Condition of premises  

Have you thought about whether all the premises/units/villas in your retirement village are in a “reasonable condition”? You may not be aware that every residence contract entered into after 1 October 2015, that relates to residential premises in an existing retirement village, must have a warranty (or will be deemed to have a warranty) from the administering body that the residential premises will be in a “reasonable condition” when the resident takes possession.[1]

  So what is a “reasonable condition”? The answer will always depend upon the facts in each instance. The age, character and physical condition of the premises, the condition of other parts of the village and the administering body’s vision for the standard of the village will be relevant.

Before taking into account the above factors (which do need to be taken into account), at its most basic a “reasonable condition” will probably require:

  • the premises to be safe and secure;
  • the premises to comply with all applicable laws (e.g. RCDs and smoke detectors);
  • the premises to be fit for their purpose as a residence;
  • the premises to be watertight and weatherproof;  and
  • all of the parts in the premises to be in a working condition.

A consequence of this warranty may be that even where a residence contract does not include a right for the administering body to recover refurbishment costs from an outgoing resident, the administering body might need to incur refurbishment costs to bring the premises up to a “reasonable condition” so that the administering body does not breach this warranty.  Do not forget that a residence contract must not include a provision that requires a resident to contribute to the maintenance, repair, replacement or renovation costs that would exceed or be inconsistent with the requirements regarding refurbishment work in the Code.[2]  

The Code provides “refurbishment work means maintenance, repair, replacement or renovation work carried out in respect of residential premises to return the residential premises to a reasonable condition”. What is reasonable is not defined, but if the resident thinks it is being asked to contribute to something unreasonable, the resident may apply to the State Administrative Tribunal.  The State Administrative Tribunal now has extended powers in relation to refurbishment work and the amount the resident must pay for it. [3]

The take away messages are:

  • when you give a new resident possession of the  premises, the premises must be in a “reasonable      condition”;  and
  • when the premises are refurbished at the end of the    occupancy, the former resident is only required to    contribute to the cost to refurbish the premises back to    a “reasonable condition”.

Legislative changes

As mentioned in previous articles and by way of summary, we note:

  • The Retirement Villages Act 1992 was not amended in    the most recent tranche of legislative changes.
  • The Retirement Villages Amendment Regulations 2015 commenced 1 April 2015 and amended the Retirement Villages Regulations 1992.  The Regulations prescribe    matters that must and must not be included in residence contracts that are entered into after 1    October 2015.
  • The Fair Trading (Retirement Villages Code) Regulations 2015 commenced 1 April 2015 (except for the new accounting and financial reporting requirements that commence 1 July 2016).
  • The Form 1 Information Statement for Prospective    Resident is being substantially re-written.

Communal amenities and services and personal amenities and services

A residence contract must include detailed provisions about communal amenities, communal services, personal amenities and personal services. As a first step, you need to identify each communal amenity, communal service, personal amenity and personal service (if any) applicable to each resident’s residence contract in accordance with their definitions. All residence contracts must provide:

  1. the administering body will not vary the provision or availability of any communal amenity unless the residents consent by a special resolution[4]; and
  2. the administering body will not vary the availability of  a communal service or provide a new communal service unless the residents consent by a special  resolution.[5]

What next?

Retirement village operators should be aware of the legislative changes and be amending residence contracts so that from 1 October 2015 new residence contracts entered into will comply with the recent legislative changes. This article highlights only some of the many factors to consider when undertaking a review of your residence contracts.