15 Aug 2013
Retirement villages in NSW - are you ready for the changes affecting disclosure?
Retirement village operators should act now to ensure they are ready to implement the new contract and disclosure requirements effective 1 October 2013.
In a move designed to increase transparency in the retirement village industry and to simplify and streamline the contractual arrangements for entry into and exit from retirements villages in NSW, the NSW Government has introduced amendments to the Retirement Villages Regulation 2009, which will govern contracts entered into on and after 1 October 2013.
Three new prescribed documents have been introduced, which will be compulsory to issue to prospective occupiers of retirement villages:
The General Inquiry Document provides a basic explanation about the retirement village, including financial matters such as current recurrent charges, departure fees and details on whether residents share in any capital gains.
The Disclosure Statement must be given to potential residents at least 14 days before entry into a retirement village contract. This document gives a more detailed overview of matters such as the management, services offered, financial matters and dispute resolution arrangements. Importantly, it also highlights the prospective residents' rights to view village documents, such as accounts, budgets and income and expenditure accounts.
If the information in the disclosure statement is materially false or misleading, a resident may, within three months of commencing occupation, apply to the Consumer, Trader and Tenancy Tribunal for an order permitting the resident to rescind the contract.
The Standard Retirement Village Contract has been drafted in plain English so as to allow prospective occupiers to clearly identify their rights and obligations and to compare costs and conditions between retirement villages. There have been five template contracts for the five most common village types developed and these are available from NSW Fair Trading.
Areas of confusion in the past, such as around financial matters including identification of the services included in the recurrent charges paid by residents, charges for optional services, the capital gain or loss structuring, departure fees and the sale of units, have been clarified, as have the operators' and residents' respective responsibilities to undertake repairs and capital replacements.
The purpose of the standard contracts is to make it easier for prospective residents to make comparisons and to reduce complexity for operators, which should deliver greater confidence in the industry.
Retirement village operators may insert additional terms in the retirement village contract, but they must ensure that those terms do not contravene the Retirement Villages Act 1999 and are not inconsistent with a term of the prescribed retirement village contract, which will mean that careful drafting is required.
Penalties may be imposed on operators who enter into a village contract for which the standard form of contract is prescribed knowing that it is not in, or to the effect of, the standard form, and the contract will be void to the extent to which it is not in, or to the effect of, the standard form.
Village operators, which include entities who manage or control the retirement village, should review their suite of contracts to ensure compliance with the new regulatory regime.