New RV Regulations (New Regulations) have been made following the commencement of the Retirement Villages Amendment Act 2020 (NSW) on 1 January 2021 (outlined in a previous blog). The New Regulations are:
- Retirement Villages Amendment (Exit Entitlement) Regulation 2021 (NSW), from 4 February 2021; and
- Retirement Villages Amendment (Asset Management Plans) Regulation 2021 (NSW), from 5 February 2021.
We have set out below the new key rules retirement village operators need to know.
General Inquiry Documents and Disclosure Statements now need to include village rules and the ‘Moving into a retirement village?’ publication of the Department of Consumer Services. The forms of both disclosure documents have also been slightly amended.
Village operators must use the updated forms and attach the required documents to any new disclosure documents they will be issuing to prospective residents going forward.
Standard form of village contract
The standard form of village contract has been amended in line with the new aged care rule, exit entitlement orders and 42-day cap on general services charges.
While those new rules only apply to registered interest holders (RIHs) (those who hold registered long-term leases with at least 50% capital gain entitlement), the standard village contract has been amended in a way that requires template contracts for both RIHs and non-RIHs to be updated.
Village operators need to update their template village contracts and use the updated templates when issuing new village contracts to prospective residents going forward.
Exit entitlement orders
The ‘prescribed period’ following which a former resident may apply for an exit entitlement order directing the operator to pay the exit entitlement before the premises are re-sold, is as follows:
- 6 months – for villages located in the specific local government areas listed in the New Regulations; and
- 12 months – for villages in all other areas in NSW.
The prescribed period commences 40 days after certain events occurring.
The New Regulations specify what matters the Department of Customer Services will consider when determining whether or not an operator has unreasonably delayed the sale of a former resident’s premises, for the purposes of exit entitlement orders. Village operators should consider those matters now and adjust their processes to maintain proper records to show they have not unreasonably delayed the re-sale.
Aged care rule
Village operators who make daily accommodation payments (DAP) to an approved aged care provider of the facility where a former resident resides, must keep specific records and provide to the former residents summary documents relating to the amounts paid under the aged care rule.
Exemption for villages held in trust
The aged care rule and exit entitlement orders do not apply to villages held in trust by a trustee that holds each village unit in trust for the benefit of a village resident.
Increase of recurrent charges
The New Regulations allow a village operator to increase the recurrent charges payable by residents of the village as a result of the liability incurred by the operator once a former RIH’s liability to pay the recurrent charges ceases (e.g. as a result of the 42-day cap commencing from 1 July 2021).
Asset management plan (AMP)
From 1 September 2021, village operators must:
- prepare in consultation with the residents, an AMP including prescribed content every 10 years in relation to each village they manage;
- include into the AMP an asset register being a list of the major items of capital and their prescribed information (Asset Register);
- if capital maintenance is included into the proposed annual village budget, include into the proposed budget a 3-year report relating to capital maintenance for major items of capital that is extracted from the AMP current for the corresponding period;
- update the AMP within 28 days of the annual budget being approved, if the 3-year report included into the approved annual budget differs from the AMP;
- update the AMP within 7 days of the purchase of a major item of capital.
Importantly, the New Regulations provide that if a major item of capital is not in the Asset Register, the funding of its capital maintenance from the capital works fund or recurrent charges is not authorised.
Concurrently with the New Regulations, the Department of Customer Services has issued Secretary’s Guidelines for Retirement Villages AMPs, including a recommended template to follow when developing an AMP.
Village contract information meeting
The Department of Customer Services has updated the Guidelines for Village Contract Information Meeting, which now include a checklist to assist village operators in conducting information meetings with residents.
If you would like assistance to discuss issues raised by the New Regulations or get assistance in updating your village contracts, policies and procedures, please contact our Health, Aged Care and Retirement Villages team.
Arthur Koumoukelis | Partner | +61 2 8248 3437 | [email protected]
Lucinda Smith | Partner | +61 2 9020 5748 | [email protected]
Maryna Roganova | Senior Associate | +61 2 8248 5881 | [email protected]