Retirement village exit entitlements and recurring charges cap

Submission cover sheet

  • Name of organisation or individual making this submission

    Aged & Community Services Australia

  • Authorised delegate/contact person

    Derek Dittrich

  • Position

    Policy & Member Support Officer Manager

  • Organisation

    Aged & Community Services Australia

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?

    I’m not sure that Lithgow considered ‘inside’ the Sydney Metro Area and Wollongong ‘outside’ is appropriate. Drawing boundaries where speed of sales by LGA drops off might work. Additionally, keeping the boundaries consistent with LGAs and the Aged Care Planning Regions has merit.

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

    Costs of the valuer should be borne in the same proportion as capital gain. Why should operator pay for valuation if resident is receiving all of capital gain? Perhaps if there is no buyer, the operator pays out based on the ingoing price say + 50% expected capital gain and the full capital gain (or loss) component is only payable when the property is finally sold. Should the valuation be done by someone independent of both parties? A neutral party would be fairest for all parties if an agreement cannot be reached. Do the provisions, above, adequately manage any potential or actual conflicts of interest? If not, why? How could conflicts of interest be better addressed? Adequately addressed What information should the operator be required to provide to the resident when the exit entitlement has been determined? • Property valuation • Historic sales within the village (and product details eg improvements/inclusions) • Sales timeframes • Current number of premises vacant • Strength of waitlist or enquiry information

  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 should be able to opt in or out of the exit entitlement provision (provided that there is no cost to the operator in terms of exit fees or recurrent charges or any other ancillary costs) At what point, or time should residents be able to exercise these rights? Within first 3 months. This should restart the exit entitlement timeframe period. Standard property settlements are 42 days, and there needs to be a period of time to source a buyer who would (most likely) need to sell their own property to fund the move. Should former residents be able to change their mind and opt back into the provisions, after they have notified the operator they are opting out? No, unless this restarted the exit entitlement period. It would be unjust for a resident to opt out of the process, then opt in leaving no time to market or sell the property but holding the operator accountable for the refund.

  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?

    Define ‘everything in their power’? What would be the expectation of outgoing residents (& The Tribunal) on the level of expense to sell and market a unit? Eg discounts, specials, protracted and expensive marketing campaigns? What is a reasonable expense in terms of the value of the contract?

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

    The number of existing vacant properties in the village, recent comparable sales in the LGA the village is located in.

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

    The permanent entry into a residential care home and the reliance upon a third party (eg family) to attend to issues getting the property ready for sale. Do you think any of the ‘triggers’ listed would be suitable to start the 6 and 12 month periods? Can you think of any others? Vacant possession in its agreed ‘to market state’

  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?

    Include provisions that the resident must not have access to other funds to make the payment. A copy of the Centrelink Income and Assessments assessment outcome to be shown. An amount of no more than 85% of the exit entitlement (before any capital gain or loss is applied – what if the anticipated capital gain is not ultimately achieved?) Operator to recover amounts paid by way of deducting from the exit entitlement. Could only apply to the last remaining resident? only if the resident is entitled to the refund? Would it benefit residents if the provisions were to apply to both registered interest holders and non-registered interest holders? It would of course benefit the resident – but would be unjust to the operator. There is time that a new incoming resident requires (once sourced) to move into a village and ‘release’ the refund. This is not dissimilar to the time the outgoing resident had to move in. Paying DAPs for all contract types could pose a significant cash flow issue for an operator, particularly if paired with the repayment of recurrent charges on behalf of outgoing residents.

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

    Operators may no longer offer a resident interest holder (& therefore capital gain sharing arrangement to incoming residents) if all of the benefits of such an arrangement result only in positive outcomes for the resident. This would limit the potential contract choices for residents.

  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?

    No - costs to maintain the premises do not cease because the unit is vacant – this can also affect its saleability (eg gardens and lawns of the premises and its presentation for inspections). Why align the repayment recurrent charges to 42 days? – they should continue to be shared in the same proportion as capital gain. The trigger point for a NRIH and RIH will then need to change to include vacant possession – the same limitation to a NRIH.

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

    Yes. Existing contracts should remain as is as these reforms could very well impact the offering of these contracts in the future (ie they may no longer exist). They should only apply to new contracts.

  11. Please provide any further comments on the reforms.

    There needs to be a subject to probate clause added. If you are dealing with a dysfunctional family where second and third marriages are involved probate is essential and can easily take 6 to 12 months which will delay any refund. This affects all contract types.

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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