Amendments to Retirement Villages Legislation

Long awaited changes to the Retirement Villages Act 1992 (WA) (Act) and the Retirement Villages Regulations 1992 (WA) came into force on 1 April 2014.

The changes effect some recommendations from the final report of the statutory review of retirement villages legislation published in November 2010 (Report), which recommended over 100 changes to the retirement villages legislation.

The Department of Commerce has advised that it will now commence work on a second tranche of amendments to the retirement villages legislation with a view to addressing a further 38 recommendations in the Report.  The Department of Commerce anticipates that these further amendments will come into force later this year.

Summary of amendments in force from 1 April 2014

Some of the important amendments to the Act are:

• a cap on the time that a non-owner resident can remain liable for ongoing fees after vacating the residence;
• prohibited charges which village operators may not collect from residents;
• amendments to the disclosure and cooling off periods for residency contracts; and
• the introduction of prohibited persons who may not be involved in operating retirement villages.

Cap on ongoing fees

A village operator can no longer charge a non-owner resident who has permanently vacated the residence with any ongoing fees (referred to as “recurrent charges”):

• six months after the resident has permanently vacated the retirement village (for existing residents at 1 April 2014); or
• three months after the resident has permanently vacated the retirement village (for residents that enter into a residency contract after 1 April 2014).

The Report recommended this amendment on the basis that many residency contracts provided that residents would remain liable for ongoing fees after vacating until a new resident commenced occupation.

Prohibited charges

For financial years commencing after 1 April 2014, village operators can no longer pass on a number of costs on to residents, including:

• legal costs (unless the residents have passed a special resolution authorising the expenditure);
• overseas travel costs;
• more than 50% of the costs for the village to become a member of an approved retirement village industry body;
• depreciation costs for assets in the retirement village; and
• a range of other costs (such as marketing, refurbishment and administration costs), to the extent that the amount collected exceeds actual costs incurred by the village operator.

Disclosure and cooling off periods

The required statutory disclosure must be given at least 10 working days before the resident signs a residency contract (up from five working days).

After a resident has signed a residency contract, the resident’s cooling off period is now seven working days (up from five working days).

Prohibitions on persons involved in village management

Restrictions have been placed on persons who may be involved in any way (including employed) in village management. Prohibited persons include a person who:

• is a bankrupt or whose affairs are under insolvency laws;
• has been convicted of a criminal offence in the last five years or has been released from prison in the last five years; or
• has been disqualified from managing corporations or managed a corporation that was involuntarily wound up in the last five years.

Prohibited persons may apply to the Commissioner for approval to be involved in village management.  The Commissioner may give this approval if satisfied that the wellbeing and financial interests of the residents will not be placed at risk.

Prohibited persons who are already involved in village management have a six month period of grace from 1 April 2014.

Please contact us if you have any queries in relation to these changes or require any advice in relation to retirement villages.  Lavan Legal will monitor the second tranche of amendments to the Act and will update you when these are released for public comment.