The Western Australian government’s enactment of stage 1 of the reforms to the retirement village laws from 1 April 2014 has resulted in retirement village operators having to make a number of changes in managing retirement villages.

In July 2014, the Department of Commerce released for consultation stage 2 of its anticipated changes to the retirement village laws that it proposes will start in October 2014.  These changes comprise a substantial re-write of the Code and by regulation prescribe many matters that must and must not be included in a residence contract.

Retirement village operators need to carefully consider amendments to the law when managing a retirement village and entering into residence contracts.  The stage 2 amendments will effectively require operators to re-write their standard residence contracts for new residents, to comply with the law.

Jackson McDonald has already drafted a new form of template residence contract that addresses and complies with the proposed new laws.

Retirement village law

The retirement village law in Western Australia primarily comprises the:

  • Retirement Villages Act 1992;
  • Retirement Villages Regulations 1992; and
  • Fair Trading (Retirement Villages Interim Code) Regulations 2014.

Stage 1 amendments

The amendments include important provisions, among others, about:

  1. Disclosure and Cooling-off Periods

The operator must provide the Information Statement and other pre-contractual disclosure documents at least 10 (increased from 5) working days before a person enters into a residence contract.  

The cooling-off period within which a prospective resident can rescind the contract is 7 (increased from 5) working days after the date of the residence contract.

  1. Imposing a cap on the operating cost/services fee liability of residents after they leave a retirement village.

The operator will not be able to charge a former resident with recurrent charges after:

  • six months after the former resident has permanently vacated the retirement village (for existing residents); and
  • three months after the former resident has permanently vacated the retirement village (for residents who enter a residence contract after 1 April 2014).

The Act now includes a definition of “permanently vacated”.

  1. Village operator’s expenses that cannot be recouped from residents

The operator is prohibited from requiring payment from residents in respect of matters that are not directly related to operating the village, such as certain legal court costs incurred by the village operators, overseas travel by the village operator and depreciation amounts.

Retirement village operators need to comply with the new requirements. 

Stage 2 amendments

The proposed stage 2 amendments include, among others:

  1. Matters which must or must not be included in residence contracts

The residence contract must clearly state rights and obligations in relation to personal amenities, communal amenities, personal and communal services and when proposed personal and communal amenities and services are to be provided.

Exit fees, such as deferred management fees and reserve fund contribution, must be calculated on a daily pro rata basis to avoid the former resident and incoming resident being charged for the same period.

  1. Increase in the disclosure information to be provided

In addition to the information statement, a notice of the cooling-off rights, a copy of the residence rules and a copy of the code, the new Regulations also propose that the financial statements, operating budget and reserve fund budget must be provided to residents at least 10 working days before entering a residence contract.

  1. New refurbishment rules

The new Code proposes a definition of “refurbishment work” that refers to the maintenance, repair, replacement or renovation work that return the premises to a reasonable condition.  

When assessing what, if any, refurbishment work may be carried out the administering body must have regard to the age, character and physical condition of the premises at the start of the residence contract and the age, character and physical condition of comparable premises in the village and common facilities and amenities in the village when the resident permanently vacates the village.

A former resident or the former resident’s personal representative may apply to the State Administrative Tribunal to resolve refurbishment disputes.

Not all of the changes are mentioned in this article.

Assuming the new laws start in October 2014, all residence contracts entered into after then must comply with the new laws, unless the law provides some transitional arrangements.  If the operator has WA Planning Commission approval to its current form of residence contract, it may require approval for the new form of residence contract.  An operator will need to re-apply to WA Planning Commission for a new approval before it commences using the new form of residence contract.