Two years after they were first mooted by the State Government, changes to NSW’s Retirement Village Act 1999 have kicked in, introducing six-month buybacks for villages in metropolitan areas and 12 months in regional areas – but operators will not feel the pain until the second half of the year.
Under the reforms, if a ‘registered interest’ home remains unsold after six months in metropolitan areas or 12 months in the regions, operators will have to pay out residents’ exit entitlements if they have not taken “reasonable steps” to sell the home.
Buyback regulations yet to be in operation
As we covered here, the introduction of 18-month buybacks in Queensland hit operators’ cash flow hard, with law firm MinterEllison, processing 100 buybacks on day one of their reforms – around $30 million in pay outs.
MinterEllison Partner Tammy Berghofer (pictured below right) tells us that while the amendments to the Retirement Villages Act 2020 started on 1 January 2021, the buyback provisions have yet to become operative.
“Operators will not be affected by the RIH buyback provisions until the relevant regulations and forms are in place, the prescribed period under the Act passes (timing anticipated as above) and the Secretary makes an order for an operator to pay an exit entitlement in respect of a particular contract,” she said.
Residents can’t apply for orders until August
Under the reforms, the time for the prescribed period starts 40 days after the date the property is first advertised for sale; the resident permanently vacates the property; or gives written notice to the operator of their intention to stay in the property while it is for sale.
This means the first residents won’t be able to apply for such orders until 1 August 2021, taking into account the six-month unsold period plus the 40-day notice – with no buybacks expected until later in the year.
This includes former residents who have had their property for sale before 1 January 2021.
The first buybacks won’t take place until September or October at the earliest then.
Operators will need to pay DAPs for residents moving into residential care
What will be in force are the new rules that operators now have to cover a portion of the estimated sale price for residents entering residential care directly to their aged care provider so residents who can’t sell their home quickly can still pay a DAP.
Residents entering an aged care facility before 1 January 2021 can’t request the accommodation payments, but can still apply for early exit entitlement payments at the relevant 6 or 12-month timeframe after 1 January start date, if their unit is not sold.
The 42-day cap on recurrent charges for general services will also only apply to residents on or after 1 July 2021, when their village’s financial year commences.
Residents can also request a deduction on recurrent charges for general services
But between 1 January and 1 July, a current resident, who has moved out, can ask the operator to deduct these charges from their exit entitlement, with the operator obligated to action these payments, within 14 days after the request is made.
The changes were recommended following Kathryn Greiner AO’s independent report into NSW retirement villages conducted in 2017 after the damaging Four Corners program that aired in June 2017.
Operators are unlikely to hear much from Ms Greiner this year – the NSW Government has now announced that its Retirement Village Ambassador program – put on hold last year thanks to COVID and of which she is the face – is still on ice for 2021.
Villages also don’t seem to factor into the Government’s plan for NSW seniors – see the next story which is led by Ms Greiner.