Western Australia is set to follow the path of eastern States and force retirement villages to purchase unsold units, after claims that residents are waiting up to four years to receive property sale proceeds.
WA’s Commissioner for Consumer Protection has released a regulatory impact statement, which continues the highly divisive national trend in favour of expanding mandatory unit buyback laws. Submissions on the statement close in March 2020.
The statement proposes that retirement villages be forced to pay the “exit entitlements” of outgoing residents anywhere between six and 18 months, even if the unit has not been sold.
The statement lists the benefits of such a provision as being:
More residents receive their exit entitlements within a reasonable time, reducing the problems in funding alternate accommodation after leaving a village.
Market consistency reduces the complexity of the decision whether to purchase the retirement village product and potential for uninformed decisions.
Provides an incentive for operators to maintain villages, ensure contract terms and price are attractive and engage in good marketing practices.
Provides an incentive for more certain exit entitlement amounts.
The statement however acknowledges the reform initiative could have the following downsides:
May result in lower prices/upfront payments and so lead to lower exit entitlements for some residents.
May result in cost shifting as operators seek to replace the value of use of the upfront payment while the unit remains unoccupied through other fees/fee increases.
May result in increased admission of residents who are not suited to the village.
May result in investors leaving the market, or insolvencies, if (operators are) unwilling to adjust business models.
WA Commissioner for Consumer Protection David Hillyard said the reform would help seniors to move into aged care in a timely way.
“The public consultation on this issue will consider whether there needs to be a time limit placed on the payment of exit entitlements to former residents,” Mr Hillyard said.
Mr Hillyard said the reforms also examined refurbishment costs in the unit sale process.
“Refurbishment costs when residents move out is another contentious issue with claims that the residents are being required to pay for works that upgrade the residence rather than simply make the unit marketable,” Mr Hillyard said.
“The consultation considers whether refurbishment provisions should be clarified so that a departing resident need only reinstate the unit to its original condition.
“The proposed reforms to the Retirement Villages Act also deal with problems being experienced with reserve funds and capital works funding, with residents often complaining that not enough money is set aside for long term capital works needed to maintain their village.”
The statement can be downloaded from the Consumer Protection website.
WA is following other States
The expansion of mandatory buyback laws has evoked bitter industry opposition across Australia.
In May 2019, Queensland introduced its mandatory buyback laws, including for freehold units. These laws have since been blamed for the collapse of the Settlers Lifestyle group and forcing a Gold Coast village operator to sell her home to buyback units.
The WA statement tries to dismiss the Settlers Lifestyle issue, saying that “Settlers’ apparent failure to apply for an extension of time to pay (available under the Queensland retirement villages’ legislation) requires some explanation”.
NSW has promised to introduce similar laws, but no legislation has been introduced to support the reform. The NSW Government did publish a consultation paper on the subject in July 2019, which floated that the reform would only apply to future but not existing residents.
The retirement village industry has claimed that the NSW laws had the potential to cause village closures, particularly in outer metropolitan and regional areas.