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NSW Retirement Village Operators – New Buyback Rule, cap on Recurrent Charges and Aged Care Rule

Donna Rayner, Rosemary Southgate, Rohan Harris, Sylvia Mansour, Lee Be

The long awaited NSW Retirement Villages Amendment Bill 2020 (Bill) has received Royal Assent. The Bill will amend the NSW Retirement Villages Act 1999 (RV Act) by introducing a timeframe for paying a resident’s exit entitlement, a cap on the period during which recurrent charges are payable by an outgoing resident after they permanently leave the village and an aged care rule. 

These reforms only apply to residents who are registered interest holders who are granted a long term lease where they are entitled to at least 50% of any capital gain. The reforms do not apply to residents in a strata scheme, community scheme or company title village.   

A link to the bill is here.

What’s new?

Below is a summary of the key changes to the RV Act.

Exit entitlement orders

  • A former resident may apply to the Secretary of the Department of Customer Services (Secretary) for an order directing the operator to pay the exit entitlement to the former resident if the premises are not sold within the prescribed period (exit entitlement order).

    The prescribed period commences 40 days after the earlier of the following:

    • the date the premises are first advertised for sale;
    • the date the resident permanently vacates the premises (including returning all keys to the operator); and
    • if the resident does not intend to move out of the premises while the premises are for sale – the date the resident gives written notice to the operator of that fact.
  • The prescribed period is expected to be six months for premises in the Sydney metropolitan area and 12 months for premises in other areas.
  • The former resident can apply to the Secretary even if the operator is paying accommodation payments under the new aged care rule, but only if the premises has not been sold within 2 years of the date on which the former resident entered the aged care facility (see below).
  • Before a resident can apply for an exit entitlement order:
    • the agreed value for the exit entitlement must have been calculated at least 30 days before making the application;
    • the application must be made in an approved form; and
    • the resident must not apply for the same premises more than once within the prescribed period (prescribed period as per the Regulations or a longer period on application by the operator approved by the Secretary or if the resident is in aged care, 2 years from the date the resident move into aged care).
  • The Secretary will only make an order if the Secretary is satisfied that the operator has unreasonably delayed the sale of the premises. However, the matters that the Secretary may take into account are likely to be set out in Regulations which are yet to be released.
  • An experienced independent valuer is to determine the value of the premises if the resident and operator cannot agree on the value. If they cannot agree on the valuer, the President of the New South Wales Division of the Australian Property Institute will appoint a valuer, valuation costs are to be shared equally between the operator and the resident
  • These provisions will apply to all existing resident contracts. For existing resident contracts where the former resident has vacated the premises and the premises are for sale, the prescribed period will commence on the date the Amending Act is proclaimed which is expected to be from 1 January 2021.
  • The right to seek an exit entitlement order will only be available to former residents and not to their Estates.

Aged care payments

  • If a former registered interest holder has moved into an aged care facility, has not yet received their exit entitlement and the premises have not yet been sold, the former resident can request that the operator pay the daily accommodation payments due to the aged care facility provider, on behalf of the former resident. The payments must be made at least 28 days prior to entry into the aged care facility, or within 28 days of the request if the former resident has already entered the aged care facility.
  • The maximum amount which is payable by the operator is an amount equal to 85% of the prescribed component of the former resident’s exit entitlement.
  • Within 28 days of the former resident’s request, an operator can apply to the Tribunal to extend the timing of the first payment, or to be exempt from making payments on hardship grounds.
  • If the former resident is of the opinion that the exit entitlement was calculated incorrectly, they can apply to the Tribunal for an order to request the village recalculate the amount and pay any additional amount because of the recalculation. The Tribunal may also order the payment of interest on the additional amount.

Cap on recurrent charges

  • A former resident who is a leasehold registered interest holder will not be liable to pay recurrent charges 42 days after vacant possession (including the return of all keys to the operator). In the case of a deceased estate, this is the date that the executor or administrator delivers up vacant possession .
  • The new provisions will commence at the beginning of the first financial year for the village commencing on or after 1 July 2021.

We are here to help

If you require any further information please contact Donna Rayner, Rosemary Southgate, Rohan Harris, Sylvia Mansour or Lee Be.

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