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Mon 6 Apr 2020

Residents Leaving Retirement Villages


Legal Services
This article considers the circumstances where a retirement village resident’s right to reside may be terminated.

Termination of right to reside
There are several circumstances where a retirement village resident’s right to reside may be terminated. These include if a resident passes away or decides to leave, or the operator of the retirement village asks them to leave or is implementing an approved closure plan (which should provide a transparent, orderly and fair process for the wind-down period and closure) of the retirement village.

By resident
If termination occurs by a resident on the basis that they wish to leave the premises, they must provide one months’ notice to the operator of the retirement village scheme. On deciding to leave, a resident has the right to request a written estimate of their current exit entitlement. The operator must then provide the resident with that estimate. Unless the resident has already been provided with one at any time in the preceding six-month period.

If a resident becomes aware that their village is not registered, this provides grounds for the resident to terminate the contract. After becoming aware of the village’s unregistered status, the resident must provide the operator with 14 days’ notice. The operator must then, within 30 days, refund their ingoing contribution (the one-off payment that secures a resident’s right to live in the retirement village) in full within 30 days.

By operators
On provision of 14 days’ written notice, an operator may terminate a resident’s right to reside at the village if:

  • a person is injured while in the village
  • the resident seriously damaged their unit
  • the resident seriously damaged another person’s property in the village
  • they are likely to, or intentionally or recklessly, do one or more of the above things

An operator may terminate a resident’s right to reside by providing two months’ written notice if the resident does not fulfil the financial requirements of their contract. The operator has a reasonable belief that the resident has abandoned their right to reside or a suitable professional specified under the Aged Care Act 1977 (Qld) concludes the accommodation is unsuitable for the resident.

If termination of this right arises as part of implementing an approved Closure Plan, then the operator must pay the exit entitlement (explained below) within 14 days, once an agreed re-sale value is determined. Under Queensland law, the former resident and the scheme operator are to negotiate in good faith and, if possible, agree in writing on the re-sale value of the right to reside in the accommodation unit within 30 days after the termination date. Importantly, this timeframe will not apply where the resident terminates their right to reside, even if this occurs during the implementation of a closure plan.

Written notice provided by the operator must state the reasons for termination of the right to reside, as well as the latest date that the resident must vacate.

Unit re-sale
Similar to a tenant occupying rental premises, when a resident leaves a village it must be left in the same condition it was in on commencing occupation of the unit. Exclusions to this rule include fair wear and tear and renovation.

If the unit is not returned in its original condition, the operator may carry out reinstatement works and claim the cost from the resident. Reinstatement works include those repairs or replacement deemed reasonably necessary to reinstate the unit to its original condition, exclusive of fair wear and tear and renovations mutually agreed to.

Exit entitlement
The exit entitlement is the amount the operator must pay or credit the former resident when their right to reside is sold. This amount must be paid either:

  • on or before the dated stated within the residence contract
  • within 14 days after the settlement date for the re-sale
  • on the day which is 18 months after the termination date (for units which at that time remind unsold).

Also, the operator must provide the former resident with a statement detailing the fees deducted from the exit entitlement. This will include the exit fee; general service charges that have accrued; any outstanding service charges; fund contributions; expenses payable by the former resident relating to the re-sale of the right to reside; and any other amounts payable under the contract.

Mandatory purchase of freehold property
These provisions will apply where a former resident has terminated their right to reside, but their freehold interest has not been sold. In this circumstance, the operator will be obliged to enter into a contract to purchase the former resident’s freehold property and complete the purchase within a specified timeframe.

A mandatory purchase must occur unless the operator has a reasonable explanation, such as if they fail to secure the release of a mortgage over the property, or otherwise hinder the process despite their best efforts. Purchase in this manner must be completed by the latter of:

18 months after the right to reside was terminated
If the former resident is deceased—14 days after the operator is shown the Grant of Probate of the previous resident’s will or letters of administration of their estate
the day fixed by QCAT.

Importantly, a resident must terminate their right to reside by providing one months’ notice to the operator or by death. There will be no obligation on the operator to purchase the freehold unit if there has been no termination of the right to reside appropriately communicated.

Retirement Village can be complex. If you’re seeking clarity and advice to entering or exiting a retirement village scheme, we can provide easy-to-understand guidance to ensure you are well-informed before making any decisions. For a free, confidential discussion, contact Tracey Robinson,  Robinson Nielsen Legal.

This publication is not intended to be a comprehensive review of all developments in the law and practice or to cover all aspects of those referred to. Readers should take legal advice before applying the information contained in this update to specific issues or transactions. For more information or specific advice on your circumstances, please contact the writer –  Tracey Robinson .

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