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Are you doing it right?

A_86947v1

Friday 12 September 2014

Wai Hwoon Low, Principal

Kathryn Elleman, Principal

Donna Rayner, Senior Associate

Wai-Hwoon LowPrincipal

> Within 7 days of request

> When "promotional material" handed out or sent to retired person

> 21 days before resident enters into any management contract unless:> previously provided; and

> no material change to information

Factsheet – when to provide

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> given to retired person or person acting on behalf of retired person; or

> addressed personally to retired person or person acting on behalf of retired person; and

> intended to promote particular retirement village as a place in which to live; but

> excludes material distributed generally in mail-out or letter-box drop

"Promotional material" is material:

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> Key questions:

> Is your material given to retired persons or persons acting on their behalf?

> Is your material addressed personally to retired persons or persons acting on their behalf?

> If yes to either question:

> Are you promoting your village?

Is it "promotional material"?

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> Contrast with:

> General letter drop or mail out

> Not addressed to any person in particular

> Not promoting village but promoting a particular activity

Is it "promotional material"?

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> Generic/mixed tenure village

> Strata titled villages

> Loan lease/loan licence village

Types of factsheets

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> Amounts in factsheet to be GST inclusive unless otherwise specified

> Formatting nightmare!

> Some inapplicable sections may be deleted, but sections with tick boxes must not be deleted

> Size of font cannot be changed

> Lengthy document – 11 to 13 pages

Common problems, things to note

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> Inapplicable sections may be deleted entirely

> Or, use "not applicable" for section no. to maintain numbering

> Revisit and update every 3 to 6 months

> Must revisit after AGM and new maintenance charges fixed

> Changes not allowed

Common problems, things to note (cont)

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> Factsheet 1 – mixed tenure:

> For villages with titled and non-titled units, or company share

> Sections of factsheet do not distinguish between them

Factsheet 1

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Microsoft Word 97 - 2003 Document

> Reference to in-going contribution being "refundable" or to be "refunded"

> Applicable to non-titled units

> Difficult to reconcile with titled units

Factsheet 1 (cont)

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> Reference to "Long term maintenance fund charge"

> Relevant only if LTMFC payable on a recurring basis

Factsheet 1 (cont)

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> Recognition that OC fees in titled village can be included in the maintenance charge

Factsheet 1 (cont)

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Factsheet 1 (cont)

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Factsheet 1 (cont)

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> What is the difference between sections 11 and 12 of factsheet?

Factsheet 1 (cont)

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> Same issues as with Factsheet 1

Factsheet 3 – loan/lease or license villages> No additional issues

Factsheet 2 – titled villages

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Kathryn EllemanPrincipal

> Second stage of disclosure:

> Pre-contract stage

> New form of disclosure statement

> Information as prescribed in the Regulations

> Must be in a form approved by Consumer Affairs Victoria

Pre-contract Disclosure

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> When is this?

> At least 21 days before the prospective resident signs a residence contract or management agreement

> What has to be provided?

> By the owner or manager - a Factsheet if it has not previously been provided, or if it has previously been provided but has materially changed

Pre-contract Disclosure

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> By the owner or owner’s agent – the residence contract

> By the manager – the management contract and village by laws

> By the manager - an expanded and individually tailored Disclosure Statement (in the form required by Consumer Affairs Victoria) which must be certified and signed by the manager

Pre-contract Disclosure

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> 6 different versions

> Loan-lease/loan-licence, rental, strata title, company title, unit trust, general – all villages

> A sample of the general statement is as follows:

Disclosure Statement

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4.6 Post-departure costs (cont)

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> Failure to comply:

> With pre-contract disclosure - right of rescission by the resident at any time up until 6 months after become aware of the breach

> Penalty fines

Pre-contract Disclosure – Offence

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Donna RaynerSenior Associate

> Regulations deal with residence and management contracts in 4 ways:

> Certain matters must be excluded from contracts

> Certain matters must be addressed in contracts

> Prescribed terms that must be included

> Standard or prescribed layout

Introduction

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> Regulations and preliminary agreements - contract for sale of land; agreements to lease

> Regulations and strata titled villages – option to purchase and deferred payment deed Important note: From 1 October 2014 – a new prescribed form of contract for the sale of land

Introduction (cont)

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> From 1 July 2014, operators must use 1 of the prescribed forms of contract

> 4 types of prescribed forms of contract:

> a residence contract

> a management contract

> a combined residence contract and management contract (where the entities are the same); and

> a combined residence contract and management contract (where the owner and manager entities are different)

New Prescribed Form of Layout of Contracts

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> A number of matters must be excluded from contracts. For example:

> Must not require resident to effect insurance other than liability insurance for any motorised wheelchair BUT may include a warning that resident should effect house contents insurance

Excluded Matters

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> Cannot have "entire agreement" provision in contract

> Cannot require resident to pay owner/manager costs of enforcing contract against resident

Excluded Matters (cont)

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> Regulations specify a number of prescribed terms including:

> Owner/Manager obligations

> Resident’s obligations

> Resident’s rights

> Legal matters

Standard or Prescribed Terms

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> Regulations require a number of matters to be addressed in the contract including:

> Basic information

> Use of unit

> Financial matters

Matters which must be addressed

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> Services

> Insurance & Maintenance

> Termination

> By-laws of the Village

Matters which must be addressed (cont)

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> Contracts may include additional terms provided they are not inconsistent with the RV Act or Regulations

Additional terms

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[SAMPLE OF PRESCRIBED FORM

OF RESIDENCE AND MANAGEMENT CONTRACT

(OWNER & MANAGER SAME ENTITY)]

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Sample RV Contract

> Adding or deleting information on page 2 of contract or the prescribed terms (generally clauses 2 to 6 of contract)

> Amending headings of prescribed terms or matters

> Inserting a table of contents

> Why use different terminology e.g. "resident’s premises", "maintenance charge"

> Other

Common Questions/Queries

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> May result in financial penalties (up to $7,000) and contract terms being implied or unenforceable

Failure to comply

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QUESTIONS

The information contained in this presentation is intended as general commentary and should not be regarded as legal advice. Should you require specific advice on the topics or areas discussed please contact the presenter directly.

Disclaimer

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Wai-Hwoon LowPrincipal

Telephone: 03 9609 1627Email: whlow@rk.com.au

Kathryn EllemanPrincipal

Telephone: 03 9609 1633Email: kelleman@rk.com.au

Donna RaynerSenior Associate

Telephone: 03 9609 1503Email: drayner@rk.com.au