Retirement village exit entitlements and recurring charges cap

Submission cover sheet

  • Name of organisation or individual making this submission

    Chris & Katherine Keun

  • Authorised delegate/contact person

    Chris & Katherine Keun

  • Position

  • Organisation

Questions on possible options

  1. Is the description of the ‘Sydney Metropolitan Area’ appropriate? If not, why not, and what areas should be included or excluded?

    The application of a Metropolitan area is unnecessary and distorts the intention of the legislation. The legislation is designed to address the current in-balance of power which is biased strongly in favour of operators and against residents. Creating an artificial area - in this case described as "metropolitan" - will inevitably raise many difficulties, disputes and cause unnecessary conflict which will involve cost to resolve. The creation of a Metropolitan area clearly favours the operator. Examples of the type of issues that might arise: Macarthur falls within the Metropolitan area. Menangle falls outside the Metropolitan area. They are 10 minutes drive away from each other and fall within the same property market. In this situation, residents in Menangle are clearly discriminated against. There will be many other such examples. The metropolitan boundary will change over time. The new Western Sydney Airport is an example of a development that will almost certainly lead to a change in the boundary. We believe the creation of an artificial area with a different buy-back period (6 months) to the rest of the state (12 months) will cause unnecessary complications and we are strongly opposed to its creation. We believe the application of a single buy-back period (in this case 6 months) applied state wide is fair, equitable, simpler and more cost effective to implement.

  2. Are the proposals for appointing a valuer, to determine the value of the property, necessary and appropriate?

    The appointment of an independent valuer is not only necessary and appropriate, it should be mandatory. The valuing of retirement village units requires a valuer with additional qualifications and experience in the retirement village industry. To recognise this, the legislation needs to specify the qualifications and experience required by a valuer to undertake the valuation of retirement village units. Further, to provide a higher degree of confidence to operators and to residents, valuers should be accredited by Fair Trading.

  3. Where residents wish to sell their residence on their own terms, under what circumstances should they be able to opt in or opt out of the exit entitlement provision?

    Residents (or their representatives) wishing to sell their residence on their own terms should advise the operator (in writing) of their intention at the same time as they advise the operator of their intention to sell their unit. The operator, within one month of receiving notice from a resident of their intention to sell the residence on their own terms, should provide the resident with the necessary documentation (including price, refurbishment schedule/budget), contracts and disclosures. The exit entitlements and cap on recurrent charges should not apply during the period the resident is handling the sale of their unit. Should the resident wish to opt in (after opting out) the terms should be subject to agreement between the operator and the resident.

  4. What issues should the Tribunal take into account when considering whether or not the operator has done everything in their power to enable the sale of a premises?

    The issues that the Tribunal should take into account include: • whether a lower price has been tested within a range that the owner is willing to accept, the departing resident may be willing to accept a lower resale price in return for a speedier exit payment; • whether the contract terms have been modified to make the premises more attractive – e.g. changing the DMF structure; • whether the property has been advertised with other real estate agents or websites; • whether the operator has sold new units when the second-hand unit has remained unsold; • whether promised community facilities have been built and maintained; • the speed at which renovations have been completed; • the contract terms being offered to new buyers; and • whether there have been any delays from the retirement village operator’s side.

  5. Are there any additional circumstances the Tribunal should be able to take into account when considering a hardship application from an operator?

    As currently proposed, the process for a hardship application to the tribunal hearing is a very one-sided affair favouring operators. It considers applications from operators who experience hardship and want to delay making a payment, but not applications from ex-residents who suffer hardship and need a payment quicker. Given the extreme vulnerability of many ex-residents of retirement villages, the theoretical right to appear before a tribunal may be of little practical benefit. If there is provision in the legislation for hardship applications from operators, then to ensure fairness, either: • Fair Trading should join each case as a party, so it can ensure the relevant information and expertise is available to the Tribunal, and/or • Fair Trading should provide case by case funding to Seniors Rights Rights Service so it can provide free legal representation and appropriate accounting analysis for the ex-resident or the estate, where needed. If a hardship provision is allowed, the Tribunal should also consider the hardship to the resident or the beneficiaries of their estate. As a general principle, the terms of s181 in relation to non-Registered Interest Holders should apply to the benefit and protection of Registered Interest Holders in the proposed amendments.

  6. Are there any other factors that could affect the setting of a ‘trigger point’?

    We suggest a trigger should be the earlier of a number of events, including: • 28 days after the resident gives notice that they wish to exit • the date they provide vacant possession • 28 days after the resident’s death. There is no trigger required where the outgoing resident opts to sell on their own terms.

  7. Would any of the current provisions in Victoria and South Australia as set out in Appendix A (in the discussion paper), be of benefit to NSW residents of retirement villages?

    We are opposed to the suggestion that an operator could make payments as a DAP and for those payments to be deducted from the exit entitlement when it is finally paid. If the whole exit entitlement is paid to the departing resident, that amount can be used to make a RAD or can be invested at a rate of return which will provide sufficient funds for that RAD to be paid. In either case the outgoing resident’s capital is preserved. In the situations set out in the discussion paper, the residents capital is eroded and the resident is denied any interest income, whist the operator benefits from the continuation of an interest free loan. Another example of bias against residents and in favour of operators.

  8. Can you think of any other benefits or costs of this proposal? What are they?

  9. As with residents with a non-registered interest, should the ‘trigger’ to commence the 42-day period begin when the resident permanently vacates the premises?

    The 42-day period should begin when the resident permanently vacates the premises.

  10. Should one or both of the proposals be ‘grandfathered’? If not, please provide your reasons.

    We are totally opposed to the proposal to "grandfather" the changes. This would be a betrayal of the recommendation contained in the Greiner report. A betrayal of the written promise, made by the Honourable Matt Kean MP, (when he was the Minister for Innovation and Better Regulation) to the members of the Retirement Village Residents Association and a betrayal by the government of all those who voted for the them at the last state election on the basis of the promise. 66,000 residents existing residents would lose out, but powerful operators would win. How fair is that?

  11. Please provide any further comments on the reforms.

At our discretion we may remove parts of submissions because of length, content, appropriateness or confidentiality (privacy) reasons.

Website https://www.fairtrading.nsw.gov.au

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