Client Update
Retirement Villages

South Australia - Retirement Villages Reform: Timeframes that matter

Overview

The Retirement Villages Act 2016 (SA) and the Retirement Villages Regulations 2017 (SA) came into effect on 1 January 2018. They have replaced the Retirement Villages Act 1987 and the Retirement Villages Regulations 2006, and will apply to all new and existing residence contracts.

The new Act and Regulations introduce a number of timeframes. These can be confusing, particularly where some timeframes commenced prior to the commencement of the new Act and Regulations. We have set out below, a summary of the key timeframes to be aware of and how they affect the implementation of documentation required by the new Act and Regulations, and the general operation of a village.

Compliant Contracts

Residence contracts signed after 1 January 2018 must comply with the new Act and Regulations. Contracts entered into after 1 January 2018 that do not comply with the requirements under the new Act and Regulations, are voidable and operators face significant penalties for non-compliance if prosecuted.

Residence contracts signed before 1 January 2018 do not require amendment to comply with the new Act and Regulations. Those contracts will continue as if they were contracts entered into in compliance with the new Act and Regulations.

The 18 Month Statutory Buy Back

Section 27 of the Act requires that a resident's exit entitlement must be repaid from the first of the following to occur:

  • the specified conditions in a residence contract are fulfilled, such as the residence being sold or a contractual repayment provision of less than 18 months;

  • 18 months from when the resident ceased to reside in the residence; or

  • 18 months from when the resident gave a notice to the operator that they wish to cease to reside in the residence, but that they wish to remain in occupation.

So as not to unfairly disadvantage operators who have had residences on the market for a significant period prior to 1 January 2018, there is a transitional provision in the new Act that clarifies that the 18 month period will commence on 1 January 2018. This means that residents cannot require an exit entitlement repayment pursuant to section 27 until 1 July 2019 where the specified conditions of the contract have not already been fulfilled.

Remarketing of Residence at 9 Months

Section 32 of the new Act provides a resident with the right to participate in remarketing of the residence if it has been 9 months since the resident ceased to reside in the residence, or gave notice that the resident wishes to cease to reside but remain in occupation. At this point, the resident is entitled to appoint their own agent in relation to the relicensing of the residence but they may still be liable for remarketing fees, including advertising and commissions charged by an operator pursuant to a residence contract. Unlike the 18 month statutory buy back, there is no transitional provision in relation to commencement of the 9 month time period. Therefore, there is an argument that the 9 month time period may begin when the resident ceased to reside, regardless of whether this occurred prior to 1 January 2018.

Surplus and Deficit Policy

An operator is now required to have a written policy dealing with any surplus and deficit of any recurrent change and this must be attached to a residence contract. If an operator does not have a surplus and deficit policy in all of the operator's contracts, it must adopt one, and have it approved by a special resolution of residents prior to 30 June 2018. If it does not, a default policy will apply.

New contracts should have a surplus and deficit policy annexed to them.

The policy must therefore be approved prior to issue of any new residence contracts or included in the residence contract with a clear note that the policy is subject to approval of the residents by special resolution.

Implementation of Policies

The new Act and Regulations require updates to an operator's dispute resolution policy, residence rules and remarketing policy in order for them to be compliant.

These policies form part of the statutory documents that are required to be annexed to a residence contract. They must all be attached to every residence contract signed after 1 January 2018. An operator should not sign any new residence contracts unless the new policies are in place and attached to the new contract. The Act and Regulations set out the approval and consultation process and transitional provisions (for remarketing policies only). Operators should also consider their policies and ensure that there are no additional contractual requirements within the current policies which require further consultation or approval of residents.

For assistance in making sure your contracts are compliant, please contact a member of our Retirement Villages team.

Best Lawyers Australia 2019 – Retirement Villages and Senior Living Law: Congratulations to Danielle Macolino and Julia Sweeney for their inclusion and to Julia, named Lawyer of the Year.

IMPORTANT: The material contained in this newsletter is general comment only and is not intended as advice on a particular matter. No reader should act on the basis of any material contained in this newsletter without taking appropriate professional advice.