Victorian Retirement Villages Reform

Financial

• A deferred fee may only be charged on the ingoing contribution paid by the resident; and if the capital gain and the capital loss are shared between the operator and the resident, they must be shared in the same proportion;
• A deferred fee cannot be charged if the resident leaves the village within a settling in period (if there is one);
• A resident’s exit entitlement must be paid to the resident within 12 months of vacant possession;
• Recurrent maintenance charges, personal services charges, and the accrual of the deferred fee, must cease upon the resident providing vacant possession.
• If there is an operating deficit in the village fund in any year, that deficit is to be borne by the operator. However, if there is a surplus, it is to be carried forward to the following year.

The concept of “vacant possession” is still to be clarified.

Disclosure and transparency

• An information statement will be required to be prepared by an operator and will need to be published on the village website. This will replace the current fact sheet and disclosure statement.
• Operators will be required to provide an annual contract check to each resident in the village free of charge. The check must summarise, among other things, the resident’s obligations upon vacating the unit, payments due from the resident, a reasonable estimated sale price for the premises and their exit entitlement.
• Residence contracts for new residents must be in a new format, which is still be determined.

Repairs and maintenance

• Operators will be responsible for items of capital, which include any building, structures, plant and equipment in the village, unless owned by the resident. The operator may use funds from maintenance charges or a separate maintenance fund (comprising a portion of the maintenance charge) to pay for the repair and maintenance of these items in accordance with a maintenance plan.
• Operators will be responsible for funding any capital replacements.
• A maintenance plan that sets out the items of capital which will require repair and replacement over a period of 10 years will be required where maintenance charges are used to fund capital maintenance at the village.
• Residents may request alterations and modifications to their unit, subject to the operator’s consent (which must not be unreasonably withheld).

Refurbishment/reinstatement

• The obligation of a resident upon exiting the unit is limited to ensuring the premises are reasonably clean and are reinstated to their condition upon entry, excluding fair wear and tear (which includes a deterioration in the condition caused by the reasonable use of the premises or natural environmental forces).
• However, the resident and operator may agree to renovate the premises and, if so, the operator must carry out that renovation within a certain timeframe. The cost of renovation is to be borne between the resident and operator in the same proportion as the share of the capital gain and loss.

Disputes and termination

• Before an operator may serve a notice of termination on the grounds of a breach the operator must take into consideration whether it is reasonable and proportionate to serve a notice, having regard to balancing the effect the notice will have on the health and safety of the resident and the risk to another resident or the operator, employer or contractor of the operator, or their visitors.
• Before an operator may serve a notice of termination on health grounds the operator must apply to VCAT for approval.
• Internal dispute resolution requirements will remain largely the same. However, there will be a new external alternative dispute resolution scheme within the Department of Government Services. It will primarily provide conciliation of disputes between residents and between operators and residents.

Code of Practice

• The Bill introduces the power for Regulations to be made to create a Code of Practice. Details in relation to the Code of Practice are not yet available; however, the Bill does refer to a Code of Practice covering matters such as disclosures and marketing, village operation and administration, requirements to pay fees upon vacant possession, renovation, refurbishment and reinstatement requirements and good practice in dealing with disputes, among other things.

At this stage, it seems that all the proposed amendments which will impact financial matters, such as deferred fees, exit entitlements, maintenance charge restrictions ceasing and maintenance and repair obligations, will be prospective. However, requirements in relation to termination of contracts, disclosure and disputes will apply to existing contracts.

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