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Amendments to the Retirement Villages Act Queensland, have received royal assent meaning that the changes are now law. So, what does that mean now for retirement village operators and residents?

The Housing Legislation (Building Better Futures) Amendment Act 2017 (Qld) received royal assent on Friday November 10, 2017, making substantial changes to the Retirement Villages Act 1999 (Qld) (RV Act).

According to the amendment summary, the changes aim to “increase transparency in the relationships between operators and residents and provide greater security and confidence to residents, balanced with industry viability”.  The amendments are also aimed at addressing resident and consumer advocate concerns raised recently in the media.

From Seasons Aged Care’s point of view, the changes around transparency and fairness for residents is an issue we’ve always actively supported.

Prior to the amendment to the Act, we worked hard to make our operations as transparent as possible. We’ve done this by explaining retirement village terminology, simplifying our financial model to allow comparison with residential aged care facilities and introducing measures such as a nine-month guaranteed pay-out period (buy back).

So, what do the complete set of amendments mean for retirement village operators?

A range of amendments have been made across the following areas:

  1. Pre-contractual disclosure, condition reports and content of residence contracts
  2. Buy back provisions
  3. Reinstatement and renovation
  4. Financial matters
  5. Behavioural standards
  6. Redevelopment of retirement villages
  7. Change of scheme operator
  8. Closure or winding down of retirement villages
  9. Miscellaneous amendments

 

While the majority of amendments won’t commence until a future date, the following key amendments are now in effect:

Change to a maximum 18 month buy back

This applies to new residence contracts and retrospectively to all existing residence contracts, with a limited exception for undue operator financial hardship.

Buy back provision review

There is an added amendment that requires that the 18 month buy back provision be reviewed no later than two years after commencement. This is to determine the impact of the provision on residents, former residents, families of residents or former residents and operators.

New enforceable behavioural standards for operators, village staff and residents

There are now clear guidelines on enforceable behavioural standards for operators and their staff in interactions with residents as well as residents in their interactions with other residents and operators.

Key future changes

The rest of the changes will come into effect at a later date, these include: 

Pre-contractual disclosure

The single, large Public Information Document (PID) will be replaced with two separate documents.

A village comparison document will outline general information about a village to potential residents. It must be published on the operator’s website, in an approved form, containing the information prescribed by regulation. It must be given to prospective residents within seven days of receiving a request.

Prospective residents will receive a prospective costs document. This also needs to be in an approved form and contain the information prescribed by regulation, while also providing a summary of the estimated costs of moving into, living in and leaving the village.

Resident contracts

With the abolition of the PID, some content will now be moved into the residence contract. This includes information about the funds the operator is required to keep, a description of the percentage of the resident’s ingoing contribution that the operator will contribute to the capital replacement fund, an outline of the retirement village facilities and land, and approach to capital gain and capital loss sharing.

Reinstatement and renovation

The government has introduced what it sees as a ‘simpler, more predictable reinstatement process’ that makes a clear distinction between ‘reinstatement’ and ‘renovation’ in relation to residents who enter into residence contracts after the commencement of the amendments.

Missed opportunities around terminology

Regrettably, the government didn’t take the opportunity to simplify the language used in the legislation. As this same terminology is required to be used in provider/consumer contracts, a high degree of confusion is, therefore, likely to persist.

In a previous blog post about retirement living terminology, I have made some observations about the key terminology used in the legislation and what they actually mean in the hope they may give cause for readers to think and engage in meaningful discussion about what the Retirement Living product actually is and what the industry should look like.

A key part of this discussion is the idea of what leasehold means. While there are a number ways that a resident can take occupancy of a Retirement Living Unit/Apartment, leasehold, also known as the Deferred Management Fee (DMF) model, is far and away the most common. But there remains a lot of confusion about what a leasehold in the retirement living industry means.

Understanding lease agreements

My question is, what makes Retirement Village lease agreements so different to what we understand a normal lease to be?

People ‘buying in’ to a retirement village are not actually buying a property, they are paying for a 99-year right to reside. Just as in a rental agreement, there are terms around permitted use, make good provisions, lease payment details and terms, and an upfront payment (which is actually a BOND, not a purchase payment) that provides surety over the property.

In a rental/lease arrangement (which the DMF model actually is), the owner is under no obligation to share any capital growth in the lease price, while the tenant is under no obligation to continue paying any ongoing costs to the owner once they’ve vacated the property. The Retirement Villages Act, however, even after the recent amendments, provides for alternate arrangements where there continue to be limited ongoing obligations on both the resident and the operator, even after the resident vacates.

The only income the village operator makes is derived from the lease payment or DMF, which they only get after the lease terminates. I discuss ingoing contributions, deferred management fees and weekly payments in more depth here.

Read the full summary of changes to the Queensland RV Act.

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Nick Loudon
Nick Loudon is Group Chief Executive Officer of Seasons Aged Care and a Board Director of Leading Age Services Australia (LASA). Nick has more than 35 years clinical and executive management experience in the hospital and aged care sector and believes passionately that advanced age is not a ‘disease’. His vision is that aged care with a focus on quality of life and respect for the choices of our elders can be delivered in any location.