amendments to the Queensland Retirement Villages Act 1999 (“the Act”) were
assented to on 15 March 2006, after an exhaustive review and consultation
process, which began in September 2001.
main objective of the amendment act was to provide increased consumer protection
for what the Government sees as one of the most vulnerable groups in our
community; elderly retirees. The promotion of consumer protection and fair
trading practices has been added as one of the primary objects of the Act set
out in Section 3 and the amendments are aimed at:
the rights and obligations of residents and operators;
resident involvement in the budget-setting process; and
greater transparency and accountability in the financial management of
most significant changes have been made in relation to:
cooling off period
for the Capital Replacement Fund and Maintenance Reserve Fund
Accounts and Statements
right to reside
paper looks at each of those changes and the potential impact they will have on
residents and operators.
very strong opposition from the
Nine month cap on general services
Contracts entered into after 1July 2000, Section 104 provides that the
resident’s liability to continue paying general services charges ends if a
unit remains unsold at nine months from the date of vacation, regardless of any
contractual provision to the contrary.
Exit fee calculated at date of
exit fee calculation date for all contracts will now be the date the unit is
vacated1 Previously, for
contracts entered into before 1 July 2000 the calculation was made at the date
the unit was sold resulting in higher exit fee calculations for pre-Act
New Reinstatement Standard
new reinstatement standard based on marketable condition2
applies to all contracts regardless of when they were entered into or any
contractual provision to the contrary.
Time for Agreeing on Reinstatement
time frame allowed for the resident and operator to agree on the reinstatement
work is now thirty days for all contracts3.
departure from the general rule that legislative changes should not
retrospectively affect the rights of individuals was considered necessary
because of the Government’s concerns regarding the perceived imbalance in the
contracting powers of the parties to a residence contract.
The commercially minded scheme operator on one side and the vulnerable
retiree on the other.
imposing additional budgeting requirements and responsibilities will all
commence on 1
creating new restrictions on insurance excesses will commence on a date to be
fixed by proclamation so that they will commence at the same time as related
amendments to be made to the Retirement Villages Regulation 2000.
other amendments commenced on 15 March 2006.
Information Document (“PID”) and Residence Contract
additional requirements for these documents are:
PID must be in the approved form and relate to only one Retirement Village
Scheme4. A new
version of the approved form has been released by the Office of Fair Trading
for use by operators from 17 March 2006.
with information relating to insurance arrangements, the PID must include
the amount of any excess to which any insurance policy is subject5.
Where a scheme operator proposes to start levying a charge for facilities to be provided at some point in the future, the PID must state when the scheme operator proposes to start levying a charge for those facilities6.
Example: If the operator intends building a community facility and swimming pool at the end of Stage 1 of the construction of a new village, the PID must state when the operator proposes to commence including charges relating to those facilities in the general services charge.
However, as the statement need only be as general as saying that the operator proposes to start levying a charge for that facility when the facility is complete, it adds little to the disclosure information provided to prospective residents.
requirements to disclose inaccuracies in the PID in Section 36 have been
strengthened. Full written
disclosure must be made within 28 days after the scheme operator becomes
aware of the inaccuracy to the Chief Executive and to each resident who is,
or who is likely to be materially affected by the inaccuracy.
This now includes any person who has signed a Residence Contract for which the cooling off period has not ended and a person who has indicated that they intend signing a Residence Contract. Failure to inform a person falling into any one of these three categories attracts a maximum penalty of 540 penalty units.
interpretation of inconsistency in the contract documents is now skewed very
much in favour of residents with Section 37 providing that:
If a provision in a PID is inconsistent with a provision in any other part of the Residence Contract, the provision that is more beneficial to the resident will prevail; and
If a provision in a PID is inconsistent with the Act, the Act prevails.
Contracts continue to be subject to a fourteen day cooling off period.
However, the changes made in respect of the commencement of the cooling
off period have created uncertainty for prospective residents, operators and
fully understand the changes, it is necessary to look at the definition of
“cooling off period” contained in the dictionary which is as follows:
“cooling off period for a residence contract means a 14 day period starting on:
the day the contract is signed; or
if the residence contract is subject to a later event happening or another contract being entered into – the day the later event happens or the other contract is entered into.”
Section 45(1), if the cooling off period starts on the day the residence
contract is signed, the residence contract must state the date the cooling off
period ends. If the cooling off
period starts on the day a later event happens or another contract is entered
into, the residence contract must state the later event or other contract.
effect of this amendment can best be understood by way of example.
If Mr and Mrs Brown want to purchase a unit in
“This contract is subject to the resident entering into and settling a contract for the sale of their property at
16 Blackside Streeton or before 30 June 2006.”
to the 2006 amendments, the cooling off period would have commenced on the date
the contract was signed. When the
cooling off period ended, the contract would still be subject to the sale of the
resident’s existing property being settled ensuring that they would have
sufficient funds available to pay the ingoing contribution.
if this same special condition was to be used in a residence contract entered
into after 15 March 2006, the cooling off period would not commence until the
sale of their property at
operator would be unwilling to allow Mr and Mrs Brown to enter
sold their home, Mr and Mrs Brown would have to look for short term
the operator allowed Mr and Mrs Brown to enter the Village, the ingoing
contribution would have to be held in a trust account under Section 46 until
the cooling off period ended.
further reason why operators will be reluctant to allow residents to move into
the Village before the end of the cooling off period results from the changes to
Section 63. The operator must now
pay the exit entitlement of a former resident within fourteen days after the
settlement day. The settlement day
is defined as the day on which the sale of the right to reside to a new resident
or the scheme operator is settled.
an operator was to allow a resident to pay the ingoing contribution into a trust
account as allowed by Section 46 and to move into the Village, the operator
could be required to pay the exit entitlement of the former resident of the unit
only to find that the new resident rescinds the contract under the cooling off
advising scheme operators will be looking for inventive ways to draft special
conditions to accommodate these new requirements.
However, given the uncertainties of the conveyancing process, it is
unlikely that those special conditions will satisfy lawyers advising new
residents. The result may be that
many operators will now simply refuse to contemplate residence contracts subject
to the sale of an existing home.
general services budget and increases to the general services charge have been
the source of greatest friction between residents and operators.
This has resulted from:
lack of a clear regulatory framework for the budget setting process;
failure to understand that the general services budget is a cost recovery
budget and not a source of profit for operators.
new Section 102A, which comes into, effect on 1
for a reasonable amount to be raised to provide the general services for the
financial year; and
the amount to be raised by way of contribution to cover the expenditure.
residents committee can give the operator a written request to provide it with a
copy of the draft budget at least fourteen days prior to the beginning of the
financial year. Such notice must be
given at least twenty-eight days before the beginning of the financial year.
regulatory framework reflects industry practice and is one of the measures
designed to address the perceived lack of transparency and accountability
provided by operators in respect of village finances.
The residents committee is only entitled to view the draft budget and has
no right of veto meaning that responsibility for finalising the budget still
rests with the scheme operator. It
is therefore uncertain whether these changes will facilitate better co-operation
between residents and operators in formulating the village budget.
102A has clarified one important point with Subsection 6 providing that if there
is a surplus or deficit at the end of any financial year, that surplus or
deficit must be carried forward and taken into account in adopting the general
services budget for the next financial year.
This is one of the exceptions to the limit on increasing general services
charges contained in Section 106.
General Services Charges
conflicting decisions which have come out of the Commercial and Consumer
basket approach7 which allowed the general services charge to be
increased so long as the increase in the total charges did not go above the
CPI limit; and
line by line approach8 which required each budget item to be
scrutinised to ensure it did not increase by more than the CPI increase
to have been resolved in favour of the basket approach.
reworded Section 106 introduces the new concept of “total of general services
charges”. The stipulation that
this total must not increase by more than the CPI percentage increase for a
given financial year suggests that the Government has opted for the basket
a closer examination of the definition of “total of general services
charges” reveals that it is by no means certain that this is the case.
Total of general services charges is defined as:
sum of all charges for general services for the financial year other than:
charge for a general service that has been increased by more than the CPI
percentage increase and approved by special resolution at a residents
charge for a general service that has been increased by more than the CPI
percentage increase and is allowed under Section 107.
result is that if the total increase is more than the CPI percentage increase
for any given financial year; the operator will have to revert to a line by line
approach to either:
the residents’ approval through a special resolution; or
whether the increase is a result of increases allowed under Section 107.
issue is further complicated by the new Section 107A which requires the scheme
operator to consider whether there is a more cost effective alternative before
increasing the charge for a particular general service.
This additional requirement could see a more protracted budgeting process
with residents committees requiring evidence that the scheme operator has looked
into alternative means of providing services.
This raises the potential for friction between residents arguing the case
for the cheapest method of providing a service and the operator looking to
provide a quality service, which will maintain the value of the village.
Obligation to Pay General Services Charge
most significant changes are:
nine month cap on a resident’s obligation to continue paying the general
services charge after they have vacated their unit; and
sharing of charges from day 91 to nine months in the same proportion as the
resident and operator share in the gross ingoing contribution on the resale
of the unit.
resident who has vacated a unit continues to be liable for the general services
charge until the first of the following events occurs:
unit is sold;
days elapses; or
Commercial and Consumer Tribunal orders the operator to pay the exit
position during the first ninety-day period after vacation is unchanged.
if the unit remains unsold after the ninety days has elapsed, then the resident
and the scheme operator are to pay the charge in the same proportion as they
share the gross ingoing contribution on the sale of the unit.
continues until either the unit is sold or nine months has passed since the
resident vacated the unit.
the consultation process, submissions made on behalf of residents identified the
uncertainty of rights following vacation of a unit and the financial impact of
the continuing liability to pay the charge as major concerns.
In line with the consumer protection focus, the Government has moved to
limit the onus on residents to continue paying the village’s operating costs
and to clarify the obligations of both parties.
nine month cap was chosen because, based on information provided by the
industry, the Minister determined that under “usual market conditions” most
units sell nine months after vacation, 9 nd Aged Care Queensland
incorporated in its submissions in response to the consultation draft bill made
on 6 October 2005 reported that the average time taken to sell a unit is four
months, with a range from one to fourteen months.
This data suggests that, for most operators, the new nine-month cap will
have minimal financial impact.
there will be a financial incentive on operators of villages which are below
standard and therefore experiencing long delays in resales, to improve their
business practices and the Government sees it as a way to lift standards in the
new concept of gross ingoing contribution is defined as the ingoing contribution
before any deductions, including the exit fee are made.
Prior to 15 March 2006, the proportion was calculated based on the
“sale proceeds”, a term which was not defined.
The change clarifies how the calculation should be made in favour of
FOR THE CAPITAL REPLACEMENT FUND AND MAINTENANCE RESERVE FUND
changes come into effect on 1
is no longer necessary to obtain a full Quantity Surveyor’s Report in relation
to these funds on a yearly basis. Full
reports need only be obtained in:
and every third year following; and
other year when substantial changes have been made to the village. 10
years when a full report is not required, an update of the previous full report
is to be obtained.
is a new requirement for the scheme operator to use its best endeavours to
implement the report’s recommendations in the context of:
objects of the Act; and
circumstances relevant to the village but apparently not considered by the
concerning aspect of the change is that it suggests the Quantity Surveyor’s
report provides a spending or maintenance program rather than projections of
anticipated maintenance and capital replacement requirements.
residents committee is given a say in the budget for the two funds by being able
to require the scheme operator to:
it with draft budgets for both funds 11 provided that notice is
given at least twenty-eight days before the beginning of the financial year;
a meeting at which the budgets will be discussed. 12
increased involvement of the residents committee in the budgeting process will
be a double-edged sword for those committees.
It allows greater transparency and involvement of residents in financial
decision making for their village but for those residents who are members of the
committee, it will bring increased expectations and greater pressure from other
residents or their representatives.
does repair of a capital item cross the line and become replacement of that
item? If it is repair, it is paid
for from the maintenance reserve fund and therefore paid for by the residents
but if it is replacement, the expenditure is met by the capital replacement fund
and therefore, the scheme operator. This
distinction has been the source of many disputes and was identified as one of
the most contentious issues during the review of the Act.
new Section 113A permits a regulation to be made prescribing model rules about
the classification of items of expenditure.
These model classification rules may:
how a particular item of expenditure must be dealt with;
scheme operators to classify how other items of expenditure must be dealt
will be mandatory for scheme operators to comply with the model classification
the rules leave it to the scheme operator to classify how items of expenditure
must be dealt with, then the scheme operator must provide the residents with a
written notice of how it intends to classify those items.
is dealt with for the purposes of the Section if it is:
to the capital replacement fund;
to the maintenance reserve fund; or
as a general services charge.
is another provision aimed at imposing greater consumer protection, through the
model classification rules and, increased resident involvement in the financial
management of the village.
ACCOUNTS AND STATEMENTS
has been no change to the frequency of providing financial statements to
reports are still only required quarterly and:
audited financial statements must be provided within five months of the end
of each financial year.
Sections 112 and 113 clarify that in addition to showing the income and
expenditure of the capital replacement fund and maintenance reserve fund, the
statements must also list the expenditure involved in providing each general
Section 112, the residents committee may request a document providing further
details of the quarterly financial statements.
If requested, the document must explain:
expenditure involved in providing each general service; and
increase in the expenditure involved in providing each general service that
varies from the expected expenditure for that service as provided for in the
general services budget.
purpose of this document is to enable residents to see the overall cost of
supplying particular general services, not the individual items of expenditure
related to those services. 13
example, the document should show the total cost of providing a swimming pool to
residents rather than the individual costs of chemicals, cleaning equipment,
electricity and water.
90 re-states the position that a scheme operator is solely responsible for the
cost of the retirement village’s capital improvements.
new Sections 90A and 90B also re-state the position that if a resident requests
that a capital improvement be made to the resident’s unit and the scheme
operator agrees to make that improvement, the resident is solely responsible for
the cost of the capital improvement.
the residents of a village request capital improvement to the village and the
operator agrees to make the improvement, all residents are jointly responsible
for the cost of the improvement. This
is a change from the previous position where residents were jointly and
Section 90C, a resident who has vacated the village ceases to be responsible for
any part of the cost when they stop being responsible for ongoing general
services charges under Section 104. If
that occurs, the scheme operator becomes liable for the resident’s share of
the cost of the capital improvement.
Section 90D, residents can have the scheme operator obtain quotes for the
changes again provide greater transparency and clarify procedures but
potentially increase the administration load of scheme operators and expose them
to additional costs. It is possible
that result will be that operators simply refuse to agree to capital
improvements requested by the residents.
have been major changes to the process and rights and obligations of the parties
new standard of reinstatement work in Section 58;
pays for reinstatement work under Section 62;
time for payment of the exit entitlement required by Section 63;
the rights of relatives in the new Section 70B.
of Reinstatement Work
new standard which applies to all contracts is that the unit be reinstated to a
marketable condition having regard to:
condition of the unit at the start of the resident’s occupation;
general condition of other accommodation units in the village that are
comparable with the resident’s unit.
are no longer able to require that the unit be returned to the condition it was
in at the beginning of the resident’s occupation.
Pays for the Reinstatement Work?
freehold schemes, the resident continues to be liable for the cost of the
leasehold or licence schemes, who pays for the reinstatement work depends on
when the residence contract was entered into.
However, in all cases, residents are responsible for the cost of
reinstatement work caused by accelerated wear or deliberate damage to the unit.
other reinstatement work:
contracts entered into before 15 March 2006, if the contract states who is
to pay for the work then that person continues to be responsible for
the contract does not state who is to make the payment then
for contracts entered into between 1 July 2000 and 14 March 2006, the
scheme operator is to pay for the reinstatement work.
contracts entered into before 1 July 2000, the resident and the scheme
operator share in the cost of the reinstatement work in the same proportion
as they are to share in the gross ingoing contribution paid on the sale of
contracts entered into from 15 March 2006 onwards, the cost of reinstatement
work will be paid by:
if the resident and scheme operator share in any capital gain on the sale of the unit, they will share the cost of the reinstatement work in the same proportion that they share the capital gain; or
otherwise the scheme operator will be solely responsible.
the scheme operator must pay the cost of reinstatement work, it is to be paid
out of the capital replacement fund.
is anticipated that these changes will have the following effects:
will look to identify as much of the reinstatement work as possible as
accelerated wear and this will lead to disputes over just what is
accelerated wear. It will
require greater diligence in completing the inventory at the commencement of
leases and licences.
in capital gain between resident and operator will become more commonplace
as a means of ensuring that residents bear some of the cost of the
fees will be increased as operators look to compensate for the increased
liability for reinstatement work.
operators from the not-for-profit sector will calculate exit fees on the
resident’s ingoing contribution preferring instead to calculate the exit
fee on the resale price or simply increasing their exit fees.
it is unlikely that these changes will have the desired effect of decreasing the
financial impact on residents when they leave the village.
Operators will simply look for other ways as suggested above to
compensate themselves for these increased costs.
for Payment of the Exit Entitlement
exit entitlement must be paid no later than fourteen days after the settlement
date for the resale of the unit. This
is a reduction from the former twenty-eight days14
Right to Reside
70B gives rights to relatives of a resident who are not parties to the residence
contract. It is not uncommon for a
resident to remarry after moving into a retirement village or be joined by a
relative, in many cases, a child. 15 A relative or spouse in this
situation has no rights under the residence contract to remain in the unit if
the resident should die or move into a nursing home.
rights given to these relatives are intended to allow them sufficient time to
put their affairs in order without being forced to find an alternative home.
However, the extent of those rights will lead to operators restricting
residents’ ability to have relatives stay with them.
new section provides that spouses or relatives living with a resident now have
the right to remain in the unit for up to three months after the resident dies
or vacates the unit.
is defined very broadly and includes spouses, parents, siblings and children.
are four conditions that the relative must meet:
residence contract must be terminated;
relative must be living in the unit when the resident died or vacated;
relative must have lived in the unit for at least six months;
relative must agree to be bound by the terms of the resident’s contract
with the operator.
leasehold and licensed units, the relative has the first option to enter into a
new residence contract for the unit. If
the relative meets the eligibility criteria for residence in the village and
gives the scheme operator the proper notice, the scheme operator must enter into
a residence contract with the relative before the end of the three-month period.
contract must be on the same terms as would be offered to any other potential
regarding reinstatement work will be between the relative16and the
scheme operator and the work will have to be carried out while the relative is
in the unit. The contract with the
relative will therefore have to reflect any agreement reached in relation to how
the reinstatement work will be carried out.
provisions relating to relatives affect many aspects of the termination process.
of the exit fee – Section 15;
the vacation date and agreeing on reinstatement work – Section 59; and
the termination date – Section 56.
main changes are:
breach of the Act is now a dispute17
can no longer request that the Chief Executive make an application for a
group of residents can jointly apply to the Tribunal about a dispute arising
from the same or similar facts or circumstances18
can be represented before the Tribunal19by:
Another resident of the village who is not a lawyer;
A relative who is not a lawyer; or
With the leave of the Tribunal, a lawyer or any other person.
legislative intention is to make access to the Tribunal easier and less
intimidating for residents.
position in relation to voting rights at residents’ meetings has been
clarified with Section 133 providing that it is one vote per unit unless the
residents agree by special resolution that each resident should be entitled to a
contractual arrangements governing life in a retirement village, the
relationship between resident and operator and the relationship between
residents are necessarily complex. The
legislation seeks to control every aspect of those arrangements and retirement
villages therefore operate in a highly regulated environment with the 2006
amendments increasing the level of regulation even further.
It is worth noting that the original 1988 Act had just over 60 sections
while the newly amended Act has about 270.
professionals to competently advise residents and operators, a detailed
knowledge of the expanded issues is now more than ever required.
15 of the Act
57 and the definition of Reinstatement work in the Dictionary
57 and 58 of the Act
74(1) of the Act
75(d) of the Act
79(d) of the Act
Phillips and others v Eden Lea Retirement Village Pty Ltd
Phillips and others v Eden Lea Retirement Village Pty Ltd
rationale was provided by Cameron Crowther, Advisor to the Hon Margaret
Keech, Minister for Tourism Fair Trading and Wine Industry Development at
the Aged Care Queensland Retirement Living Conference on 11 May 2006.
Replacement Fund – Section 92 of the Act and Maintenance Reserve Fund –
Section 98 of the Act.
Replacement Fund – Section 93(3) of the Act and Maintenance Reserve Fund -
Section 99(3) of the Act
the proper notice is given under the new Section 129B of the Act; the scheme
operator must comply with the notice.
Villages Amendment Bill 2006 – Explanatory Notes.
63(1) of the Act
the aging population, it is not unusual for an 80 year old resident to have
a child who also meets the eligibility criteria for a retirement village.
will also be the new resident
21 of the Act
173 of the Act
174 of the Act
the Act previously did not specify who was entitled to vote at residents
meetings, it was determined by the residence contract. Refer Philips, P.
G. v Edenlea Retirement Village Pty Ltd  QCCTRV 8
What are the new requirements for Public Information Documents?
What will be the effect of the changes to the commencement of the cooling off period?
How are the new rules expected to reduce the number of disputes over general service charges?
What will be the function of the new model rules for the Maintenance Reserve and Capital Replacement funds?
What will be the impact of the new rules for payment of capital improvement costs?
How will the new rules relating to reinstatement work?
Which provisions of the Amending Act have retrospective effect?