requirements will place an initial administrative burden on village operators, the long term benefit should be a reduction in resident complaints about the contracts they have signed.

Some of the key changes include:

• A village comparison document (VCD) will replace the current public information document (PID). The VCD is to be published on an operator’s website (every operator must maintain a website) and be included in any promotional material that is given to prospective residents. The VCD provides information about the scheme to potential residents including types of accommodation, facilities and services, and amounts payable by or to residents or the operator.
• A new prospective costs document for the residence contract provides a summary of the estimated costs of moving in, living in and leaving the village.
• A new process for operators and residents to complete condition reports on units at both commencement and termination of residence contracts. 
• Operators must not enter into a residence contract until 21 days after the operator has given the prospective resident the residence contract, VCD and prospective costs document. However, a prospective resident may sign a residence contract less than 21 days after receiving the documents if they have signed a waiver stating they have received legal advice from a lawyer about entering into the contract. Cooling-off provisions in their current form remain available to residents to rescind residence contracts.
• Operators are required to pay residents their exit entitlement 18 months after the residence contract is terminated, unless to do so would cause the operator undue hardship. This change will apply to new and existing residence contracts, that is, where a resident has already left the village the 18 month period for payment of the exit entitlement will start from the date of commencement of the amended act. An operator must pay the exit entitlement at the end of the 18 month period and if the parties do not agree on the resale value, the operator must obtain a valuation not more than 14 days before the payment date.
• If the resident does not leave the unit in the same condition (except for fair wear and tear and agreed renovations) as when they entered the unit, the operator may carry out reinstatement work and claim the cost from the resident.  A new definition of “reinstatement work” in the amended Act establishes the “same condition” test. There appears to be no restriction on the operator and resident agreeing on entry that any reinstatement costs will be deducted from the exit entitlement.

The operator and former resident must agree on the date when renovation work to the unit will be completed. The cost of the work is paid by the parties in the same proportion they share in any capital gain on the sale of the unit. The definition of “renovation work” is replacement and repairs other than reinstatement work.

If the operator fails to complete the renovation work by the agreed date, the former resident may obtain an order that the operator pay the exit entitlement. The former resident has to show they were materially prejudiced by the failure.

These new processes do not apply for residence contracts in force before the commencement of the amended Act.

• The operator and resident can now make submissions (and respond to each other’s submissions) about the valuation of the resale value of the unit to the valuer. It also sets out other matters the valuer must have regard to in conducting the valuation and gives the valuer the power to request information from the operator about the Village, the unit or the residence contract.
• The amended act contains a new part which prescribes behaviour standards for residents and operators (and their staff), including:
  • • an operator must take reasonable steps to ensure a resident does not interfere with the reasonable privacy of another resident, and
    • an operator must give a written response within 21 days of receiving a written complaint, proposal or question from a resident or former resident (or their representative).

Overall, the changes are a positive move to clarify the rights of residents, while at the same time balancing the need for operators to run villages within an agreed set of principles and commercial guidelines.

Julie McStay is a Director at Hynes Legal and leader of their national aged care and retirement living team.

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