Proposed changes to timeframes for exit payments in Queensland retirement villages

The final report of the Independent review of timeframes for exit payments in Queensland retirement villages (the Review) has been released, along with the Queensland Government’s response. This blog explores the recommendations made by the independent review panel, each of which are supported by the Queensland Government as it looks to demonstrate its commitment to creating a fair and sustainable retirement village industry.

Under the Queensland Housing Strategy 2017-2020 Action Plan, the Retirement Villages Act 1999 (Act) was amended in 2020 and a number of consumer protections were introduced including the requirement to pay exit entitlements to retirement village residents within 18 months of a resident’s departure unless doing so would cause the operator undue financial hardship.

The recommendations are not yet implemented and Government has invited stakeholders including residents, operators and industry to provide feedback on the recommendations.  The survey is open until 20 May 2022.  Further information is available at: www.qld.gov.au/housing.

The independent review panel was appointed to consider the impact of the 18 month buy back and made four recommendations to Government regarding the 18 month time frame for exit payments.

Recommendation 1: Timeframe for payment of exit entitlements and mandatory purchasing of a unit

The first recommendation was that:

(a) payment of exit entitlements and mandatory purchases of units in Queensland retirement villages be reduced to 12 months; and

(b) the 12 month period should commence 20 business days (or 40 business days for non urban areas) after the resident has provided vacant possession of the Unit.

The specific reference to the time frame for the commencement of the buyback period (the date the resident provides vacant possession) ensures there is clarity about when the payment will be made.

Recommendation 2: QCAT and the financial hardship provision

Scheme operators can apply for a six month extension of the mandatory buy back period.  Originally the application, which was required to be made via QCAT, was only available on grounds of financial hardship. The proposed recommendation allows a scheme operator to make an application based on market conditions and the extent of actions taken to sell the right to reside.  The resident can object if the operator did not take all reasonable steps to sell the unit in a timely fashion and the inconvenience and harm caused to the resident as a result of the extension would outweigh the inconvenience to the scheme operator if the extension was not granted. The recommendation is that operators only be granted one extension of up to 6 months per unit.

Recommendation 3: Alternative mechanism for application for extension or payment of exit entitlements

The third recommendation is to establish a timely and accessible decision-making mechanism for applications for extensions of time or payment of exit entitlements.

It is proposed that applications for extension or an application by a resident for payment of an exit entitlement be made in writing addressed to the Director-General of the Department of Communities, Housing and Digital Economy where a decision should be made in a timely manner (rather than via a QCAT application).

The recommendation is based on concerns expressed by operators of a reluctance to seek an extension via QCAT as to do so indicates to the residents and to the market at large that business is in financial distress.  Residents also expressed a reluctance to bring a matter before QCAT because of a perception that the jurisdiction is legalistic and difficult.

Recommendation 4: Resident-operated retirement villages

Resident-operated retirement freehold villages should be exempt from the mandatory buy back requirement, provided:

1. the scheme operator is not a commercial operator;
2. the scheme operator does not charge a DMF or exit fee;
3. the unit owner is free to organise their own sale; and
4. the resident or their estate retains the proceeds of the sale.

This is an important change as it removes the obligation of buy backs of strata titled retirement villages.

The Government fully supports the exemption of resident-operated retirement villages and it has already implemented the exemption via the Housing Legislation Amendment Act 2021.

Additional Recommendations

The independent panel made three additional recommendations to Government.

These recommendations relate generally to concerns raised by residents, their families and advisors about the impact that the delay in payment of the exit entitlement has on residents in a practical sense.

(a) Ongoing Service Fees

Residents currently pay general services charges at the full rate for 90 days after vacant possession of the unit and then at a proportionate rate for up to 9 months. The Panel recommended the length of time that the resident pays the general services charges be reduced from 9 months to 6 months and that residents’ payment of general service charges and maintenance reserve fund payments should be deducted from the exit entitlement.

(b) Aged Care Rule – moving to a residential aged care facility

The Aged Care Rule would require scheme operators, when requested by the outgoing resident, to pay the Daily Accommodation Payment (DAP) when a resident moves from a retirement village into aged care.

The DAP that is paid by the scheme operator would be deducted from the resident’s exit entitlement and continued up until payments have reached 85% of their exit entitlement. The Aged Care Rule will not apply to freehold tenure because the scheme operator does not owe a resident any monetary entitlements out of which the DAP could be paid.

(c) Rent Advance Rule – accommodation safety net

The panel suggested that outgoing residents on either a leasehold or licence arrangement could be paid weekly rent which would be offset against their exit entitlement up until the exit entitlement is paid, or until payments have reached 85% of their exit entitlement.

Where to from here?

We will keep you updated with the Government’s further response and any legislative changes as they occur. If you are interested in making a submission and would like our assistance please contact us.

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