Submission cover sheet
- Name of organisation or individual making this submission
Questions on possible options
- Is the description of the ‘Sydney Metropolitan Area’ appropriate? If not, why not, and what areas should be included or excluded?
The description of Sydney Metropolitan Area is adequate
- Are the proposals for appointing a valuer, to determine the value of the property, necessary and appropriate?
Yes. However, the valuer must be conversant with retirement village properties and values as they are often quite different to traditional real estate propositions. The valuer must be neutral, impartial and independent of either party to ensure fairness. There must be consideration to the age of the village, level of services and amenities, upkeep and maintenance costs, the size and aspect of the property, competitor developments, current vacancies and historical values.
- 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 can opt out of 6/12 month payout but must do so within 30 days in writing. If the resident opts out, the valuer should not be required to be paid by the operator. Residents must give 1 months notice to the operator of opting back into the mandatory payout conditions, with payout to be made 6 months after notification period is completed.
- 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?
numbers of other vacant units within the village. Is there a factor that is affecting the sale, such as condition of unit, unrealistic price, market conditions etc. Numbers of inspections by prospective residents and marketing being conducted. Competitor developments and marketing
- Are there any additional circumstances the Tribunal should be able to take into account when considering a hardship application from an operator?
Numbers of other vacant units that have already been paid out by operator. Operator could offer to pay Daily Accommodation Payment (deducted from final exit entitlement) if resident moves to a registered aged care facility.
- Are there any other factors that could affect the setting of a ‘trigger point’?
- 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?
Either would be of benefit to residents
- Can you think of any other benefits or costs of this proposal? What are they?
There may be a reduction in new developments of retirement villages as the profit motive will be reduced and the risk factor increased as a result of increased cash holdings or borrowing costs to fund mandatory buybacks. The benefit flows entirely to the resident, not the operator, so the operator may have to adjust deferred management fees to cover increased costs, making it harder again for future sales. Village operators may convert to being strata or company titled villages so the ownership remains with the resident, not the operator, thus reverting the onus on selling and costs back to the resident.
- 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 trigger should be when the unit is handed back as vacant possession. If there is limited family support for residents, there may be more than 42 days before the unit has been fully vacated of goods and chattels. There may then need to be a component of repairs and maintenance or refurbishment to present the property in a suitable condition for sale. This may often take more than 42 days, dependent upon the extent of works involved. In traditional real estate, the owner would have to empty contents, renovate and present the property, have inspection days and then go to auction or offer for sale and still have a 6 week or longer settlement period. There is also no certainty of sale in this situation so components may have to be repeated. During this time the owner would still need to pay for lawn to be cut, any utilities, insurance, council rates, land tax etc. This should not be any different in a retirement village where these things still need to be paid for.
- Should one or both of the proposals be ‘grandfathered’? If not, please provide your reasons.
Yes, this will provide an amount of time for the operator to prepare for the change and ensure there is not a sudden influx of previous residents whose units have not sold, beating on the door demanding a payout of their exit entitlement
- Please provide any further comments on the reforms.
Whilst this does create a series of certainties for both residents and operators, the operator is the one that retains the majority of the risk. There are villages out there who do not have the luxury of sufficient funds or borrowing capacity to pay these costs, nor do they have waiting lists of prospective residents waiting to purchase. This means they could be left holding the bag if things go wrong. It is a complete turnaround from the current position and a transition period should be considered. This could be instead of a current 3 year payout dropping to 6 months in metro, maybe 18 months for 3 years, then down to 6 months to provide sufficient time to modify business practices and find efficiencies etc. Additionally, on pages 24 and 32 of the discussion paper there is a mention of operators adjusting recurrent charges to cover operator costs. This is only to be done with residents consent by voting and for the purpose of running the village, not for an operator to derive a profit from or to assist in paying a mandatory exit entitlement or plus 42 days of recurrent charge payments. This should not be mentioned at all in the discussion paper as it is irrelevant to the proposal and patently wrong to imply operators can increase the recurrent charges for covering their increased costs as a result of these changes.