Review of the Retirement Villages Act 1986 Proposed Legislative … · The Victorian Retirement...

March 2004

Review of the Retirement Villages Act 1986Proposed Legislative Changes – 2004

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Every effort has been made to ensure that the informationpresented in this discussion paper is accurate at the time ofpublication.

© Copyright State of Victoria 2004

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Published by Consumer Affairs Victoria, 452 Flinders Street, Melbourne, Victoria, 3000.

Authorised by the Victorian Government, 452 Flinders Street, Melbourne, Victoria, 3000.

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Foreword iii

Proposals ...........................................................v

1 Introduction...................................................11.1 Why review the Retirement Villages

Act?..........................................................1

1.2 Terms of Reference ...............................1

1.3 Consultation process............................2

1.4 Regulatory environment.....................3

2 Approach to the review..............................5

3 Analysis of the marketplace.......................7

3.1 What is the retirement village market? ..7

3.2 Characteristics of the retirement village industry (supply).....................7

3.3 Characteristics of residents and consumers (demand) .........................8

3.4 Characteristics of transactions..........9

3.5 Information asymmetry ...................9

4 Identified issues............................................11

4.1 Definitional issues ................................11

4.1.1 Commonwealth fundedfacilities.........................................11

4.1.2 Application of the Health Services Act 1988 ...........12

4.1.3 Residence right ..........................13

4.1.4 Residence parks..........................14

4.1.5 Rental villages.............................14

4.1.6 Reference to owner...................15

4.2 Protection of investment....................16

4.2.1 Retirement village notice..........17

4.2.2 Charge on retirement village land .................................17

4.2.3 Arrangements for extinguishment of charge and removal of notice ......................19

4.2.4 Crown land..................................20

4.3 Retirement village residence contracts ...............................................21

4.3.1 Contractual matters raised in the review...................................22

4.3.2 Exit arrangements .....................23

4.3.3 Sinking funds or capital maintenance and replacementfunds ...........................................26

4.3.4 Retirement village fees..............26

4.3.5 Unfair terms in residence contracts .....................................27

4.3.6 Proxies and powers of attorney.......................................28

4.3.7 Options for intervention...........28

4.3.8 Assessment tool .........................35

4.4 Disclosure..............................................36

4.4.1 Checklist (Schedule 3) ..............36

4.4.2 Mandatory disclosure period...37

4.4.3 Professional development for secondary market providers ....37

4.5 Cooling off period.................................38

4.6 Resident participation .........................38

4.7 Adjustments to the maintenance charge ...................................................40

4.8 Exemptions............................................41

4.9 Retirement village management.......42

4.10 Monitoring and compliance ...........42

4.11 Dispute resolution and complaints handling..............................................43

4.11.1 Introduction .............................43

4.11.2 Levels of disputes in retirement villages.......................................43

Review of the Retirement Villages Act 1986, Proposed Legislative Changes – 2004

iContents

Contents

iiContents


4.11.3 Approach to dealing with disputes.....................................44

4.11.4 Options for resolving retirementvillage disputes ........................45

4.11.5 Internal retirement villagedispute resolution procedure 45

4.11.6 Government dispute resolution..................................46

4.11.7 Government and an independent adjudicator.......46

4.11.8 Independent alternative dispute resolution...............................46

4.11.9 Industry self-regulation disputeresolution scheme .................47

4.11.10 Peferred model....................47

4.12 Accommodation standards andstandards for services and amenities........................................48

4.13 Consumer education .....................49

4.14 A retirement villages residents' association......................................49

4.15 Retirement Villages Association Ltd Accreditation Scheme....................50

4.16 Emerging issue: care provision ......50

Appendices

1 Terms of Reference ....................................53

2 Submissions received in the review..........55

3 Stakeholder liaison....................................57

4 Accommodation types and consumer protection .................................................59

5 Legal structures of residence contracts.....61

6 Comparison between Retirement VillagesAct and Residential Tenancies Act ............63

7 Benchmarks for Industry-Based Consumer Dispute Resolution Schemes ....................65

The Victorian Retirement Villages Act wasintroduced in 1986 and has not since beenreviewed. The retirement village industry and theaged accommodation sector more broadly haveexperienced significant change since 1986. Thereare currently approximately 60,000 retirementvillage units in Australia, and expectations are thatthe number will increase to 90,000 in the next 20years1, indicating significant future growth inVictoria. The accommodation needs of Victoria’sageing population are of growing significance. It istherefore considered essential that Victoria has anadequate consumer protection and regulatoryregime in place to manage the retirement villageindustry into the future.

The review of the Retirement Villages Act wasestablished in 2002 to determine the effectivenessof the Act in clarifying and protecting the rights ofretirement village residents, while encouraging andsupporting the development of an ethical andviable industry. The scope of the review waslimited to factors concerned with the economicinterests of consumers, such as contractualarrangements, and also reviewed dispute resolutionmechanisms, resident rights, definitions and therelationship with other Victorian Acts. The reviewdid not examine issues relating to health care,which are subject to separate regulation. (Terms ofReference are located at Appendix 1)

Consultation with stakeholders who have aninterest in aged accommodation has been anessential part of the review process and ConsumerAffairs Victoria has worked diligently to ensure theirviews have been considered.

Analysis of the retirement village market hasrevealed evidence of potential for substantialconsumer detriment arising from informationasymmetry – the position where villageowners/operators have superior knowledge of theservices provided than do prospective residents.

A considerable number of submissions to thereview raised concerns about the potential forfinancial loss when residents exit a retirementvillage. Contracts that respond to the range oflegal structures, services, facilities and feearrangements are complex and residents find themdifficult to understand. The problem iscompounded by the large proportion of residentswho are making a one-off decision, of a significantfinancial nature, to enter a retirement village.Many of the legal and fee arrangements they mustconsider are unfamiliar to them and informationand advice to help them make an informeddecision appears to be limited.

Possible negative consequences for residents andprospective residents are also increased because ofthe effects of age-related characteristics on theirability to make informed and knowledgeabledecisions about retirement village services.Secondary markets that respond to the complexinformation requirements of the retirement villagemarket (solicitors, financial planners, accountantsand the like) have not developed to a level whichadequately responds to market need.Consequently, the potential for consumerdetriment is enhanced.

The review has revealed that the key provisions ofthe existing Retirement Villages Act are operatingas intended to protect residents against loss of theirresidence rights. However, a number of issueswere raised that need a response and requireamendments to the Act. The informationasymmetry problem and a general lack ofconsumer awareness of the existing laws requireparticular attention. In its current format, theRetirement Villages Act 1986 does not satisfactorilydeal with the information asymmetry problem.Legislative intervention to set minimum standardsfor residence contracts is considered an appropriateresponse.


iiiForeword

Foreword

1ANZ Industry Brief, Retirement Villages, 17 July 2003

ivForeword


A comprehensive community education campaignby Consumer Affairs Victoria is considerednecessary to raise awareness of consumer rightsand responsibilities concerning retirement villagesand relevant complaint handling and disputeresolution services. Consumer Affairs Victoria alsoproposes the introduction of more comprehensivedispute resolution services which includes aretirement village based procedure and an externalremedy through Consumer Affairs Victoria and anindependent adjudicator. In addition ConsumerAffairs Victoria will assist in the establishment of aresidents association. This will allow a collectivevoice for retirement village residents and willenable individual assistance to be provided toresidents.

The proposed changes to the Retirement VillageAct are outlined in this paper. I now welcomecomments on the proposed reforms and willundertake a consultation period on behalf of theMinister for Consumer Affairs John Lenders, tofinalise proposed changes to the RetirementVillages Act.

Maxine Morand MPMember for Mount Waverley

Proposal 1Residential Aged Care Facilities, which are certifiedand accredited by the Commonwealth under theprovisions of the Aged Care Act 1997 (Cwlth) beexempted from the Retirement Villages Act.

Proposal 2Reference to ‘residential hostel and hospitalaccommodation’ be removed from the definitionof ‘residence right’ in section 3 of the Act, in theevent that Commonwealth Aged Care Facilities areexempted from the Retirement Villages Act.

Proposal 3Reference to ‘hospital, nursing or medical servicesincluding accommodation’ and ‘hostelaccommodation’ be removed from the definitionof ‘services’ in section 3 of the Act, in the eventthat Commonwealth Aged Care Facilities areexempted from the Retirement Villages Act.

Proposal 4The Retirement Villages Act be amended todistinguish between obligations on the villageoperator and obligations on the landowner.

Proposal 5The Act be amended to give the Director ofConsumer Affairs Victoria discretion to considerapplications for the cancellation of a retirementvillage notice and extinguishment of a chargeconcerning a subdivided part of retirement villageland that is not used as a retirement village.

Proposal 6The Act be amended to:

• Prevent an operator from requiring a residentto vest rights of sale of the resident’s interestin the village in the operator

• Prohibit an operator charging a fee orreceiving a commission in relation to the saleof the resident’s interest where an externalagent has managed the sale on behalf of aresident, former resident or their beneficiary

• Ensure, where an external agent is engagedby a resident, former resident or a formerresident’s beneficiary, that the operator’sinvolvement in the process of selling theresident’s interest is sufficient to allowdischarge of the operator’s obligations underthe Act and protection of the operator’sinterest in maintaining a compatible residentpopulation.

Proposal 7The retirement village operator have no right toimpose recurrent charges on the resident beyond28 days after the resident vacates the retirementvillage.

Proposal 8The Act require that a departing resident’s refundentitlements be paid within 14 days of the right toreside in the unit passing to another person and,where the resident was occupying the unit undera periodic tenancy, no later than 6 months afterthe resident’s vacation of the unit.

Proposal 9The Act be amended to prohibit a retirementvillage operator from seeking or accepting theassignment of a power of attorney from a resident(except where the resident is a relative of theoperator).

Proposals


vProposals

Proposal 10The Act be amended to prohibit a retirement villageoperator from seeking or accepting an irrevocableproxy from a resident (except where the resident is arelative of the operator).

Proposal 11The Act be amended to require that retirementvillage residence contracts be in writing and eitherset out their terms in accordance with theappropriate prescribed model form or include anintroductory statement explaining how the form ofthe contract differs from the appropriate prescribedmodel. The prescribed model format/s would include asequence of generic headings and provide thatdetails of at least the following must be included:

• Basic particulars such as the name of thevillage, its address, the names of the partiesand the date on which the contract is made

• The resident’s rights under the statutorycooling-off period (currently required undersection 24)

• A list and description of services, facilities andamenities, together with any fixture, fittingsand furnishings that may be provided

• Any restrictions on the use of the residence• Terms that deal with such matters as the

operator’s access to premises and village rules• Details of the minimum of advance notice to

be given to the resident in the case oftermination of contract by management

• Details of any capital replacement fund orother fund held by the retirement village

• The process by which residents can ask theoperator to carry out repairs and maintenance

• All retirement village fees payable: – Details of all costs payable to gain entry,

reside in and leave the village (ingoingcontribution, maintenance charges and anydeferred management fee)

– How the maintenance charge is to beadjusted and how special levies can beimposed

– The method of calculating any refund dueto the resident on termination of thecontract and any applicable financialpenalties

– A summary of all fees payable (in dollarfigures) if a resident were to exit a villageafter two years and six years of enteringvillage

• Details of how the contract may be terminatedand a resident’s right to remove any fixturesadded by the resident during their occupancy

• Details of the how the right to reside in theunit may be sold or re-leased

• Details of how the resale or re-lease value willbe decided

• What refurbishment of the unit will be requiredand who pays for it

• The process for, and effect of, accepting offers,including when offers may be refused

• The provision of monthly sales information• How the expenses of sale are to be shared,

including any commission payable to theoperator

• Dispute resolution arrangements:– How disputes are to be dealt with through

an internal process and an external body– The fees payable for dispute resolution.

viProposals


Proposal 12The provisions of the Act be extended to specifythat a residence contract must not include thefollowing:

• Any term which is unfair • Any term requiring irrevocable proxies or

powers of attorney as a condition of entry toa retirement village

• Requirements for residents to take out anyform of insurance, including home contentsinsurance, ambulance cover or other forms ofhealth insurance

• Restrictions on the period of time (eg.holidays, visiting relatives, hospitalisation)residents may be absent from the village

• Requirements upon residents to have a will orto disclose its location to the operator/ownerof the retirement village.

Proposal 13The Checklist for prospective residents in Schedule3 of the Act be updated in consultation withresident and operator stakeholder groups.

Proposal 14A scheme be established whereby ConsumerAffairs Victoria is notified of all retirement villagessubject to the Retirement Villages Act at any giventime, of proprietors’ details and of any changes inthose details.

Proposal 15Each retirement village be required to establish adispute resolution mechanism and ensure that:

• A written Policy and Procedure for disputeresolution is in place

• Residents are fully informed of the disputeresolution mechanism and the Policy andProcedure document is readily available to allresidents within the village

• Records are maintained of ‘material’comments and complaints with details ofactions and resolutions.

Proposal 16The current arbitration provisions in theRetirement Villages Act be replaced with a disputeresolution process involving Consumer AffairsVictoria for information and conciliation and anindependent adjudicator for complex disputes.

Proposal 17Consumer Affairs Victoria develops andimplements a comprehensive consumer educationstrategy concerning retirement villages. Thestrategy should be sensitive to the specific needs ofsenior Victorians and present any residentdocumentation in plain language and large print.

Proposal 18Consumer Affairs Victoria supports thedevelopment of a residents' association.


viiProposals

The Retirement Villages Act 1986 (the Act) and theRetirement Villages Regulations 1999 regulate theretirement village industry in Victoria. The Act wasintroduced in 1986 to clarify and protect the rightsof persons who live in, or who wish to live in,retirement villages.2

The Act has not been reviewed since its introductionin 1986. During this period, the retirement villageindustry and the broader aged accommodationsector has experienced significant change. As peopleage, their housing arrangements will be influencedby factors associated with ageing, such as security,lifestyle and health issues. In line with Australianpopulation projections predicting a doubling of thecurrent aged population over the next 40 to 50years, the continued growth of the retirementvillage industry seems assured.3 There are currentlyabout 60,000 retirement village units in Australia,and expectations are that the number will increaseto 90,000 in the next 20 years4, indicatingsignificant growth in Victoria. Therefore, it isconsidered essential that Victoria has an adequate

consumer protection and regulatory regime in placeto manage the expansion of the retirement villageindustry into the future.

The review was established in April 2002 todetermine the effectiveness of the RetirementVillages Act in clarifying and protecting the rights ofretirement village residents while encouraging andsupporting the development of an ethical and viableindustry.

The scope of the review is limited to the protectionof the economic interests of consumers. The Termsof Reference for the review do not extend toconsideration of matters involving the provision ofcare. In particular, the review aims to:

• Consider whether the current objectives of theAct and the definition of retirement villageremain appropriate

• Explore the relationship between the Act andother Victorian and Commonwealth legislationand, in particular, whether some classes of

Section 1Introduction

1


1Introduction

1.1 Why review the RetirementVillages Act?

2 Retirement Villages Act 1986 s13 1998, Australian Bureau of Statistics (www.abs.gov.au/austats)4 ANZ Industry Brief, Retirement Village, 17 July 2003

1.2 Terms of Reference

retirement villages should be entitled toexemptions

• Consider whether the Act should establishstandards for accommodation, services andamenities. (This covers services – cleaning,maintenance and meals etc, and buildingstandards – emergency access and lightingetc, but does not cover issues of care.)

The Terms of Reference are included at Appendix 1.

Consultation with stakeholders who have aninterest in aged accommodation has been anessential part of the review process and ConsumerAffairs Victoria has worked constructively to ensurethat their views have been represented.

On 27 May 2002 a letter was sent to stakeholdergroups and all Members of Parliament informingthem of the review and inviting them to identifyissues. A media release was issued at the sametime. Following this, officers from Consumer AffairsVictoria attended informal meetings with keyindustry, consumer, community and residentstakeholder groups to identify and analyse issues.

Major concerns arising from these meetings andthe 35 letters and/or contracts received byConsumer Affairs were presented in a DiscussionPaper. In order to maximise accessibility to seniorVictorians, the paper was produced in large print.The Discussion Paper was direct mailed toapproximately 700 stakeholder groups on 25 July2002. All self-funded and community-auspicedretirement village residents’ committees (listed inthe Council on the Ageing directories) wereforwarded a copy of the paper. The paper was alsoavailable on the Consumer Affairs Victoria andSenior Victorians web sites.

The community responded positively to the releaseof the Discussion Paper, with Consumer Affairs

Victoria receiving a large number of enquiriesconcerning the review. Subsequently, a total of1200 copies of the paper and numerous copies ofthe Act were disseminated by mail to interestedparties.

Submissions were accepted until 19 September2002. This provided the community with eightweeks in which to respond. A total of 101 writtensubmissions were received within the responseperiod. However, a large number of letters werealso received over the broader period of the review.Roundtable discussions concerning residentparticipation and dispute resolution were held withkey stakeholders early in 2003. Other meetingswere also held to flesh out options concerningretirement village contracts, deferred managementfees, capital maintenance issues and residentialparks (caravan type parks).

A list of submissions received is presented inAppendix 2. Residents who made submissionshave not been individually identified for reasons ofconfidentiality. A list of roundtable sessions andmeetings is also presented in Appendix 3.

Mr John Lenders, Minister for Consumer Affairs hasappointed Ms Maxine Morand MP, Member forMount Waverley, to oversee the final stage of thereview.

2Introduction


1.3 Consultation process

The Retirement Villages Act 1986 and RetirementVillages Regulations 1999 provide the regulatoryframework for retirement villages in Victoria. Theprimary objective of the legislation ‘is to clarify andprotect the rights of persons who live in, or wishto live in, retirement villages’ 5 .

The Act largely operates to protect a resident’sfinancial investment in a retirement village,principally through mechanisms such as aresidence right, a retirement village notice(recording with the Registrar of Titles that the landis used for a retirement village) and a charge(security) on retirement village land to protect theresident’s ingoing contribution. The Act also dealswith: information which must be given toconsumers 21 days prior to signing a contract,including the residence and managementcontracts, prescribed documents, the disclosurestatement, the checklist and the by-laws, processesfor resident participation, and adjustments to themaintenance charge.

Other State and Commonwealth laws also play arole in regulating retirement villages. Theexistence of general competition and consumerprotection laws, such as the Fair Trading Act 1999and the Trade Practices Act 1974 (Cwlth), provide abroad regulatory framework for transactionsbetween buyers and sellers. The Subdivision Act1988, the Subdivision (Body Corporate)Regulations 1989, the Sale of Land Act 1962 andthe Retirement Villages Act 1986 also interact toregulate retirement villages where units are sold byfreehold title (fee simple).

The Aged Care Act 1997 regulates CommonwealthResidential Aged Care Facilities and the HealthServices Act 1988 regulates Supported ResidentialServices, which may be co-located withindependent living units on a retirement villagesite. Details of the range of legislation that appliesto older persons’ accommodation can be found atAppendix 4.

It should be noted that Consumer Affairs Victoria isalso conducting a review of bodies corporatelegislation. This provides opportunities to considerthe relationship between bodies corporate andretirement villages and possible synergiesconcerning consumer protection into the future.


3Introduction

1.4 Regulatory environment

5 Retirement Villages Act 1986 s1


5Approach to the review

Because regulation can impose cost on consumersand suppliers, a clear assessment of all costs andbenefits is needed to ensure that it serves the publicinterest.

Private and non-profit retirement village operatorsoffer a wide range of residential options. Continuedprivate sector involvement and competition toattract and retain residents serves the interests ofconsumers and needs to be encouraged.

In the economy generally, competitive marketspromote community welfare through greaterefficiency, the development of higher economicgrowth and increasing employment opportunities.However, markets may fail to operate competitivelyor provide efficient outcomes for a range of reasons,and a public interest test may show that the costsimposed by regulation are lower than the costs ofthe original market failure. For example, there islikely to be a case for government interventionwhere consumers are not reasonably able to informthemselves adequately when entering into significantcommitments6.

Benefits in terms of broader social goals, such asequity, are also part of an overall public interestassessment of existing or proposed regulatory action.

The Government’s vision for Growing VictoriaTogether emphasises building cohesive communitiesand planning for the needs of our population at allstages of life. Consistent with these goals, the reviewhas paid particular attention to how best to ensurethat consumers understand their contractual rightsand obligations and have good access to appropriatedispute resolution services where required, withoutunnecessarily constraining retirement village investorsand operators.

Section 2 Approach to the review

6 The form of market failure where there is a difference in the knowledge or information about product or servicequality held by buyers and sellers is known as ‘information asymmetry’.

2


7Analysis of the marketplace

The retirement village market supplies people withindependent accommodation, shared facilities(common meeting rooms, library, pool, etc), lifestyleservices and social amenity (the opportunity tointeract and socialise with people in a sharedenvironment). Although staff in some villages havehealth care backgrounds, services specified inresidence contracts are generally related tomaintaining a household.

The distinction between retirement villages and carefacilities may not be as easily discernible as it oncewas. It has become more common for villageresidents to receive health and personal care underseparate contracts with specialist third partyproviders.

The issue of personal care provision is discussed atsections 4.1.1, 4.1.2 and 4.1.6, but the reportgenerally focuses on market provision of independentliving accommodation in a community setting.

A diversity of suppliers operates in the Victorianretirement village market and includes smallcommunity based organisations, substantial welfareand church based agencies, and large companieswho operate several retirement villages. Twooperators are known to be publicly listed on theAustralian Stock Exchange. While there is very littlespecific information about the market in Victoria, it isestimated that there are around 400 retirementvillages; 115 resident-funded retirement villages runby private operators on a commercial basis and 280community-auspiced villages (commonly referred toas independent living units) run by organisations ona not-for-profit basis.7 The Retirement VillagesAssociation accredits sixty-two Victorian retirementvillages.8

Section 3 Analysis of themarketplace

33.1 What is the retirement village

market?3.2 Characteristics of the retirement

village industry (supply)

7 Council on the Ageing8 Information provided by the Retirement Villages Association at the time of writing.



Retirement villages offer self-care accommodation anda range of services and facilities to meet residents'differing social and economic needs. For example,some villages provide inexpensive units with alimited range of services and facilities, whereas othervillages cater to the luxury end of the market.Ingoing contributions range from below $100,000 towell above $600,000. Importantly, retirement villagespredominantly offer services for propertymaintenance, including such things as emergencyassistance, security, help with home maintenance andaccess to recreational facilities. According to theAustralian Housing and Urban Research Institute,approximately 27 percent of social housing for olderpersons is provided by independent living units (orcommunity-auspiced villages), with 6,200 individualunits being offered throughout Victoria. These figuresdemonstrate the vital role played by these types ofvillages in the provision of accommodation andservices for people on low income.9

The market offers a broad range of arrangements andlegal structures to facilitate entry to a retirement village.The most common structure is a long term leasearrangement, however, a residence right can bepurchased by title (fee simple), units in a unit trust,shares in a company or periodic tenancy. Newarrangements are continuing to emerge. Deferred fees,which are designed to keep the refundable ingoingcontribution (ingoing fee) low, are an arrangement,which allows residents to defer some of the costs ofentering a village until they exit the village. Marketflexibility has allowed many residents to enter a villagewho, in a restricted market, may have been preventedfrom doing so.

Retirement village operators may offer health orpersonal care, in particular where a CommonwealthResidential Aged Care Facility or a Supported ResidentialService is operated on a retirement village site.Residential Aged Care Facilities receive funds from the

Commonwealth government and, thus, must beregistered and meet specified standards of equity andquality. Access to subsidised residential care is availableonly to those who have been assessed as needing oneof the various levels of care. Supported ResidentialServices are health service establishments which provideboth accommodation and special or personal careservices and must be registered with the Stategovernment (Department of Human Services) underthe Health Services Act 1988.

Retirement villages also offer a range of intangiblefeatures that could be described as lifestyle factors orsocial amenity, offering residents opportunities tointeract, socialise and build friendships with peopleof a similar age. While these aspects of retirementvillage living are often not referred to in retirementvillage residence contracts, anecdotal evidencesuggests that they are nevertheless important toresidents and act as a significant drawcard forprospective residents.

The retirement village market is experiencingsignificant growth in response to demand from anincreasingly ageing population.

The Retirement Villages Association suggests that theaverage age of a retirement village resident is 85 years;the majority of these people are women. Old age oftenbrings with it frailty, ill health, bereavement, reducedcognitive abilities, and social isolation. In some casesthis may result in a low or declining ability to makecritical assessments and cope with the complexitiesassociated with personal finances. Many women ofthis generation have been excluded from variousfinancial and legal decision-making during their lifetimeand may be ill equipped to enter into a complexretirement village transaction.

3.3 Characteristics of residents andconsumers (demand)

9 Australian Housing and Urban Research Institute, Independant Living Units: The forgotten Social Housing Sector,November 2003

Further, buyers may enter the market under stressful ortraumatic circumstances. Often a decision to move intoa retirement village occurs shortly after a spouse has diedor because a person is suffering increasing frailty or illhealth. Such difficult personal circumstances inevitablyreduce a person's capacity for rational decision-making.

A significant proportion of retirement village residentslive on age pensions or incomes that are not fullyindexed for inflation.

These residents have a very limited capacity to purchaseadvice from secondary markets, such as solicitors,accountants and financial planners, or to cope with anynegative consequences arising from a significant financialtransaction.

These characteristics and/or the fact that prospectiveresidents are entering into a complex transaction for anarrangement potentially lasting many years indicatesthat retirement village buyers have an increasedlikelihood of being vulnerable and disadvantaged.

Retirement village transactions are contract based,complex in nature and respond to a growing variety ofretirement village legal arrangements. A range of feesare usually payable involving substantial sums ofmoney, including an ingoing contribution (some ofwhich may be refundable on exiting the village), amaintenance charge and a deferred management feewhich is payable on exiting the village. Depending onthe type of village and the services offered, ingoingcontributions can range from under $100,000 to wellover $600,000.

Buyers are usually making a one-off decision to enterinto a long term transaction, as residents commonlyplan to spend the rest of their life in the village.Consequently, the consumption of theaccommodation and associated services is spread overa significant number of years. This inherently involvesuncertainty, because the quality of the accommodationand associated services can only be assessed afterpurchase and consumption.

Perfect competition assumes that buyers and sellershave the same knowledge about the quality of thegoods or services for sale. In some cases, however,information asymmetry exists where sellers havemore information than buyers. This can arise wherea large amount of technical knowledge is required inthe decision-making process; the cost to buyers ofacquiring equivalent information to the seller prior topurchase is prohibitive; or the quality of the purchasecan only be assessed after purchase andconsumption (this is particularly the case for the saleof services and advice).

These characteristics are evident in the retirementvillage marketplace; however, there is littleauthoritative data to indicate levels of consumerdetriment. For example, very few retirement villagecomplaints have been lodged with Consumer AffairsVictoria. This is not unexpected given thecharacteristics of retirement village residents. Asresidents age they suffer from a range of difficultpersonal circumstances which may deter them fromcomplaining. In some cases, the detriment onlybecomes evident when the contract has ended dueto the death of a resident, leaving the beneficiaries ofthe estate to pursue any redress.

However, there were a considerable number ofsubmissions to the review that raised concerns aboutthe potential for financial loss when residents exit aretirement village. There is evidence10 that contractswhich respond to the range of legal structures,services, facilities and fee arrangements are complexand residents find them difficult to understand. Thisis compounded by the fact that a large proportion ofresidents considering entering a retirement villageare making a one-off decision of a significantfinancial nature.



10 From submissions from residents and findings from consultancy on the analysis of the fairness and reasonablenessof retirement village contracts.

3.5 Information asymmetry

3.4 Characteristics of transactions



Many of the legal and fee arrangements that theymust consider are unfamiliar to them andinformation and advice to help them make aninformed decision appears to be limited. Evidenceindicates that secondary markets that respond to thecomplex information requirements of the retirementvillage market (solicitors, financial planners,accountants and the like) have not developed to alevel that adequately responds to market need.While self-regulation through the Retirement VillagesAssociation Accreditation Scheme appears to bemaking some inroads into raising standards in themarket, it has had little success in addressing thesespecific problems.

This evidence points towards a potential forconsumer detriment arising from informationasymmetry. Possible negative consequences forresidents are increased because of their age-relatedcharacteristics, their reduced capacity for criticalassessments and because they may be living on alow income. Consequently, their capacity to recoverfrom consumer detriment is reduced. Informationasymmetry also impacts on community welfaremore broadly, because the quality of retirementvillage accommodation and services may be reducedand prices may be higher than would occur werethere no market failure.

Legislative intervention is considered an appropriateresponse to the information asymmetry problem. Inits current format, the Retirement Villages Act 1986does not adequately respond to the cause of theproblem. Proposed amendments concerningstandards for residence contracts, disclosure andpublic information are discussed in the next sectionof this report.

Section 4 Identified Issues

4The Retirement Villages Act defines “retirementvillage” as: a community:

• The majority of which is retired persons who areprovided with accommodation and services; and

• At least one of whom, before or upon becoming amember of the community, pays or is required topay an ingoing contribution.11

An ingoing contribution is a payment (that is notrent) entitling a person to become a resident of aretirement village, regardless of who makes thatpayment or whether it is in a lump sum or byinstalments.

4.1.1 Commonwealth funded facilities

The review identified substantial support for theexemption of Commonwealth funded facilitiesfrom the definition of retirement village in the Act.

Where Commonwealth Aged Care Facilities areco-located with independent units, operatorsmust comply with two sets of laws: theRetirement Villages Act and the Aged Care Act(Cwlth) (in addition to other applicable laws).

This is considered problematic for retirementvillage owners/operators who face substantialcompliance challenges including costly, timeconsuming and confusing administrativerequirements. There is anecdotal evidence that theapplication of the two Acts also serves to confuseresidents rather than provide any added benefits.

A submission from an industry group presentedseven instances where either operationaldifferences or overlaps exist in relation to the twoActs. For example, section 16 of the RetirementVillages Act sets out the procedures for thetermination of a resident’s contract, however,these procedures are quite different from thosecontained in the Aged Care Act.

A resident group indicated that excludingResidential Aged Care Facilities from theRetirement Villages Act would deprive residentsof the protection of the charge12 over the land.They suggested that the security of tenureprovisions, the disclosure of informationprovisions and the provisions requiring ingoingcontributions to be held in trust prior to aresident’s entry should be redrafted so thatCommonwealth funded facilities are treated in adifferent way to other facilities meeting thedefinition of “retirement village”.

4.1 Definitional issues


11Identified Issues

11 Retirement Villages Act 1986 s312 There is a legal term that creates a protection (right) over the title of land. Used in this context, the term

‘charge’ does not relate to monetary payment.

12Identified Issues


In other words, their suggestion was to amendthe Retirement Villages Act in areas where currentoverlap or contradictions exist, in order for theAged Care Act and the Retirement Villages Act tooperate in harmony.

The Aged Care Act and the Retirement VillagesAct are designed to serve different purposes. TheAged Care Act responds to the complex andsometimes substantial care needs of residents inlow and high level care, whereas the RetirementVillages Act is concerned with accommodationand non-care-based services. There is noevidence that adopting the approach suggestedby this resident group would result in anydiscernible benefit for residents or operators.Further, as the Aged Care Act and the RetirementVillages Act deal with different matters, they canbe easily separated. Other jurisdictions, such asQueensland and New South Wales, haveexempted Commonwealth funded facilities fromthe operation of the Retirement Villages Act (in itsrecent review Western Australia has alsorecommended similar exemptions) and it isproposed that Victoria adopt a consistentapproach with these states.

Proposal 1

Residential Aged Care Facilities, which arecertified and accredited by the Commonwealthunder the provisions of the Aged Care Act 1997(Cwlth), be exempted from the RetirementVillages Act.

4.1.2 Application of the Health Services Act1988

A number of industry submissions revealedconfusion regarding the application of the HealthServices Act 1988 to some retirement villages. Inparticular, the confusion seems to stem from thedefinition of a “Supported Residential Service” inthe Health Services Act, which operators haveinterpreted to cover matters such as the provisionof meals and some other personal-type services.

In exploring this issue Consumer Affairs Victoriahas consulted the Supported Residential ServiceUnit of the Department of Human Services,being the authority responsible for theregistration of Supported Residential Services.

A Supported Residential Service is a health serviceestablishment and is registered with theDepartment of Human Services in accordancewith the requirements of the Health Services Act1988. A Supported Residential Service is definedin that Act as any premises where bothaccommodation and special or personal care isoffered or provided to residents in return for a feeor reward.

Special or personal care is further defined as anyone or more of a list of services that includesassistance with dressing, bathing, toileting,personal hygiene and mobility. Assistance withmeals is also one of the services included in thedefinition of special or personal care, though thishas been interpreted to mean assistance with theconsumption of meals (i.e. feeding) rather thanthe simple provision of food.

Despite State and Commonwealth fundedresidential care services being specificallyexempted from the definition of a SupportedResidential Service, the definition is still verybroad in scope.

A building in a retirement village is likely to fallwithin the definition of a Supported ResidentialService if:

• The right to occupy rooms/units in abuilding at the retirement village is notbased in fee simple

• The retirement village offers any of the types of special or personal careservices listed above in those rooms/units.

A number of traditional retirement villagesalready have specific buildings registered as aSupported Residential Service; much as othershave Residential Aged Care Services co-locatedon site.

Conversely, a Supported Residential Servicewhere an ingoing contribution is paid byresidents, or on behalf of residents, as a necessarycondition of becoming a resident, is covered bythe requirements of the Retirement Villages Actas well as the Health Services Act.

4.1.3 Residence right

A residence right is created when a resident signsan agreement to move into a village. This is aright to occupy the unit and to use the servicesoffered within the village. A residence rightmeans that the resident has a right to “useresidential hostel or hospital accommodation orother services provided for a retirement villagewhich is created or arises by or under a contractwhether the right is expressed as an interest inland or a licence or arises because the residentbecomes the holder of shares in a companywhich provides accommodation or services for aretirement village.” 13

Residents who purchase their unit by freeholdtitle are also affected by the Subdivision Act 1988,the Subdivision (Body Corporate) Regulations1989 and the Sale of Land Act 1962.

Minor amendments to the definition of aresidence right will be required in the case ofCommonwealth Aged Care Facilities beingexempted from the Act, as reference to“residential hostel or hospital accommodation”would become obsolete. Accordingly, ConsumerAffairs Victoria proposes the removal of thereference to “hospital accommodation” in thedefinition of “residence right”. As a matter ofconsistency, it is also necessary to amend thedefinition of “services”14 and remove reference to“hospital, nursing or medical services” and“hostel accommodation".

Proposal 2

Reference to “residential hostel and hospitalaccommodation” be removed from thedefinition of “residence right” in section 3 ofthe Act, in the event that Commonwealth agedcare facilities are exempted from theRetirement Villages Act (see Proposal 1).

Proposal 3

Reference to “hospital, nursing or medicalservices including accommodation” and “hostel accommodation” be removed from the definition of “services” in section 3 of the Act, in the event that Commonwealth aged care facilities are exempted from theRetirement Villages Act (see Proposal 1)


13Identified Issues

13 Retirement Villages Act 1986 s314 Section 3

14Identified Issues


4.1.4 Residential parks

Residential parks marketed to retirees appear tobe somewhat similar to retirement villages asresidents live in clusters of self-contained homes.However, closer examination of this type ofaccommodation reveals significant differences inthe nature of the transaction, as residentspurchase their own prefabricated dwelling(which may be constructed on-site) and pay rentfor the site on which the dwelling sits.

The Residential Tenancies Act 1997 deals withresidential tenancy matters and “caravan park”accommodation. The Act lays out a detailed setof rights and responsibilities in connection withrented dwellings and establishes jurisdiction inthe Victorian Civil and Administrative Tribunal toresolve the full gamut of tenancy disputes.Security of tenure under the Residential TenanciesAct is limited and the test for coverage of thecaravan park provisions may not be easy to applyin some circumstances. Accordingly revision ofrelevant parts of the Act may be warranted toensure that people residing in residential parksand other owner-occupiers of substantialdwellings on rented sites are appropriatelyprotected. This issue will be consideredseparately in any future review of the ResidentialTenancies Act.

4.1.5 Rental villages

There are other examples of accommodationmarketed specifically to retired people, which donot necessarily fall within the definition ofretirement village in the Retirement Villages Act.One developer is marketing units in a villageenvironment to purchasers for investmentpurposes, which are in turn offered to residentsunder a tenancy agreement. The fortnightlyrental is linked to a resident's age pension andrent assistance – usually 85 percent of the agepension and 100 percent of rent assistance.Three meals a day are offered in a commondining room and a heavy laundering service isalso provided.

The Department of Human Services has advisedConsumer Affairs that the provision of servicessuch as meals and laundering do not constitute"special or personal care" for the purposes of theHealth Services Act 1988. Therefore, these typesof establishments are not required to register as aSupported Residential Service with theDepartment of Human Services.

The nature of the transaction for establishmentswhere all residents make residential tenancyagreements is different from that of entry into aretirement village. Residents are not required tomake a substantial upfront financial investment(or pay deferred management fees) for a right toreside in the village and, therefore, the range ofinvestment protections which exist in theRetirement Villages Act are not required. TheResidential Tenancies Act lays out a detailed set ofrights and responsibilities in connection withrented dwellings where no ingoing contributionor deferred management fee is payable. This Actalso establishes jurisdiction in the ResidentialTenancies List of the Victorian Civil andAdministrative Tribunal to resolve the full gamutof tenancy disputes.

Security of tenure is a central issue for olderpeople residing in these types of establishments.The Residential Tenancies Act requires landlordsto provide particular notice periods (dependingon the circumstances) should a tenant berequired to vacate the premises. For example,120 days notice must be given if no specifiedreason is provided. Importantly, the ResidentialTenancies List has the power to cancel notices orvary notice periods should, for example, thetenant dispute the reasons for the notice tovacate or find it difficult to move within thenotice period. In contrast, the Retirement VillagesAct provides retirement village residents with alonger period (six months or at the end of thecontract period if later than six months), whichreflects the different contractual and financialrelationship between retirement village residents

and retirement village operators. For example,residents have usually entered into long-termfreehold or leasehold contracts and are obligedto pay substantial ingoing and deferred fees. (Acomparison between the Retirement Villages Actand the Residential Tenancies Act is presented inAppendix 6.)

Accordingly, Consumer Affairs Victoria holds theview that the Residential Tenancies Act is theappropriate vehicle to govern rental villages as itprovides substantial protection for tenants and aconsistent approach to the landlord/tenantrelationship within the rental marketplace.

It is arguable that coverage by the RetirementVillages Act might encourage the formation of aresidents’ committee, and it should be notedthat residential tenancies without an ingoingcontribution are not excluded from coverage ofthe retirement villages legislation in New SouthWales. However, there is no compellingargument that lack of coverage in Victoria createsany material disadvantage to tenants incomplexes where no ingoing contribution isrequired.

4.1.6 Reference to owner

The Act currently assumes that the landownerand the village operator are one and the sameentity. This is not always the case. Someretirement villages (particularly those run bycommunity based organisations) are built onland that is owned by, for example, local councilsor charitable trusts, or by passive investors whoare paid a rental by the operator.

A number of industry submissions raisedconcerns that the Act requires the landowner tobe a party to any resident agreement and for thelandowner to also be responsible for refundingingoing contributions. In some cases,landowners are reluctant to comply with theprovisions of the Act. Queensland imposesobligations on the "retirement village schemeoperator" who is a person, alone or withsomeone else, who controls the scheme'soperation and purports to control the scheme'soperation.15 New South Wales imposesobligations on the "operator" who, amongstother people, includes owners of land in thevillage.16 Accordingly, Consumer Affairs Victoriaproposes that the Act be amended to imposeobligations on the village operator and thelandowner.

Proposal 4

The Retirement Villages Act be amended todistinguish between obligations on the villageoperator and obligations on the landowner.


15Identified Issues

15 Retirement Villages Act 1999 (Qld) s816 Retirement Villages Act 1999 (NSW) s4 (1)

16Identified Issues


A retirement village resident’s financial investment isprotected by a range of mechanisms including:

• A retirement village contract

• A retirement village notice on the retirementvillage title

• A charge on the retirement village land (incases where a refundable ingoing contributionexceeds $10,000).

A retirement village contract generally contains(amongst other things) details of theaccommodation, facilities and services offered bythe village and is the primary form of informationby which a consumer chooses a retirement village.The retirement village notice and charge act toensure that a retirement village resident’s funds aresheltered and recoverable as follows.

4.2 Protection of Investment

Retirement village contract Retirement village notice

Charge on land

Residence right

• Leasehold

• Licence

• Shares in company

• Units in a unit trust

• Periodic tenancy

• Other arrangements.

Freehold right

• RV Act residence rightdoesn’t apply tofreehold title

• The Subdivision Act1988, the Subdivision(Body Corporate)Regulations 1989 andthe Sale of Land Act1962 also aply to thisarrangement

Applies to all retirement villages.

Does not apply tofreehold title.

(because protection isprovided by own title)

Right to occupy the unit and use services andfacilities in the village.

Section 14 binds owner’s successors in title tohonour the terms of the residence contract. This protects the resident if the village is sold or the owner bankrupts.

The Act prohibits contracting out, therefore, a provision in a retirement village contract ordocument is voided if it tries to exclude, modify or restrict the operation of the Retirement Villages Act (s7)

Must be registered on the title (S9, Part 2)

Requires the dischargeof all encumbrancesthat may take priorityover a resident’srefundable ingoing contribution. (Exceptfor encumbrances inS42 (2) of the Transferof Land Act 1958. Forexample unpaid taxes.)

Protects a resident’srefundable ingoingcontribution byensuring enough equityin the retirement villageland/property.

Applied to refundable ingoing contributions inexcess of $10,000.

Charge providessecurity over theretirement village land.Charge is similar to amortgage – acts as asign that the land isbeing used as securityfor money owed byowner.

Exists whether or notthe charge is registeredon the title.

Enforceable throughSupreme Court.

4.2.1 Retirement village notice

Section 9 of the Retirement Villages Act 1986requires the owner of the retirement village landto lodge a retirement village notice with theRegistrar of Titles before entering into a contractthat creates a residence right in the land; section11 requires the Registrar of Titles to make arecording of the notice on the Register. Thenotice has the effect of flagging that the land isused as a retirement village and therefore plays avital role in protecting residents’ investments.

Submissions to the review were very supportiveof the notice provisions. Problems focused onthe removal of the notice from the land title, andwhere the village was located on Crown landand where no title exists. These issues areaddressed separately in this report.

4.2.2 Charge on retirement village land

Apart from legal estates in fee simple17, thecharge applies where a refundable ingoingcontribution of $10,000 or more has been paidfor a residence right in a retirement village. Thus,the charge is created over the retirement villageland and is enforceable against any owner,whether or not the owner has notice of thecharge. Additionally, the charge acts as a signthat the land is being used as security for moneyowed by the owner and prevents the ownerselling the retirement village or encumbering theland. The interests and rights listed in section 42(2) of the Transfer of Land Act 1958, whichincludes such things as unpaid taxes, however,have priority over the charge.18

Interestingly, the review of the regulation of theWestern Australian retirement village industry19

recommended that the charge on landprovisions in the WA Act (section 20) berepealed. The Final Report20 argued that aresident’s right to security of tenure and apremium (ingoing contribution) refund wereprovided by:

• The memorial (notice on title) which hasthe effect of giving notice that the land isused as a retirement village

• The provisions of the Act which make theresidence contracts binding on successorsin title to the village (including mortgageesand other interest holders) and limits thecircumstances under which the residencecontracts can be terminated

• Provisions in the Act that prevent thetermination of any retirement villagescheme while a person remains inoccupation unless the Supreme Courtapproves.

The report argued that these provisions ensurethat any successor in title to the village is boundto recognise and perform the obligations of theprevious owner, thereby ensuring theenforceability of the premium refund rights(refundable ingoing contribution) under theresidence contracts. The report also argues thatthe statutory charge causes some confusion forfinanciers who may not be willing to lend monieson land already subject to a charge,consequently discouraging investment in theretirement village sector.


17Identified Issues



19 Department of Consumer and Employment Protection Government of Western Australia, February 2002

20 Page 27 (Recommendation 12)

18Identified Issues


Whilst the Victorian legislation has similarprovisions to those of Western Australia,Consumer Affairs Victoria does not see any needto remove the statutory charge on retirementvillage land in Victoria. The statutory chargegives a resident a priority interest over theretirement village land and provides an incentivefor operators to avoid legal action by residents.

Only a few submissions to the Victorian reviewspecifically referred to the charge. Those thatdid generally argued that the use of the chargeto secure a refundable ingoing contribution hadbeen an effective tool in protecting residents’investments. A resident group offered adissenting view that the charge affords mostprotection to residents in the event of acomplete collapse of a retirement villagescheme, necessitating the selling up of all theland. They argued that the charge does notprovide adequate protection in relation toindividual refunds of residents’ ingoingcontributions where the selling up of land is nota realistic option. This may be so, as the chargeexists primarily to ensure that residents have firstentitlement to the funds in the case of a villagecollapsing. Interestingly, in cases where a villagehas experienced financial difficulty, the bank orother financial institution that holds themortgage over the retirement village property(this mortgage is subordinate to the statutorycharge) usually sells the village as mortgagee.The new owner then assumes the liability forthe refundable ingoing contribution pursuant ofsection 29 (5) of the Act and responsibility topay any resident who is owed a refund.

The same resident group recommended that (in addition to the charge) a central investmentfund, managed by an independent andexperienced funds manager and appointed bythe State government be set up, into whichresidents’ ingoing contributions could be paid.

However, proposals that require ingoingcontributions to be paid into a central fund mayrestrict operators’ cash flow and impede furtherdevelopment in the marketplace. Additionally, itis likely that proposals of this nature wouldparticularly affect villages at the lower end of themarket, in which residents have fewer optionsfor alternative accommodation. For example, community-auspiced villagescurrently play an invaluable role in theretirement village marketplace by providingaccommodation to residents who have limitedassets and income. Historically cash poor, theseorganisations rely heavily on ingoingcontributions (amounts which are often low incomparison to those of resident-funded villages)for the day-to-day operation of their villages.Consumer Affairs Victoria is concerned to avoidarrangements under which some retirementvillages may struggle to remain viable, becausethis will invariably lead to the suffering of bothresidents and operators and would not be in theinterests of the community as a whole.

Further, there is no evidence to suggest thatretirement village operators have been failing intheir duty to refund ingoing contributions. It isprobable that the existence of the chargeprovides a strong incentive for operators torefund ingoing contributions, as legal actiontaken against them would be highly damagingto the individual business concerned and have adetrimental effect on the reputation of theindustry as a whole.

Due to the lack of any evidence of problems inthis area, Consumer Affairs Victoria cannot findjustification for an alternative system for securingresidents’ refundable ingoing contributions.

4.2.3 Arrangements for extinguishmentof charge and removal of notice

A number of submissions sought more flexiblearrangements for the removal of a retirementvillage charge and a retirement village notice incertain circumstances.

Where a site is no longer used as a retirementvillage

Sections 32 and 39 respectively regulate theextinguishment of the charge and removalof the retirement village notice. Currentlythe Act provides for the extinguishment ofa charge where:

• An agreement in writing has been signedby all the residents whose refundable in-going contributions are secured by thecharge

or

• By order of the Supreme Court undersection 31

or

• Upon the publication of a declaration inthe Government Gazette.21

A retirement village notice can be cancelled:

• By an agreement in writing signed by allthe residents of the village to which thenotice relates

or

• Upon the publication of a declaration inthe Government Gazette.22

Sections 32 (6) and 39 (6) respectivelyempower the Director to declare that a chargeis extinguished and a notice cancelled. Theapplication must include, among other things, astatutory declaration by the owner, stating thatthe retirement village land is no longer used as aretirement village and that the residents, formerresidents or (if a resident has died) legalpersonal representatives have been notified ofthe application. Residents must be given 60days within which to make a submission to theDirector. In cases where an owner is unable tocontact former residents of the retirementvillage, Consumer Affairs Victoria requires that apublic notice be placed in daily newspapers(usually the Herald Sun and The Age) of theowner’s intention to make an application for adeclaration from the Director and theconsequences of that declaration.

It is evident from the submissions that somevillage owners have found this process timeconsuming and onerous. However, a review ofapplications indicates that operators may not besuitably aware of the process and, in particular,that time (60 days) must be allocated to allowresidents to lodge an objection with theDirector. This situation indicates the need forConsumer Affairs Victoria to publicise theapplication process within the retirement villageindustry and for operators to avail themselves ofindependent legal advice and support in orderto adequately understand their responsibilitiesunder the Retirement Villages Act 1986.


19Identified Issues

21 Retirement Villages Act 1986 s32 (1)


20Identified Issues


Where part of the retirement village land is nolonger used as a retirement village and operatorswish to subdivide

The current legislation does not prevent ownersfrom subdividing a portion of retirement villageland and removing the retirement village noticeand the charge where all residents in the villageagree. However, the extinguishment of thecharge and the removal of the retirement villagenotice may have financial and amenityimplications for residents. Therefore, stringentrequirements are needed to ensure that residents’rights are protected in cases where owners areunable to obtain agreement.

It appears reasonable to allow a retirement villageowner/operator to apply to the Director for adeclaration that the notice be cancelled on theproposed portion of land that has beensubdivided and is no longer to be used as aretirement village. It should be noted that theDirector under section 29 has granted anapplication for the removal of a retirement villagenotice. Accordingly, such applications shouldprovide details of the impact of the subdivisionfor residents. In cases where it is demonstratedthat residents do not face substantial adverseaffects from the proposal, the Director shouldhave the discretion to cancel the retirementvillage notice from the subdivided land.

Proposal 5

The Act be amended to give the Director ofConsumer Affairs Victoria discretion to considerapplications for the cancellation of a retirementvillage notice and extinguishment of a chargeconcerning a subdivided part of retirementvillage land that is not used as a retirementvillage.

4.2.4 Crown landSections 9 and 29 of the Retirement Villages Act1986 require a retirement village notice andcharge (respectively) to be placed on retirementvillage land as a form of security for a residenceright and the payment of a refundable ingoingcontribution. However, an anomaly exists for aminority of retirement villages located on Crownland and specifically those where no title exists.Such villages seem to be operated by not-for-profit organisations or municipal councils on anon-commercial basis. It is difficult to gauge theextent of this problem due to the lack of dataconcerning the villages located on Crown landwhere no title exists; however, it is believed thatthe numbers are very low.

It may be thought that residents living inretirement villages on Crown land where no titleexists are more vulnerable than residents invillages on private land; however, it is difficult toimagine that a State or Commonwealthgovernment would not uphold a resident's rightsas though there were a notice and a charge.Therefore, it is thought that residents in thesetypes of villages do not face substantially higherlevels of vulnerability.

A number of options to respond to this issue havebeen considered. For example, operators ofvillages located on Crown land where no titleexists could be required to pay any refundableingoing contribution amount into anindependent investment fund. Another optionwould be for operators to pay a bond based onthe refundable ingoing contribution amount.However, these options lack flexibility, may causecash flow difficulties for some retirement villagesand, in some cases, would serve to forceoperators catering for low income and morevulnerable older people out of the marketplace.

The community-auspiced villages, which arelocated on Crown land, play a vital role inproviding accommodation for less well-off seniorcitizens. It is likely that any legislative interventionwould have the effect of dislocating poorerresidents and would not be in the public interest.

Before entering into a residence contract that givesrise to a residence right, the retirement villageowner must lodge a retirement village notice, in theform on Schedule 1, with the Registrar of Titles.23

The Registrar must record the notice in theRegister.24 Before lodging the notice the ownermust have all encumbrances on the title released toensure that the residence right will have firstpriority.25 If the retirement village owner fails tolodge a notice, they are guilty of an offence26 andthe resident may rescind or cancel the contract.27

Section 14 of the Act binds the owner's successorsin title to honour the terms of the residencecontract, thus protecting residents in cases where avillage is sold or where an owner goes bankrupt.The Act also prohibits contracting out, therefore, aprovision in a retirement village contract ordocument is voided if it tries to exclude, modify orrestrict the operation of the Retirement VillagesAct.28 All other provisions within the contract ordocument, however, remain valid andenforceable.29

Contracts that respond to the range of legalstructures, services, facilities and fee arrangementsare complex and some residents find them difficultto understand.

Arrangements and legal structures to facilitate entryto a retirement village include a long term leasearrangement, purchase by title (fee simple), units ina unit trust, shares in a company or periodictenancy, and new arrangements continue toemerge. A typical residence contract ranges from 50to 100 pages and can contain hundreds of clauses.

Deferred fees, which are designed to keep therefundable ingoing contribution (ingoing fee) low, isan arrangement which permits residents to defersome of the costs of entering a village until they exitthe village. A typical example of a deferredmanagement fee is a fee that is calculated at therate of three percent per annum for up to amaximum of 10 years (depending on how long theresident has lived in the village) on the gross pricereceivable by the resident at the time of the sale ofthe unit. Thus, if the gross price receivable for amodest unit is $150,000 and the resident has beenliving in the unit for 10 years, they would pay$45,000 in deferred management fees. Adding inthe fees to cover the sale of the unit, plus anymaintenance fees owing until the unit is sold, theresident may pay over $50,000 in exit fees.

The complexity of retirement village contracts andarrangements is compounded by the fact that alarge proportion of residents considering entering aretirement village are making a one-off decision of asignificant financial nature. Secondary markets ininformation and advice – from such providers asfinancial planners, solicitors, and accountants withexpertise in retirement village matters – areemerging but are underdeveloped. Some residentsreport that much of the pre-contractual advicereceived from their family solicitor was unhelpful inassisting them to make an informed choice aboutwhether or not to enter a retirement village.


21Identified Issues

23 Retirement Villages Act 1986 s924 Retirement Villages Act 1986 s1125 Retirement Villages Act 1986 s9 (4)26 Retirement Villages Act 1986 s8 (1)27 Retirement Villages Act 1986 s8 (2)28 Retirement Villages Act 1986 s7 (1)29 Retirement Villages Act 1986 s7 (2)

4.3 Retirement village residentcontracts

22Identified Issues


Due to the evidence of information asymmetry inrelation to residence contracts, Consumer AffairsVictoria engaged an independent consultant toundertake an analysis of retirement village contractsand the various financial arrangements associatedwith deferred management fees. (Beverly Kliger andAssociates in partnership with the Institute for SocialResearch, Swinburne University of Technology wereengaged in October 2002.) The project consistedof two elements: an analysis and report on thefairness and reasonableness of current financialarrangements within the retirement village industry;and the development of a financial modellingdevice and financial assessment tool for prospectiveresidents.

The consultant confirmed that retirement villagedocumentation was complex, technical and legallybased and concluded that there was an informationimbalance between retirement village operators andconsumers which leads to some operators gainingan unfair advantage in the marketplace. Inparticular, they found little plain languageexplanation in retirement village contracts andnoted that the documentation failed to takeaccount of the experiences, conditions andvulnerabilities that are more common among olderpeople. To overcome this imbalance, increasedtransparency of retirement village contracts and feesarrangements was recommended to assist residentsto:

• Understand the type and level of services andfacilities provided by a retirement villageoperator as part of the ingoing contribution(purchase price) and on-going costs associatedwith living in a retirement village

• Assess the costs and services on offer from theretirement village operator

• Compare the costs of living in a retirementvillage with the purchase or rental of similarsized non-retirement village accommodation ina similar location

• Choose between retirement villages bycomparing the costs charged and servicesoffered by one retirement village operator withthe costs and services of other retirementvillage operators.

Given the evidence of information asymmetry andthe potential for consumer detriment, a range ofapproaches to address the problem and to assistprospective residents to understand, assess, compareand choose require consideration.

4.3.1 Contractual matters raised in thereview

A range of contract related matters were raised insubmissions from stakeholders in the review.These included:

• Exit arrangements:

– The assignment of exclusive selling or re-leasing rights to the operator

– Liability for fees after a resident hasvacated their unit

– Responsibility for the cost of repairs orrefurbishment of a retirement village unit

– Refund entitlements

• Sinking funds or capital maintenance andreplacement funds

• Retirement village fees

• Proxies and powers of attorney

• Unfair terms in contracts.

These matters are discussed below and proposalsfor change concerning these issues are included inProposals 6 and 7.

4.3.2 Exit arrangements

Exit arrangements comprise an important part ofa retirement village contract and are subject toexplicit regulation in New South Wales andQueensland. Issues raised in the review areoutlined in the discussion below.

The assignment of exclusive selling or re-leasingrights to the operator

It is not unusual for the residence contract togrant village operators exclusive selling or leasingrights and the ability to determine the askingprice of each unit. In many cases former residentsor their beneficiaries (where the resident has died)remain liable for ongoing maintenance chargesuntil the unit has been sold or re-leased. Liabilitiesvary widely, but seem to range between $250and $1000 per month.

Residents who have found themselves powerlessto seek their own agent in cases where the sale orre-leasing of the unit has been delayed (sometimesfor months) have led calls for the prohibition ofexclusive selling rights. The situation appears tobe more problematic where the resident hasmoved out of the unit, sometimes into a carefacility. However, discussion with residents andresidents groups has revealed a generalacceptance of an operator’s right to play a majorrole in the sale of retirement village units in orderto maintain the integrity of the existing culture ofthe village.

Operators submit that they are best placed tocarry out this role because of their intimateunderstanding of the facilities, services andcontractual arrangements offered at the village,that they can assess a prospective resident’ssuitability for residency in a particular village andthat they often have a representative on site whocan handle enquiries.

While there are some valid reasons for anoperator playing a major role in the selling or re-leasing of a unit, it is not appropriate that anoperator has an automatic right to charge a fee orreceive a commission when the unit is sold or along term lease is re-assigned. Details of suchmatters should be clearly outlined to newresidents prior to entering into a contract and itshould be open to them not to assign the sellingor re-letting rights to the operator (as it is in NewSouth Wales).

However, it needs to be recognised that thevillage operator must be involved in the processwhere an external agent is used to sell or re-leasethe premises as the operator carries responsibilityfor disclosure of information and the content ofthe retirement village contract. In essence, a saleor long-term lease would need to be conditionalon the operator agreeing, with a mechanism toensure that agreement is not withheldunreasonably.

Under the New South Wales legislation, theoperator has 14 days from notification of theproposed contract to either enter into aretirement village agreement with the purchaseror seek an order that it is reasonable not to doso. The system for transfer of residency rights incaravan parks under the Victorian ResidentialTenancies Act deems consent to have been givenif the park owner does not formally object withina set time.


23Identified Issues

24Identified Issues


Proposal 6

The Act be amended to:

• Prevent an operator from requiring aresident to vest rights of sale of theresident’s interest in the village in theoperator

• Prohibit an operator charging a fee orreceiving a commission in relation to the sale of the resident’s interest where anexternal agent has managed the sale onbehalf of a resident, former resident or their beneficiary

• Ensure, where an external agent is engagedby a resident, former resident or a formerresident’s beneficiary, that the operator’sinvolvement in the process of selling theresident’s interest is sufficient to allowdischarge of the operator’s obligations under the Act and protection of theoperator’s interest in maintaining acompatible resident population.

Liability for fees after a resident has vacated theirunit

For residents who have already moved out oftheir unit (or their beneficiaries), liability forongoing maintenance fees until the unit is sold –for which they receive no benefit – can add upover time. Operators, however, argue that theyremain liable for a range of fixed costs, which arepayable whether or not all the units areoccupied. For example, rates and insurance costsremain static and there may only be minimalsavings on variable costs such as management,staff and cleaning where a unit has been vacated.

Queensland currently seeks to balance theinterests of operators and past residents bylimiting liability for recurrent charges relating to“personal services” (such as meals, laundry andcleaning) to 28 days after the resident vacates.Consumer Affairs Victoria suggests this may be anappropriate provision for Victoria also, although itis noted that New South Wales is now movingfrom a 28 day limit to disallowing all personalservice fees after a resident has left. Prospectiveresidents should also be provided with detailsprior to signing a contract of any and all liabilityfor fees on vacating a unit (see Proposal 6).

Proposal 7

The retirement village operator have no rightto impose recurrent charges on the residentbeyond 28 days after the resident vacates theretirement village.

Responsibility for the cost of repairs orrefurbishment of a retirement village unit

Responsibility for the cost of repairs orrefurbishment of a retirement village unit variesaccording to the type of legal and tenurearrangements of the village. A number ofresidents submitted that their residence contractcontained a lump sum figure for therefurbishment of their unit, which did not reflectthe true cost of such work. In particular, theyargued that operators could unfairly profit fromsuch arrangements where units had beensubjected to minimal wear and tear. Someresidents believed that they should be entitled touse selected tradespeople in order to minimisecost. Operators felt responsible for ensuring thatunits within their village are presented in asuitable condition to secure a sale or re-lease ofthe premises and to maintain a proper level ofmaintenance and capital replacement in thevillage. This has benefits for existing anddeparting residents. It is essential, however, thata resident can consider the repair andrefurbishment costs prior to signing the residencecontract.

Refund entitlements

Some residents and resident groups called for theintroduction of a statutory refund period toprevent overly long delays in refund entitlements.In particular, residents felt that uncertaintyconcerning when they would receive theirmoney after they had terminated their contracthindered their ability to exit a village.

However, to prescribe a narrow period of time inwhich a resident's entitlements must be refundedmay cause financial hardship for the retirementvillage and such financial hardship wouldinevitably be passed on to existing residents.

As with the sale of other houses or units, variablesin the economy and the real estate marketplaceimpact on the sale of a property. Issues such asprice, location of the property, quality of thefacilities and the level of services availableinfluence the selling environment.

Consumer Affairs Victoria favours a balancedapproach, broadly in line with New South Wales,where a refund must be made within14 days ofthe right to reside in the unit changing handsand, where the resident was occupying under aperiodic tenancy, no later than 6 months afterthe resident vacating. As far as possible, residentsshould be given details of refund entitlementsprior to signing a contract to enter a village.

Proposal 8

The Act require that a departing resident’srefund entitlements be paid within 14 days of the right to reside in the unit passing toanother person and, where the resident wasoccupying the unit under a periodic tenancy, no later than 6 months after the resident’svacation of the unit.


25Identified Issues

26Identified Issues


4.3.3 Sinking funds or capital maintenanceand replacement funds

Responsibility for the maintenance andreplacement of capital items varies considerablyfrom village to village. The Act does not requireor regulate sinking funds or capital maintenanceand replacement funds. Some villages providefor a separate sinking fund as part of theirresidence contracts. Other villages do not have aseparate fund, but allocate money for capitalmaintenance and replacement through theirretirement village budgets.

A number of submissions called for theintroduction of mandatory capital maintenancefunds for retirement villages, expressing theirdesire to live in a village that was appropriatelymaintained over the longer term, without theworry of any unreasonable or unexpected costimposition in the future. Most operatorsopposed mandatory sinking funds, with oneoperator group stating that they were not awareof any instance where the lack of a sinking fundhad substantially impacted on the amenity oroperations of a village or had resulted in acontractual obligation not being met.

The Queensland Retirement Villages Act 1999requires operators to establish a MaintenanceReserve Fund and a Capital Replacement Fund tobe used for the maintenance and replacement ofcapital items. The amount that must be held ineach fund is guided by a report from a quantitysurveyor that provides a ten-year projection ofmaintenance and capital replacementexpenditure. The report must be updated everytwo years. Under the Act the owner isresponsible for payments into the CapitalReplacement Fund, which are usually payablefrom a portion of the ingoing contribution or thedeferred management fee. The residents areresponsible for the payments into theMaintenance Reserve Fund, which are usuallyderived from ongoing maintenance fees.

Consumer Affairs Victoria is not persuaded thatsuch an approach would be appropriate for theVictorian environment. It is clear that there is atrade-off between provision for capitalreplacement and immediate affordability ofvillage accommodation, since any capitalreplacement funding must ultimately be derivedfrom residents.

Adequate details of capital maintenance andreplacement arrangements in retirement villagecontracts should assist prospective residents tochoose a retirement village that meets their needs.

4.3.4 Retirement village fees Lack of clear information concerning retirementvillage fees has been the source of problemsreported by respondents. A residence contractprimarily presents fees and charges as a formula,which some residents find difficult tocomprehend. A typical retirement villagecontract may include: an ingoing contributionsum; a maintenance charge sum and detailsabout adjustments to the maintenance charge;and a deferred management fee formula. Theformula for the deferred management fee can besubstantially different from village to village. Forexample, some villages link the deferred fee tothe Commonwealth Bond Rate (which is avariable figure), where other villages use astandard three percent for each year of residencyin the village to a maximum of 10 years. Mostformulas apportion part of the capital increase inthe value of the unit to the operator. Thecomplexity of fee arrangements, the substantialsums of money involved and the long termnature of the transaction all increase thepossibility of consumer detriment. The possibilityof consumer detriment is compounded by thevulnerable and disadvantaged nature ofprospective buyers (who are aged and may befrail or recently bereaved).

There is a need for clear information on fees tobe available to potential residents to assistdecision-making. The Consumer Credit (Victoria)Act 1995, which applies the Uniform ConsumerCredit Code in Victoria, requires credit contractsto include information such as: the amount ofcredit provided; the annual percentage rate orrates; how the interest is calculated and when itis charged; the total amount of interest if thecontract is to be paid out within seven years;credit charges and fees to be paid; and how theconsumer is to be informed about changes tothe contract etc. This is considered a usefulapproach for the retirement village market.

4.3.5 Unfair terms in residencecontracts

The new Part 2B of the Fair Trading Act 1999provides that “unfair terms” in consumercontracts – which includes retirement villageresidence contracts – are void.

Under section 32W of the Fair Trading Act, a term in a consumer contract is to be regardedas unfair if, contrary to the requirements of goodfaith and in all the circumstances, it causes asignificant imbalance in the parties' rights andobligations arising under the contract, to thedetriment of the consumer.

Matters that can be taken into account indetermining if a term is unfair include whetherthe term has the object or effect of:

• Permitting the supplier but not theconsumer to avoid or limit performance ofthe contract

• Permitting the supplier but not theconsumer to terminate the contract

• Penalising the consumer but not thesupplier for a breach or termination of thecontract

• Permitting the supplier but not theconsumer to vary there terms of thecontract

• Permitting the supplier but not theconsumer to renew or not renew thecontract

• Permitting the supplier to determine theprice without the right of the consumer toterminate the contract

• Permitting the supplier unilaterally to varythe characteristics of the goods or servicesto be supplied under the contract

• Permitting the supplier unilaterally todetermine whether the contract had beenbreached or to interpret its meaning

• Limiting the supplier's vicarious liability forits agents

• Permitting the supplier to assign thecontract to the consumer's detrimentwithout the consumer's consent

• Limiting the consumer's right to sue thesupplier

• Limiting the evidence the consumer canlead in proceedings on the contract

• Imposing the evidential burden on theconsumer in proceedings on the contract.30

The new provisions also give power to prescribecertain terms in standard form consumercontracts as being unfair and make it an offenceto use a prescribed unfair term. The Director ofConsumer Affairs is able to apply to the VictorianCivil and Administrative Tribunal (VCAT) for adeclaration that a term is unfair, and forinjunctions to prevent the continued use of unfairterms.


27Identified Issues

30 Fair Trading Act 1999 s32 X

28Identified Issues


4.3.6 Proxies and powers of attorney Part 6 of the Retirement Villages Act conferspowers on meetings of residents in relation toby-laws and special maintenance levies. Anumber of submissions from residents focused onthe practice of some operators requiringirrevocable proxies or powers of attorney as acondition of entry to the village. This practiceseems most prevalent in commercial or resident-funded villages.

The practice of requiring irrevocable proxies orpowers of attorney, in some circumstances, maybe aimed at preventing such matters as residentsvoting to block further development on vacantland within the village. However, the practicedenies residents an active say in the affairs oftheir village and could give unfair influence andadvantage to operators. Where a resident isunable to attend retirement village meetings dueto ill health or an absence from the village, thediscontinuous use of proxies has been proven tobe a legitimate tool. New South Wales31 hasprohibited operators from requiring a resident togive them power of attorney or from appointingthem as a proxy. Queensland has a similarprovision with regard to power of attorney32 andalso restricts the effect of proxies generally to onemeeting.33 Whether or not making anirrevocable proxy or power of attorney acondition of entry to a village constitutes anunfair contract term under the Fair Trading Act,Consumer Affairs Victoria opposes the practice.

Proposal 9

The Act be amended to prohibit a retirementvillage operator from seeking or accepting theassignment of a power of attorney from aresident (except where the resident is a relativeof the operator).

Proposal 10

The Act be amended to prohibit a retirementvillage operator from seeking or accepting anirrevocable proxy from a resident (exceptwhere the resident is a relative of the operator).

4.3.7 Options for interventionA continuum from low-level to high-levelintervention includes:

• Information for prospective residents

• Self-regulation of contractual arrangements

• Prescribing minimum requirements forresidence contracts (what must and mustnot be included in a residence contract)

• Prescribing standard forms of residencecontract;

• Prescribing a standard form contract andfinancial arrangement for the industry

• Compulsory industry code that includes amodel contract.

Information for prospective residents

The least restrictive intervention involvesproviding prospective residents with informationconcerning the retirement village market andretirement village contracts. This could includerequiring operators to provide the explanatoryinformation with other disclosuredocumentation. Section 20 of the Act requiresvillage operators to give residents a range ofdocuments before a resident enters into aresidence contract, which is further discussed insection 4.4. Disclosure.

31 Retirement Villages Act 1999 (NSW) s64 and 6532 Retirement Villages Act 1999 (QLD) s8933 Retirement Villages Act 1999 (QLD) s133

Such explanatory information would be inaddition to the current provisions. This approachon its own, however, is unlikely to be effective inaddressing the information asymmetry problem,particularly given the age related characteristicsof prospective residents, which can impact ontheir ability to make informed andknowledgeable decisions.

Self-regulation of contractual arrangements

Self-regulation of contractual arrangementswould allow the retirement village industry todevelop and enforce its own contract standards.Interestingly, the Retirement Villages AssociationLtd Accreditation Scheme requires thataccredited villages provide clear documentationof all financial systems and contractualarrangements (Standard 2.1). The Association ismaking inroads into raising standards within themarket but its membership is relatively small (62Victorian retirement villages are accredited by theRetirement Villages Association Ltd and a further26 new villages are in the process of achievingaccreditation) and it has had limited success onpositively influencing contracts in the overallmarket.

Given the widespread nature of problemsassociated with confusion about contract terms,this approach is not considered an effectiveresponse.

Prescribing minimum requirements for residencecontracts (what must and must not be includedin a residence contract)

An alternative approach involves settingminimum requirements for residence contractsby regulating the terms and conditions whichmust and must not be in a residence contract.This option would ensure that important termsand conditions are in every retirement villagecontract (regardless of the legal or financialarrangements used by the village) resulting ingreater consumer protection, transparency andbetter opportunities for residents to compare theaccommodation and services offered in themarketplace. This model does not extend toregulating the form of the contract, so supplierswould retain flexibility over the presentation ofcontracts.

The Act currently requires village operators/owners to give residents all residence documentsrelating to the retirement village concerned atleast 21 days before a resident enters into aresidence contract, but does not go so far as toset minimum requirements for the residencecontract. Section 3 defines residence documentsas any of the following:

• A residence contract

• A management contract

• A document under which a resident agreesto observe the by-laws, promises to pay anin-going contribution or a recurring chargefor the provision of goods or services by amanager

• A document which is a prescribeddocument or contains prescribedinformation

• A disclosure statement completed andsigned by the owner;

• A check list in the form in Schedule 3

• The by-laws.


29Identified Issues

30Identified Issues


Regulating minimum terms and conditions forresidence contracts, therefore, would also havethe effect of increasing pre-contractual disclosure.

It is recognised that residents stand to benefitfrom new contractual models developed to meetfuture needs. Prescribing minimum standards forresidence contracts will address the informationasymmetry problem by providing contractualdetails to help residents to understand, assess,compare and choose. Both Queensland34 andNew South Wales35 have adopted this type ofapproach by prescribing minimum requirementsfor residence contracts.

For example, Queensland's residence contractsmust contain: the right to rescind the contractduring the cooling off period; the ingoingcontribution and exit fees payable; the resident'sexit entitlements; the service charges; amountspayable concerning the maintenance reservefund; insurance for the retirement village; allconditions precedent to the resident's right toreside in the village; the resident's right to resellthe right to reside in the unit; a resident'sentitlement to village financial statements; thedispute resolution process; the statutory charge;rights to terminate the contract; and anythingelse prescribed under a regulation.

The NSW approach requires similar contractualprovisions and also prescribes matters excludedfrom contracts including: obligations on residentsto resolve disputes by processes other than thatrequired by the Act; requiring residents to have awill or to advise the operator of the location ofthe will; provisions requiring residents to agree totake out an insurance policy (except where aresident uses a motorised wheelchair); provisionsenabling the resident to be charged individuallyfor legal, accounting or other services incurred bythe operator; restricting the period of time aresident may be absent from the village;

penalty terms, in cases where a resident breachesthe contract or village rules; exclusion from thebenefit or advantage of any statute; where thecontract makes provision for varying recurrentcharges, it must not include a componentrelating to the actual or proposed expenditure ofthe village; disclaimers; and provisions indicatingthat the contract represents the entire agreementbetween the parties.

Most of these minimum requirements would beapplicable in Victoria, however, in line withconcerns identified in the review concerning exitarrangements, capital maintenance andreplacement funds, retirement village fees andproxies and powers of attorney (as discussedabove), additional detail concerning thesematters would be necessary. Therefore, mattersthat are considered necessary in residencecontracts include:

• Basic particulars such as the name of thevillage, its address, the names of the partiesand the date on which the contract ismade

• The resident’s rights under the statutorycooling-off period (which is alreadyrequired under section 24)

• A list and description of services, facilitiesand amenities, together with any fixture,fittings and furnishings that may beprovided

• Restrictions on the use of the residence

• Terms that deal with such matters as theoperator’s access to premises and villagerules

• Details of the minimum of advance noticeto be given to the resident in the case oftermination of contract by management;

• Details of any capital replacement fund orother fund held by the retirement village;

34 Retirement Villages Act 1999 (QLD) s4535 Retirement Villages Act 1999 s42

• The process by which residents can ask theoperator to carry out repairs andmaintenance

• All retirement village fees payable:

– Details of all costs payable to gain entry,reside in and leave the village (ingoingcontribution, maintenance charges andany deferred management fee)

– How the maintenance charge is to beadjusted and existence of the speciallevy;

– The method of calculating any refunddue to the resident on termination ofthe contract and any applicable financialpenalties; and

– A summary of all fees payable (in dollarfigures) if a resident were to exit avillage after two years and six years ofentering a village

• Exit arrangements:

– Details of how the contract may beterminated and a resident’s right toremove any fixtures added by theresident during their occupancy

– Details of the how a residence right toreside in the unit is to be sold or re-leased

– Details of how the resale or re-leasevalue will be decided

– What refurbishment of the unit will berequired and who pays for it

– The process for, and effect of, acceptingoffers, including when offers may berefused

– The provision of monthly salesinformation

– How the expenses of sale are to beshared, including any commissionpayable to the operator

• Dispute resolution arrangements:

– How disputes are to be dealt withthrough an internal process and anexternal body

– The fees payable for dispute resolution.(See 4.11 Dispute resolution andcomplaint handling)

Terms that should not be in the residencecontract include:

• Any term which is unfair (See above, 4.3.5)

• Any term assigning an irrevocable proxy orpower of attorney to the retirement villageoperator (See discussion at 4.3.6 andProposals 9 and 10 above)

• Requirements for residents to take out anyform of insurance, including homecontents insurance, ambulance cover orother forms of health insurance

• Restrictions on the period of time (eg. holidays, visiting relatives,hospitalisation) residents may be absentfrom the village

• Requirements upon residents to have a willor to disclose its location to theoperator/owner of the retirement village.

Prescribing standard forms of residence contract

The introduction of standard forms of residencecontract would extend intervention to regulatenot only what must and must not be in acontract but also (at least to some extent) theform of the contract. At one end of thespectrum, a standard form could be a basictemplate, requiring details to be filled in under asequence of headings, but with little or no morerestriction on content than envisaged under theprevious option (prescribing minimumrequirements). At the other, there could be ahighly developed standard form or forms,covering the fine detail of residencearrangements.


31Identified Issues

32Identified Issues


An intermediate approach would be thedevelopment of individual, standardised contract-components (for each legal arrangement used bythe industry) that could be inserted into contractsas required. For example, there are somecommon components that could be included inall contracts (details of parties involved, cooling-off provisions etc) and other components thatcould be inserted according to the particular legalstructure of a retirement village. However, theneed to respond to the range of legal structuresused by the market would necessitate substantialdifferences in actual contract formats. For thisapproach to be effective, care would need to betaken to ensure achievement of the objectives setout above of promoting understanding,comparability and choice.

Prescribing a single, standardised form contractand financial arrangement for the industry wouldsimplify the transaction for consumers, but wouldalmost certainly have a negative impact oninnovation in the market, in turn limitingconsumer choice. Contractual flexibility hasallowed many people to enter a retirement villagewho would have otherwise been prevented.Consumer Affairs Victoria considers theinformation asymmetry problem insufficient towarrant this level of legislative intervention.

Introducing a separate contract for eachcontractual arrangement used in the marketcould also provide clarity for residents. However,this would require the development of at least fivedifferent contracts and great care would need tobe taken to ensure that restrictions in their formdid not limit new types of retirement villagearrangements and stifle innovation.

There are precedents for standard contracts inother legislation. The Estate Agents Act 1980 andEstate Agents (Contract) Regulations 1997prescribe standard forms of contract to be usedby estate agents and agents’ representatives. Theforms include: the Contract Note (Form 1); theContract of Sale of Real Estate (Form 2); and the

Contract of Sale of Business (Form 3). TheContract Note sets out basic particularsincluding: the estate agent, the vendor, thepurchaser, the property, the chattels; theproperty price; the deposit paid and the balancedue; any special conditions; and details of thefinancier. The Vendor’s Statement required bysection 32 (1) of the Sale of Land Act 1962 mustalso be attached. The Vendor’s Statementdiscloses matters affecting the property such aseasements and covenants and would not beapplicable to a non-fee simple retirement villagetransaction. The Contract of Sale of Real Estatesets out specific and detailed conditions including:Particulars of Sale; the Schedule; GeneralConditions and Special Conditions (if any). Bothforms contain a cooling-off statement pursuant tosection 31 of the Sale of Land Act 1962.

The estate agents example indicates thatstandard form contracts can be beneficial to bothsuppliers and consumers, and Forms 1 and 2may be adaptable for the retirement villagemarket, even though there is a significantlygreater level of complexity in the retirementvillage context.

There are similarities between a retirement villageand a conventional body corporate establishmentas in both cases people reside in dwellings on asite where a range of common facilities andservices are provided, such as a pool or tenniscourt etc. In fact, retirement villages which sellunits by freehold title function as a bodycorporate and are regulated by the SubdivisionAct 1988, the Subdivision (Body Corporate)Regulations 1989 and the Sale of Land Act 1962,as well as the Retirement Villages Act. In thesetypes of villages the body corporate has a rangeof powers to manage, administer and maintaincommon property and perform a range offinancial functions. The practical differencebetween a retirement village and a conventionalbody corporate establishment is that a retirementvillage provides solely for a community themajority of whom are retired from full time

employment or are over 55 years of age and,therefore, is specifically focused on theexperiences, conditions and vulnerabilities of olderpeople. The village manager or operator carriesout similar (and additional) functions to a bodycorporate or body corporate manager. Asdiscussed earlier in this report, people are oftendrawn to a retirement village because of the socialamenity – the ability to socialise with others of asimilar age and build friendships.

The nature of a retirement village transaction(non-freehold arrangement) is similar to aconventional body corporate or sale of landtransaction because they both involve acontractual arrangement for substantial sums ofmoney and the rights created are intended tosurvive over a long period of time. They differbecause the buyer is not purchasing an interest inthe land but is, in fact, purchasing a right toreside in the village (through a long term lease,units in a unit trust, shares in a company or othertype of arrangement). The range of legal andfinancial arrangements in the retirement villagemarket is broader than for conventional sale ofland transactions.

The Residential Tenancies Act 1997 prescribes astandard form for residential tenancyagreements.36 However, the nature of aretirement village leasehold arrangement isdifferent from a residential tenancy agreementbecause it includes a range of lifestyle services anda share of common facilities. A residential tenancyagreement is generally for the provision ofaccommodation only. Also, the retirement villagetransaction will generally involve a range of fees(varying from one village to the next), including adeferred management fee.

Compulsory industry code

The highest level of intervention would involve acompulsory industry code. Such a code wouldmandate a standard contract and also focus on arange of other interventions such as managementof market behaviour and how a resident is to beinformed prior to entering into a residencecontract.

This approach would only be appropriate in thecase of high-level market failure and substantialevidence of consumer detriment, which does notexist in Victoria.

Consumer Affairs Victoria's preferred approach

Consumer Affairs Victoria wishes to ensure thatretirement village operators are not undulyprevented from competing in the market. And,indeed, the maintenance of competition is thepreferred mechanism to provide consumers withthe broadest range of choice concerning costs,services, location and legal arrangements. It isrecognised that residents stand to benefit fromnew contractual models developed to meet futureneeds, so it is important that the model ofintervention chosen is commensurate with thelevels of potential or existing consumer detriment.

At the same time, Consumer Affairs Victoriawishes to ensure that, when confronted withindustry contracts of whatever variety, consumers(and the advisors who may be assisting them) aregenuinely able to understand, assess, compareand choose.

Accordingly, the preferred approach is to:

• Prescribe one or more model residencecontracts, providing for details to be filled in(where applicable) under a sequence ofgeneric headings

• Require that any residence contract notfollowing the relevant model contract formcontain an introductory statementexplaining how it differs from the model


33Identified Issues

36 Residential Tenancies Act 1997 s26

34Identified Issues


• Prescribe a number of particulars whichmust be included in any residence contract

• Prescribe terms that must not be includedin any residence contract.

This approach will have the effect of wideningthe pre-contractual disclosure provisions, as aresidence contract must be disclosed at least 21days prior to a resident signing a contract. It willmeet consumer information needs, but will nothave an adverse impact on competition in themarket.

Proposal 11

The Act be amended to require that retirementvillage residence contracts be in writing andeither set out their terms in accordance withthe appropriate prescribed model form orinclude an introductory statement explaininghow the form of the contract differs from theappropriate prescribed model.

The prescribed model format/s would include asequence of generic headings and provide thatdetails of at least the following must beincluded:

• Basic particulars such as the name of thevillage, its address, the names of the partiesand the date on which the contract is made

• The resident’s rights under the statutorycooling-off period (currently required undersection 24)

• A list and description of services, facilitiesand amenities, together with any fixture,fittings and furnishings that may beprovided

• Any restrictions on the use of the residence

• Terms that deal with such matters as theoperator’s access to premises and villagerules

• Details of the minimum of advance notice tobe given to the resident in the case oftermination of contract by management

• Details of any capital replacement fund orother fund held by the retirement village

• The process by which residents can ask theoperator to carry out repairs andmaintenance

• All retirement village fees payable:

– Details of all costs payable to gain entry,reside in and leave the village (ingoingcontribution, maintenance charges andany deferred management fee)

– How the maintenance charge is to beadjusted and how special levies can beimposed

– The method of calculating any refunddue to the resident on termination ofthe contract and any applicable financialpenalties

– A summary of all fees payable (in dollarfigures) if a resident were to exit avillage after 2 years and 6 years ofentering village

• Details of how the contract may beterminated and a resident’s right to removeany fixtures added by the resident duringtheir occupancy

• Details of the how the right to reside in theunit may be sold or re-leased

• Details on how the resale or re-lease valuewill be decided

• What refurbishment of the unit will berequired and who pays for it

• The process for, and effect of, acceptingoffers, including when offers may be refused

• The provision of monthly sales information

• How the expenses of sale are to be shared,including any commission payable to theoperator

• Dispute resolution arrangements

• How disputes are to be dealt with throughan internal process and an external body

• The fees payable for dispute resolution.

Proposal 12

The provisions of the Act be extended to setminimum requirements for what must not be in a residence contract.

Residence contracts must be in writing andmust not include the following:

• Any term which is unfair

• Any term assigning an irrevocable proxy orpower of attorney to the retirement villageoperator

• Requirements for residents to take out anyform of insurance, including home contentsinsurance, ambulance cover or other formsof health insurance

• Restrictions on the period of time (eg.holidays, visiting relatives, hospitalisation)residents may be absent from the village

• Requirements upon residents to have a willor to disclose its location to theoperator/owner of the retirement village.

4.3.8 Assessment toolIn 2002 Consumer Affairs Victoria contracted thedevelopment of a Retirement Villages ConsumerAssessment Tool (ReVCAT)37 as a possible deviceto assist operators to present explanatory feeinformation to residents. The tool processes arange of variables including:

• Purchase price of the property bought byresident

• Years of residency

• Interest rate as determined by the ten yearCommonwealth Bond Rate (CBR) anddetailed daily. These can be accessed atwww.rba.gov.au/Statistics/Bulletin/F02Dhist.xls

• Monthly body corporate fee or monthlyservice fee

• Regular costs paid by resident

• The extent to which deferred managementfee (DMF) is applied

• Unit purchase price

• The CPI as applied to maintenance chargesand as applied to annual living costs

• The cost of unit sale

• Financial penalties when and if applicable

• The comparative cost of remaining in afamily home.

The Retirement Villages Association Ltd may wishto consider administering the tool as acomplementary self-regulatory response to feetransparency. The tool would be particularlyuseful to provide a summary of all fees payable(in dollar figures) if a resident were to exit avillage after two years and six years of entering avillage, as included in Proposal 11. Accordingly,the tool would provide operators with aconsistent and reliable method to summarise anddocument these costs.


35Identified Issues

37 The contract was carried out by Beverly Kliger and Associates in conjunction with the Institute of Social Research at Swinburne University

36Identified Issues


Section 19 of the Act requires villageoperators/owners to give residents all residencedocuments relating to the retirement villageconcerned at least 21 days before they enter into aresidence contract. Section 3 defines residencedocuments as any of the following:

• A residence contract

• A management contract

• A document under which a resident agrees toobserve the by-laws, promises to pay an in-going contribution or a recurring charge forthe provision of goods or services by amanager

• A document which is a prescribed documentor contains prescribed information;

• A disclosure statement completed and signedby the owner;

• A check list in the form in Schedule 3

• The by-laws.

These provisions give prospective residentsinformation and time to access suitable legal andfinancial advice in order to make an informeddecision about whether or not to enter into aretirement village residence contract. Section 22allows a resident to rescind their residence contractif the prescribed period is not provided and wherecertain information is not given or is false ormisleading. The Act also provides penalties wherefalse or misleading statements are made in thedisclosure documents.38

4.4.1 Checklist (Schedule 3)Section 19 of the Act currently requires that theChecklist in the form in Schedule 3 be providedto prospective residents. The Checklist ispresented in two parts and outlines a range ofquestions designed to draw residents' attentionto important matters that should be consideredbefore deciding to enter a retirement village.The Checklist also warns prospective residents toseek advice in circumstances where they areuncertain about any aspects of the village ordocuments received from retirement villageoperators.

Consumer Affairs Victoria supports thecontinuation of the Checklist to assist prospectiveresidents to choose a retirement village, but areview of the Checklist has revealed the need forupdating. For example, it is unlikely that seekingadvice from a Citizens' Advice Bureau concerningcomplex retirement village documents is stillappropriate. Also, reference to nursing care andnursing care facilities in the Checklist mayconfuse prospective residents and suggest tothem that they will be able to automaticallyprogress to a Commonwealth Aged Care Facilityif one is located onsite. It is therefore proposedthat the Checklist be revised, in consultation withstakeholders.

Proposal 13

The Checklist for prospective residents inSchedule 3 of the Act be updated inconsultation with stakeholders.

4.4 Disclosure


4.4.2 Mandatory disclosure periodProspective residents must be given at least 21days to consider all residence documents prior tosigning the residence contracts.39 This period isdesigned to allow residents adequate time toperuse all disclosure documents and seek advicefrom a secondary market provider, such as asolicitor, accountant or financial planner beforemaking a decision to enter a residence andmanagement/service contract with a village.Some submissions suggested an extension to 28days, but it was also pointed out that too long amandatory pre-contractual disclosure periodcould disadvantage people with an urgent needfor accommodation. The 21 day disclosureperiod is considered best practice in Australia andwill complement the proposal to increase theregulation of residence contracts as a response tomarket information asymmetry.

4.4.3 Professional development forsecondary market providers

A relatively narrow secondary market exists toprovide prospective residents with independent,specific and personalised financial and legaladvice concerning retirement village matters.However, some residents have reported receivinginformation and advice of limited value,suggesting that while there are numerousadvisers, many of them lack specialist retirementvillage knowledge. For example, a resident whosigned a contract containing a complex deferredmanagement fee claims their solicitor did notinform them of the deferred fee arrangementincluded in the contract.

Given the potential for growth in the retirementvillage market, there are opportunities forsecondary market growth. However, it is evidentthat advisors need to strengthen their knowledgeof retirement village contracts and feearrangements to ensure advice is accurate,helpful and responsive to demand. This mayinvolve better attention to education and trainingneeds. It is thought that the provision ofaccessible, high-quality advice through secondarymarket providers will help to boost competitionand benefit the retirement village market as awhole.


37Identified Issues


38Identified Issues


A cooling-off period should give residents time toreconsider their decision to sign a residence contractwith the retirement village owner/operator. The Actcurrently provides three clear business days in whicha resident can change their mind and cancel theircontract.40 This entitles the resident to the return ofall money paid under the contract, except for thesum of $100 or 0.2 per cent (whichever is thegreater) of the ingoing contribution paid. A businessday is a day that is not a holiday.41 Also, a residentmay rescind their contract if it does not contain aconspicuous notice advising of their cooling-off right.

Many submissions recommended increasing thecooling-off period, however, the industry view was tomaintain the current provisions. The AustralianCompetition and Consumer Commission (ACCC)submitted concern that the three-day cooling-offperiod is shorter than the practice in other states inAustralia (14 days in Queensland and seven days inNew South Wales) and recommended increasing theperiod to 7-10 days. However, Victoria currentlyprovides a minimum 21-day disclosure period inwhich prospective residents can seek advice from asecondary market provider and consider theretirement village documents prior to signing theircontract, which significantly exceeds similarprovisions in other states.

The cooling-off provisions within the RetirementVillages Act do not apply to a residence contract towhich section 31 of the Sale of Land Act 1992applies.42 In such circumstances residents receivesimilar protection under the Sale of Land Act, whichprovides a three-business day cooling-off period, ifthe land is residential. As a matter of consistency, it isconsidered appropriate that retirement villageresidents have similar cooling-off rights regardless ofthe type of legal structure adopted by their residencecontract. 43

Consumer Affairs Victoria believes that it isappropriate to retain the current emphasis on thedisclosure period, which gives residents time toconsider their contract/documentation beforesigning. This should result in a reduced likelihood ofresidents needing to implement their cooling-offrights. It is therefore proposed that the three clearbusiness day cooling-off period remain unchanged.

Part 6 of the Retirement Villages Act provides rulesfor resident participation.

Section 33 of the Act requires the village owner toconvene an annual meeting of residents. At thismeeting the owner must provide a written, auditedand signed statement showing a range of financialdetails.

Further, village by-laws can only be created orchanged if three-quarters of the residents vote infavour of the change44, although this provision doesnot affect body corporate rules made under theSubdivision Act or Regulations, if applicable.

A three-quarters majority is also one of theprescribed ways in which a special levy can beimposed on residents.

Part 6 (section 36) also provides that, in the case ofa retirement village where there is no bodycorporate, the residents may elect a residents’committee to represent the interests of the residentsof the village.

A well functioning residents’ committee adds valueto a retirement village, as residents can offersignificant assistance to the overall functioning of avillage and can contribute to a stable villageenvironment. Residents’ committees are a commonway for residents to have influence over their village,but a committee's role varies from village to village.

4.6 Resident participation

40 Retirement Villages Act 1986 s24 (2)41 Interpretation of Legislation Act 1984 s44 (3)42 Retirement Villages Act 1986 s24 (1)43 See Appendix 5 Legal structures of residence contracts for information about the range structures44 Retirement Villages Act 1986 s37

4.5 Cooling-off period

For example, some residents’ committees areinvolved with the management of services providedwithin the village, organising outings andrecreational activities or helping to resolve minordisputes. At other villages residents are not keen toparticipate.

The review revealed that some residents are worriedabout their ability to have meaningful input intoretirement village decision-making and confusedabout their legal right to do so. Some residentsexpressed concern that their village does not have afunctioning residents’ committee and that, withoutone, they do not have an ongoing mechanism toinfluence decisions.

Section 36 allows residents to elect a committee torepresent their interests and gives the committeediscretion to develop its own procedures. Where Part5 of the Subdivision Act 1988 and the Subdivision(Body Corporate) Regulation 2001 apply (whereresidents have purchased the title to their unit), thebody corporate has the powers of a residents’committee under the Retirement Villages Act.

Residents were concerned that managementrepresentatives can hold positions on residents’committees. One resident claimed that threepositions within their committee were allocated tomanagement. However, a provision in a contract ordocument concerning a retirement village thatpurports to exclude, modify or restrict the operationof the Retirement Villages Act is void.45 Or, putanother way, a term in a retirement village contractcannot limit or prevent a residents’ committee fromdetermining its own procedures.

To the extent that the conflation of the bodycorporate and the residents’ committee is causingproblems, it is anticipated that this will be remediedas a result of the current review of body corporatelegislation. Where the body corporate does notapply, a member of a residents’ committee may, atany time, be removed from office by specialresolution at a meeting of residents.45

Therefore, if residents do not wish to have amanager on their residents' committee, they areentitled to vote to have him or her removed. Theseprovisions combine to provide residents with a highdegree of autonomy to determine how thecommittee is run and by whom.

There is evidence that residents lack understandingof the laws regulating resident participation. Thisproblem can be alleviated by an educationcampaign by Consumer Affairs Victoria to informresidents of their legal rights and responsibilities.Importantly, the campaign should incorporate abooklet outlining details of residents’ rights to electand operate a residents’ committee. Additionally,residents may require support and guidance toeither establish and/or maintain an effectiveresidents’ committee. The proposed RetirementVillage Residents' Association could play a valuablesupport role in this regard. (Refer to 4.14.Retirement Village Residents' Association andProposal 13.)


39Identified Issues

45 Retirement Villages Act 1986 s746 Retirement Villages Act 1986 s36 (3)

40Identified Issues


The Retirement Villages Regulations 1998 limitincreases to the maintenance charge in accordancewith the consumer price index number, unlessapproved by a resolution of a majority of theresidents or the residents’ committee.

Generally, residents support the current formula toadjust the maintenance charge, as it provides a levelof predictability regarding future increases.

A number of not-for-profit operators expressedempathy for residents living on incomes that are notfully indexed for inflation, but admitted that therewas a tension between providing affordable housingand the need to cover costs. According to theAustralian Housing and Urban Research Institute,approximately 27 percent of social housing for olderpersons is provided by the not-for-profit sector, with6,200 independent living units (or community-auspiced units) being offered throughout Victoria.47

These figures demonstrate the vital role played bycommunity-auspiced retirement villages in theprovision of accommodation and services for peoplewith low assets and incomes. However, with anincreasingly ageing stock (the majority of units aremore than 20 years old) and a limited capacity torecover costs from lower income residents, thesector is confronting a challenge to upgrade orrefurbish 38 percent of its units.48

Ingoing, ongoing and deferred fees at community-auspiced villages have generally been based on aprospective resident’s assets and income. In anattempt to keep fees low, many of these operatorshave struggled to maintain village standards relativeto the broader market. Some operators havechosen to fund initiatives to upgrade their villagesby elevating the ingoing contribution and themaintenance charge for new residents to morerealistically cover the costs of running a retirementvillage and providing the services promised. Otheroperators have introduced a new fee regime thatallows residents to take advantage of RentAssistance. The Commonwealth Rent Assistance isavailable for retirement village residents, howeverspecial rules apply. For example, residents who payingoing contributions of less than $101,000 andfortnightly payments in excess of $82.80 for singlesand $134.80 for couples are entitled to RentAssistance.

Consumer Affairs Victoria is cautious of anyintervention that results in increasing themaintenance charge, particularly given the largeproportion of retirement village residents who liveon age pensions or incomes that are not fullyindexed for inflation. Even a small increase in feescould have a negative affect on a resident's qualityof life and could even force some people to movefrom their current homes. However, operators mustbe able to collect fees that adequately cover thecost of operating the village, as the worst-casescenario could involve a village being forced out ofthe market, with devastating consequences for bothvillage operator and residents.

47 Australian Housing and Urban Research Institute, Independant Living Units: The Forgotten Social Housing Sector,November 2003

48 Sean McNelis, Swinburne University of Technology, July 2003

4.7 Adjustments to the maintenancecharge

In addition to maintenance fees, the Act alsoprovides for a special levy to be charged, providedthis has not been done in the preceding 12months.49 The operator is able to impose a speciallevy if the residence contract, the managementcontract or the by-laws provide that the residentsare responsible for the expenditure or the class ofexpenditure that the special levy is intended tocover. Otherwise, the levy must be approved byspecial resolution at a residents’ meeting.

Consumer Affairs believes this regime is reasonable,in that it allows operators who wish to make specialprovision for re-investment in the villageinfrastructure to write this into their contractualarrangements with residents. Provided prospectiveresidents are properly informed, they are able tomake a decision as to whether this additional cost isworthwhile for them or whether they should lookelsewhere. If there is no contractual provision forlevies over and above the maintenance fee, it isreasonable that a majority decision of residentsshould be required.

It is apparent that the market is responding to themaintenance charge tensions described above and,it appears likely that it will continue to do so.Varying fee structures for new residents to utiliseRent Assistance, improvements to financialmanagement (for instance, setting ingoingcontributions and maintenance fees for newresidents commensurate with the cost of operatingand maintaining a retirement village) and betterinformation for residents concerning theirobligations to pay a special levy in certaincircumstances are evident in the market.Accordingly, it is proposed that the current formulato adjust retirement village maintenance fees bemaintained.

A significant number of respondents to the reviewfelt that the granting of exemptions from parts ofthe Act had been a useful and acceptable toolwhere operators faced considerable compliancedifficulties. However, a resident group argued thatexemptions from specific sections of the Act shouldonly be granted in one-off situations. Thisstatement may stem from concerns regardingsection 6(1) and 6(2), which provides for religiousor charitable organisations and owners andmanagers of retirement village land to apply forexemptions from all or any of the provisions of theAct. Additionally, section 6(5)(b) allows the Directorto make recommendations to the Ministerconcerning exemptions which the Directorconsiders should be granted, regardless of whetheror not an application has been made.

Currently, exemptions are only granted subject toconditions that ensure residents are provided with asimilar level of protection. Additionally, the grantingof an exemption is conditional upon the operatoradvising all current and prospective residents of theexemption and from which parts of the Act theexemption has been granted. Given that there isno evidence of problems in relation to exemptions,Consumer Affairs Victoria believes that the existingprovisions should be maintained.


41Identified Issues

49 Section 38 (6)

4.8 Exemptions

42Identified Issues


The review revealed that some residents weredissatisfied with retirement village management, aminority describing intimidation, dictatorialbehaviour, autocratic rules, and disrespect forresidents. Some residents thought that certainqualifications, particularly in relation to issuesaffecting aged persons, should be mandated.However, mandating specific managementqualifications would not necessarily respond to thediverse range of needs within retirement villagesand may simply serve to add to the cost of runninga retirement village. Inevitably, additional costswould be passed on to residents, perhaps withoutany concrete benefits to them.

Determining what constitutes an appropriate rangeof skills to manage a retirement village is a complexand subjective matter and largely depends on thecharacter and size of individual villages. Forexample, a manager of a smaller village may berequired to carry out a broad range of functions,from financial management to village maintenance.However, larger villages may have the capacity toemploy or contract staff to carry out certainfunctions, leaving the manager to concentrate onadministration and financial management.

Currently, the Retirement Village Association Ltdoffers members and non-members training on anad hoc basis. However, the Retirement VillageAssociation Ltd recently introduced, on a pilot basis,mandatory professional development and trainingas a requirement of their Accreditation Scheme.Consumer Affairs Victoria welcomes and supportsthis initiative and encourages the Association tooffer this training to non-members on a fee forservice basis.

It is the industry’s responsibility to ensure thatretirement village managers are appropriatelytrained. The provision of accessible and affordableeducation and training, which meets the broaddiversity of needs within the retirement villagemarketplace, is imperative for the industry to beconsidered credible and professional. Accordingly,Consumer Affairs Victoria is supportive of a self-regulatory approach to the education and trainingof retirement village managers. It may bebeneficial for the retirement village industry, underthe auspices of the Retirement Village AssociationLtd, to consider developing benchmarks andprocedures for good management in retirementvillages to guide the industry towards higher andmore consistent standards of management.

Sections 40 and 41 of the Retirement Villages Act1986 provide clear power to Consumer AffairsVictoria to take action against any offence under theAct.

Government accreditation or licensing of retirementvillages per se is not warranted. ExistingCommonwealth and State legislation generallyapplies where establishments provide health orpersonal care. It should be possible to addressdisputation with or complaints against retirementvillages effectively through information andconciliation, with an alternative dispute resolutionservice for complex disputes (see section 4.11below).

While it is noted that Queensland operates aregistration system for retirement villages, there isno evidence that the special supervisory apparatusof a registration scheme is necessary in Victoria.

4.9 Retirement village management

4.10 Monitoring and compliance

However, a simple notification scheme wouldaddress other issues, without imposing anyrestriction or burden on the industry. It wouldprovide consumers with basic information aboutwhich establishments were subject to theRetirement Villages Act. While the lack ofprosecution activity since the Act's inceptionindicates broad compliance with its basic provisions,operators are not necessarily aware of their fullobligations, and these will be expanded if Proposals6, 7 and 11 are adopted. A list of villages currentlysubject to the Act and the contact details of theirproprietors would also facilitate proactiveinformation and compliance work to ensure thatoperators from across the industry spectrum areaware of and meeting their specific obligationsunder the Act.

Proposal 14

A scheme be established whereby ConsumerAffairs Victoria is notified of all retirementvillages subject to the Retirement Villages Act at any given time, of proprietors’ details and of any changes in those details.

4.11.1 IntroductionRetirement villages play an important role inproviding shelter, security of tenure, safety andpeace of mind for senior citizens. Consequently,disputes that threaten these fundamental needsplace residents in a vulnerable position. Age, illhealth and a lack of familiarity with legalprocesses used by retirement village operatorsare other factors that must be considered inassessing the vulnerability of retirement villageresidents. While strategies can be implementedto help ameliorate differences between residentsand village operators, it is accepted that somegroups of residents will not be adequatelyempowered to advocate for their consumerrights or resolve their own disputes. Therefore, itis necessary to develop a model of complainthandling and dispute resolution that caters forthe specific needs of these vulnerable people.

The majority of submissions to the review raisedconcerns about accessibility to an affordable andeffective dispute resolution regime. Clearly,many residents are unaware of the existence ofthe information, complaint handling and disputeresolution services offered free of charge byConsumer Affairs Victoria or that the RetirementVillage Association can intervene in disputesinvolving members of their Association.

4.11.2 Levels of disputes in retirementvillages

Disputes involving residents and operators ofretirement villages seem to arise at three levels:

• Disputes involving goods and servicesprovided under the contract

• Disputes between residents and retirementvillage owners/operators involvingsignificant contractual matters

• Disputes between residents.


43Identified Issues

4.11 Dispute resolution andcomplaints handling

44Identified Issues


An effective dispute resolution regime mustensure that disputes at each of these levels canbe adequately dealt with, although notnecessarily within the one scheme or approach.

Currently, section 35 of the Retirement Villages Act1986 prescribes arbitration to resolve retirementvillage disputes. This involves employing acommercial arbitrator (an independent thirdparty) to determine a dispute. The cost of thecommercial arbitration is borne by the partiesinvolved in the dispute. Disputes involvingresidents and village operators concerning theprovision of goods and services can be dealt withunder section 19 of the Fair Trading Act 1999.Unresolved matters can be referred to the CivilClaims List of the Victorian Civil andAdministrative Tribunal (VCAT), at which aMember can make a legally enforceable orderafter hearing the case or in cases where theparties reach a voluntary agreement. Parties alsohave the option to resolve a dispute through thefree, mediation service provided by the DisputeSettlement Centre of Victoria (Department ofJustice).

4.11.3 Approach to dealing withdisputes

A broad approach combining proactive andreactive strategies to deal with disputes ispreferred. Importantly, communityconsciousness raising strategies such as residentand village operator education should beencouraged as a proactive approach to disputeprevention. It is accepted, however, that effortsto educate the community about their rights andresponsibilities may not always translate intobehavioural change and, in these cases, areactive complaints handling and disputeresolution scheme is required. A further matterthat should not be overlooked in relation todisputes is the role of a regulator, in this caseConsumer Affairs Victoria, in monitoringcompliance with the law, identifying thedevelopment of new trends and communicatingthese issues to the community.

When considering the introduction of acomplaint handling and dispute resolutionregime it is essential to establish a set ofprinciples to guide the development of theregime and against which the regime can beevaluated. Benchmarks have been published forindustry-based customer dispute resolutionschemes.50 Six principles for dispute resolutionschemes have been identified:

• Accessibility

• Independence

• Fairness

• Accountability

• Efficiency

• Effectiveness.

(Appendix 7 expands on these benchmarks.)

50 Commonwealth Department of Industry, Science and Tourism 1997

4.11.4 Options for resolving retirementvillage disputes

Consumer Affairs Victoria has considered anumber of models for dispute resolution. Thereis merit in a staged approach to disputeresolution. Minor disputes can often beadequately dealt with in-house through aninternal retirement village dispute resolutionprocess. This would be particularly relevant forminor disputes between residents and operators,as well as disputes between residents. Disputesthat are not resolved within an internal processwould proceed to external dispute resolution,which generally falls into four categories:

• Government dispute resolution

• Government and independent adjudicatorcombination

• Independent alternative dispute resolution

• Industry self-regulation dispute resolution.

4.11.5 Internal retirement villagedispute resolution procedure

It is preferable that disputes between a residentand an operator and between residents be dealtwith efficiently and effectively within the village,often without the need to seek advice or supportfrom an external dispute resolution body. Aninternal approach to retirement village disputesoffers a highly accessible option for residents andallows the retirement village community a levelof autonomy concerning the manner of andprocesses for dispute resolution. This also allowsfor minor retirement village problems to beaddressed early so they do not develop into amajor dispute. Dispute resolution processes canbe modified to meet the specific needs of theparties involved.

The Retirement Village Association LtdAccreditation Scheme requires accredited villagesto have a dispute resolution or comments-and-complaints mechanism in place. The criterion fora dispute resolution mechanism requires that:

• Residents are fully informed of the DisputeResolution or Comments and ComplaintsMechanism, and this procedure is readilyavailable to all residents within the village

• A Policy and Procedure is in place, whichcomplies with State legislation or IndustryBody where applicable

• Records are maintained of materialcomments and complaints with details ofaction and resolutions.

The Association is to be commended for its effortto set a national industry standard for villagebased dispute resolution. Consumer AffairsVictoria supports this standard and proposes thatall retirement villages be required to put intoplace a dispute resolution mechanismcommensurate with Standard 1.10 of theRetirement Village Association Ltd AccreditationScheme. In cases where a dispute is not resolvedby an internal dispute resolution process, partiescan seek assistance through external options.

Proposal 15

Each retirement village be required to establish a dispute resolution mechanism which provides that:

• A written Policy and Procedure for disputeresolution is in place

• Residents are fully informed of the disputeresolution mechanism and the Policy andProcedure document is readily available toall residents within the village

• Records are maintained of materialcomments and complaints with details ofactions and resolutions.


45Identified Issues

46Identified Issues


4.11.6 Government dispute resolution Consumer Affairs Victoria currently provides arange of information, complaint handling anddispute resolution services, including a free-callservice. This service offers information and adviceby phone and over the counter (at theConsumer Affairs Victoria Melbourne Office) anda conciliation service.

Consumers can apply to the Victorian Civil andAdministrative Tribunal (VCAT) for a decisionwhere Consumer Affairs Victoria cannot resolve adispute. An order from VCAT is enforceablethrough the courts. Some consumer groups,however, have cautioned that some people areunable to adequately represent themselves at theTribunal, that the procedures are legalistic andthere are delays.

Mediation is also available through the DisputeSettlement Centre of Victoria, Department ofJustice. This service is free and confidentiality isprotected under the Evidence Act 1958.Mediation is offered (to consenting parties) as away of settling a civil dispute without legal actionand provides another option for dealing withmore complex matters and disputes.

4.11.7 Government and anindependent adjudicator

This model involves combining the existinginformation and conciliation services offered byConsumer Affairs Victoria and an independentadjudicator to address unresolved disputes andmake determinations. If this model was adopted,consumers could seek information, complainthandling and conciliation services fromConsumer Affairs Victoria in the first instance.However, if a dispute was not resolved throughthese processes the matter could be referred toan independent adjudicator specifically set up todecide on complex retirement village disputes.The independent adjudicator could be located atthe offices of Consumer Affairs Victoria.

The introduction of an independent adjudicatorto deal with complex retirement village disputeswould maximise efficiency and offer a moreflexible approach to dispute resolution thanVCAT. In particular, a service model could bedesigned to specifically meet the needs ofretirement village residents, taking into accounttheir age-related characteristics. Further, anindependent adjudicator could be less costly tooperate than other government disputeresolution models such as VCAT. Economies ofscale could also be achieved if the adjudicator'sscope were also to include body corporatedisputes.

4.11.8 Independent alternative disputeresolution

Adopting an independent alternative disputeresolution model would involve the developmentand operation of a scheme that is independent ofboth government and the retirement villageindustry. The scheme would provide the fullsuite of dispute resolution functions. ConsumerAffairs Victoria and other relevant agencies wouldrefer all retirement village complaints to theindependent scheme.

For this model to be successfully adopted, allstakeholders would need to be consulted in thedevelopmental stage to ensure that the modelmeets the needs of prospective users of thescheme. Locating funds and resources todevelop and operate the scheme would alsoneed to be considered for this model. Forexample, one option may be to chargeretirement village operators a fee for each disputethat is lodged with the scheme, with the feeincreasing as the dispute progresses to the nextlevel of disputation. This is the funding modeladopted by the Australian Banking IndustryOmbudsman. Economies of scale could beachieved if the scheme also dealt with disputesconcerning bodies corporate. A disadvantage ofthis model is its failure to provide a direct link toan enforcement function, reducing its efficiency.

4.11.9 Industry self-regulation disputeresolution scheme

An industry self-regulated scheme would becompletely funded and operated by theretirement village industry. If this model werepreferred, it would need to be developed inconsultation with stakeholder groups to ensurethat the scheme met the needs of service users.

To be effective, an industry dispute resolutionscheme would need to have widespread industrysupport and industry leadership. The retirementvillages industry in Victoria, however, is relativelyfragmented. As discussed previously in thisreport, the industry is divided into two distinctcategories: resident-funded retirement villagesrun on a profit making basis; and community-auspiced retirement villages operated bycommunity based organisations (welfareagencies, churches and the like) on a not-for-profit basis. A relatively small proportion ofretirement villages in Victoria are accreditedmembers of the Retirement Village AssociationLtd Accreditation Scheme, with the majorityoperating outside the current self-regulatoryscheme. This dynamic leads to distinctdifferences within the industry. Therefore, it isquestionable whether the industry is cohesiveenough to support a self-regulatory model ofdispute resolution.

4.11.10 Preferred modelThe best dispute resolution model will be onethat, firstly, has high potential to meet all thebenchmarks of accessibility, independence,fairness, accountability, efficiency, andeffectiveness. Another important consideration isspecific suitability for the needs of older people. A“one-stop shop” where the dispute resolutionprocess can move from a lower to a higher levelof formality if necessary is also desirable, whilethe use of existing infrastructure will reduce cost.Further, it is important that government disputeresolution resources only be called upon where amatter is genuinely too difficult to resolvebetween the parties at the village level.

On this basis, Consumer Affairs Victoria'spreferred model is the Government andindependent adjudicator combination. Thismodel utilises Consumer Affairs Victoria's existinginformation and conciliation services andprovides for an independent adjudicator to dealwith complex disputes. There may also beopportunities through this approach to achieveeconomies of scale to deal with body corporatedisputes.

Proposal 16

The current arbitration provisions in theRetirement Villages Act be replaced with adispute resolution process involving ConsumerAffairs Victoria for information and conciliationand an independent adjudicator for complexdisputes.


47Identified Issues

48Identified Issues


The Building Act 1993, the Food Act 1984 and thePlanning and Environment Act 1997 play a role insetting certain basic minimum standards forretirement villages. In addition to this, the FairTrading Act 1999 applies to goods or servicesprovided in a retirement village. Therefore, someminimum standards are set by existing legislation.

Further, retirement villages accredited by theRetirement Village Association Ltd's AccreditationScheme are required to meet specific management,service and amenity standards. Sixty-two retirementvillages in Victoria are currently accredited by thescheme. The scheme has had a positive effect onsetting a benchmark for service and amenities(above the legislative requirements) within theretirement village industry.

A minority of submissions to the review commentedon accommodation standards and standards forservices and amenities. A substantial number ofthese respondents felt that it would be difficult toset further minimum standards or minimum levelsof service and amenities, due to the breadth ofvillage types and the differing range of servicesprovided by the industry. For example, oneoperator commented that they providedaccommodation to residents from a variety of socio-economic groups and offer a variety of lifestyle andaccommodation options, with ingoing contributionsranging from $100,000 to over $600,000. Theyargued that there is no such thing as a minimumstandard that suits all markets or all socio-economicgroups of residents.

Consumer Affairs Victoria is cautious aboutintervening to arbitrarily set standards for retirementvillage services and amenities in the marketplace,particularly when basic protection already existspursuant to the Building Act 1993, the Food Act 1984and the Planning and Environment Act 1997.Unavoidably, residents’ views concerning the level ofservices and amenities that should be provided inretirement villages will differ and be influenced by arange of factors, including socio-economicbackground. Further, the imposition of standardsmay have the effect of placing some smaller orolder villages (in which residents are satisfied withthe level of services and amenities provided) underextreme financial pressure and potentially exposeresidents to additional costs.

Currently the market appears to be adequatelyresponding to the differing needs of residents.There is a wide selection of villages, offering a rangeof services and amenities, from which residents canchoose. In order to ensure the success of thisapproach it is necessary that residence contractsand marketing information and materials accuratelyreflect the level of services and amenities offered atindividual villages so that prospective residents canmake informed choices.

Overall, Consumer Affairs Victoria believes thatconsumer demand will continue to positivelyinfluence retirement village standards of services andamenities into the future. However, it is proposedthat village operators be required to disclose toprospective residents specific details of the servicesand amenities provided at each village. (See section4.3 on Retirement Village Residence Contracts.)

4.12 Accommodation standards andstandards for services andamenities

The Terms of Reference specifically sought viewsfrom stakeholders regarding the need for consumerinformation for retirement village residents. Mostsubmissions expressed the need for industry specificconsumer information focusing on:

• Consumer and operator rights andresponsibilities

• Complaint handling and dispute resolutionmechanisms.

The review has revealed that consumers are unclearabout their rights and responsibilities as retirementvillage residents and lack an understanding of whereto obtain assistance and advice about a problem ordispute involving a retirement village. A free, plainlanguage booklet or brochure setting out residents’rights and responsibilities concerning retirementvillages may help educate the marketplace. It isproposed that a booklet, similar to Retirement VillageLiving published by the NSW Office of Fair Trading,be produced.

A broader community education campaign aboutretirement villages designed to meet the needs ofsenior Victorians is also considered desirable,including advertisements in older person’spublications and public presentations to seniorcitizens groups.

Proposal 17

Consumer Affairs Victoria develops andimplements a comprehensive consumereducation strategy concerning retirementvillages. The strategy should be sensitive to the specific needs of senior Victorians andpresent any resident documentation in plainlanguage and large print.

Statewide residents' associations are found in allother states in Australia. They provide a collectivevoice for retirement village residents and offerinformation and help to individual residents,educational presentations to residents’ groups andadvocacy. Some associations also assist with theresolution of minor retirement village disputes andsupport the development and operation ofresidents' committees.

Generally, residents' associations do not receiveongoing financial support from government, but fundtheir operation through a small membership levy. Forexample, the South Australian Retirement VillagesResidents' Association has 1600 members, who eachpay a $6.00 annual membership fee. In some statesthe Council on the Ageing either auspices theresidents' association or provides minor administrationsupport and free access to a meeting room.

A number of years ago the Retirement VillageAssociation Ltd attempted to set up a residents'association or residents' council in Victoria, however,residents abandoned plans due to lack of interest.Ongoing change and expansion within theretirement village industry over the past few yearshas seemingly created an environment in whichresidents are now highly receptive to theestablishment of a Victorian residents' association.Similar interest in other states is evidenced byresidents' associations maintaining significantmembership rates.

Consumer Affairs Victoria supports the concept of astate based residents' association, as a useful vehicleto support residents of Victorian retirement villages.Assistance in establishing a residents' associationcould be sought from an existing communityorganisation working with seniors. For example,the Council on the Ageing has an establishedinfrastructure, expertise in developing and operatingcommunity-based groups and broad networks withsenior Victorians and retirement village residents.


49Identified Issues

4.13 Consumer education 4.14 A retirement villages residents’association

50Identified Issues


A grant for the establishment of a residents'association would be necessary, however, it isenvisaged that, once established, the associationwould be self-funding.

Proposal 18

Consumer Affairs Victoria support thedevelopment of a residents' association.

The Retirement Villages Association Ltd introducedits national Accreditation Scheme in 1996. A newRetirement Villages Association Ltd AccreditationScheme was launched in October 2002. Theindustry-based Scheme is voluntary in nature and isavailable to members of the Retirement VillagesAssociation Ltd, its affiliate organisations and otherparticipating organisations. The broad objective ofthe Scheme is to ensure that residents live in a safe,pleasant and positive environment that will supportthem in all reasonable circumstances.51 It isunderstood that 62 retirement village are accreditedmembers of the Scheme. (A further 26 establishingVictorian retirement villages are in the process ofachieving accreditation.) The standards set by theScheme are in addition to those required under theRetirement Villages Act.

Submissions on the Retirement Village AssociationAccreditation Scheme were generally supportive ofthe Scheme. However, there was some concernthat the Scheme only covered a relatively smallnumber of villages.

Consumer Affairs Victoria supports the RetirementVillage Association Ltd Accreditation Scheme as aself-regulatory approach to promoting continuousimprovement to retirement village service delivery.The Scheme has had the positive effect of settinghigher standards for management practices, servicesand amenities in the retirement village industry andhas also provided an additional dispute resolutionoption for residents who live in accredited villages.

The provision of personal or specialist care servicesto village residents is not regulated. This iscontrasted with the provision of care andaccommodation in Supported Residential Servicesthat are regulated under Victoria's Health Services Act1988, and Commonwealth Residential Aged CareService that are regulated under theCommonwealth's Aged Care Act 1997.

A growing number of retirement villages are directlyproviding or contracting external provision ofpersonal care or other specialist care services inaddition to accommodation. Historically theprovision of care and accommodation wouldtypically have resulted in increased regulation,however, the emerging trend of retirement villageoperators selling or leasing accommodation isresulting in an unclear situation with regard to Stateand Commonwealth legislation.

Prior to determining whether any action is requireda number of questions should be considered:

• What are the various resident needs inretirement villages where personal care isprovided?

• What type of personal care is provided?

• Have concerns arisen in relation to theprovision of personal care in retirementvillages?

51 Retirement Village Association Ltd Accreditation Scheme 2002

4.15 Retirement Villages Association LtdAccreditation Scheme

4.16 Emerging Issue: Care Provision

• What monitoring systems do retirementvillages themselves or the relevant industrybody have in relation to the provision ofpersonal care?

• Where would a complaint about the provisionof personal care be directed?

• If regulation were to occur, what regulatorymodel should be adopted? How would it relateto that currently undertaken by theCommonwealth and State in relation to therespective residential care options?

• What is the capacity for self-regulation?

It is suggested that the Department of HumanServices and Consumer Affairs Victoria jointlyexamine the issues and determine what action maybe required.


51Identified Issues

REVIEW OF RETIREMENT VILLAGES ACT1986This review is established to:Determine the effectiveness of the Act in clarifyingand protecting the rights of retirement villageresidents while encouraging and supporting thedevelopment of an ethical, viable industry.

This review should consider:

Scope of the Act:• Whether the objectives of the Act remain

appropriate

• Whether the current definition of retirementvillage remains appropriate

• The relationship between the Act and otherVictorian legislation

• The relationship between the Act and otherCommonwealth legislation

• Whether particular facilities or classes ofretirement villages should be exempt from theAct and, if so, what should be the relevantexemption

• Whether the Act should establish buildingstandards or minimum standards for servicesand amenities.

Effectiveness of the Act:• Whether the $10,000 contribution threshold is

an appropriate way to determine whichretirement villages are regulated by the Act

• Whether current provisions for securingresidents' financial investment are adequate,particularly in relation to ongoing maintenanceand refurbishment, instances of conflict ofinterest and failure of the managementcompany

• Whether current provisions relating toownership arrangements are adequate

• Whether current provisions relating tocontractual arrangements are adequate,particularly in relation to billing for water andother services, repayment of refundablecontributions and application of maintenancefees

• Whether current provisions facilitating residentinput to village management are adequate,particularly in relation to delegation ofresidents' proxy voting rights

• Whether current provisions relating to thedistribution of information to residents andprospective residents are adequate, particularlyin relation to financial disclosure

• Whether current provisions relating tocomplaints handling and dispute resolutionprocedures are adequate

• Whether it would be appropriate to prescribe amandatory code of practice for retirementvillage operators or a retirement villageaccreditation scheme.

Administration of the Act:• What arrangements should be put in place for

the effective administration of the Act

• Whether there is a need for ongoingmonitoring of compliance with the Act, and ifso, who should be responsible for this

• Whether there is a need for Government toprepare a general information booklet fordistribution to all prospective retirement villageresidents.


53Appendices

Appendix 1Terms of Reference

1 Australian Competition & ConsumerCommission

2 Australian Retirement Homes Limited

3 Brotherhood of St Laurence

4 Catholic Homes for the Elderly Inc

5 Council on the Ageing Victoria

6 Department of Natural Resources and Environment

7 Health & Extended Care

8 Hong Lim MLA (Member for Clayton)

9 Housing for the Aged Action Group

10 Kasaligan Pty Ltd

11 Kelvin Thomson MP (Member for Wills)

12 Law Institute Victoria

13 Long Island Retirement Village (Manager)

14 Mahons with Yuncken & Yuncken

15 Michael Anstis – Lawyer

16 Michael W Flynn – Retirement VillageConsultant

17 Ministerial Advisory Council of Senior Victorians

18 The Hon. Neil Lucas PSM MLC (Member for Eumemmerring Province)

19 Russell Kennedy Solicitors

20 National Council of Women of Victoria

21 Residential Care Rights

22 Residents Rights

23 Retirement Village Association Australia

24 Tenants Union of Victoria Ltd

25 Southern Cross Care

26 Supportive Residents & Carers Action GroupInc

27 Susan Davies MP (Member for Gippsland West)

28 Vasey Housing Limited

Plus 73 Submissions from residents andresidents’ committees


55Appendices

Appendix 2Submissions received in the review


57Appendices

Appendix 3Stakeholder liaison

Jill Thompson Council on the Ageing 16 April 2002

Chris Spark Seniors Information 17 April 2002

Sandra McCollough Residential Care Rights 09 April 2002

Peter Govan Retirement Villages Association 23 April 200

John Corchran Russell Kennedy Solicitors 23 April 2002

Peter Inge Zig Inge Group 24 April 2002

Chris Daly Australian Retirement Communities 24 April 2002

Jeff Fiedler Housing for the Aged Action Group 30 April 2002

Workshop with 20 residents Council on the Ageing 01 May 2002

Residents group Port Phillip Retirement Village 07 May 2002

John Krimmer & Tony Roberts Village Life 09 May 2002

Terry Porter Brotherhood of St Laurence (GK Tucker Settlement) 15 May 2002

Di McKellar Southern Cross Care 21 May 2002

Interdepartmental group DHS – Aged Care and Office of Housing 27 May 2002

Anthony Mutton & Mary Barry Victorian Association of Health & Extended Care 29 May 2002

Workshop with 12 residents Housing for the Aged Action Group 04 June 2002from community-auspiced villages

Interdepartmental group DHS – Aged Care and Office of Housing) 01 July 2002

Peter Govan Retirement Villages Association 02 July 2002

Jill Thompson Council on the Ageing 02 July 2002

Beverly Kliger Beverly Kliger and Associates 03 July 2002

Presentation to approx 50 Municipal Association of Victoria 31 July 2002municipal council representatives

Residents group The Village, Williamstown 10 September 2002

Peter Govan, Peter Inge Retirement Villages Association 07 November 2002& Chris Daly

Jill Thompson Council on the Ageing 12 November 2002

Jeff Fiedler Housing for the Aged Action Group 20 November 2002

Jill Coyne Department of Human Services 29 November 2002

Jill Thompson Council on the Ageing 09 January 2003

Jill Thompson Council on the Ageing 10 March 2003

Jill Coyne & Dennis Gaylard Department of Human Services 19 March 2003

Jill Thompson Council on the Ageing 20 May 2003

Matthew Evans & Municipal Association of Victoria 22 May 2003Heath Downie

Tony Roberts Village Life 04 June 2003

Don Reddin Resident 02 July 2003

Sean McNelis Swinburne Institute of Social Research 10 July 2003

Jill Thompson Council on the Ageing 10 September 2003

Round table workshops on key issuesarising in submissions to the review

Analysis of relationship between ingoingcontributions and deferred managementfees project (undertaken by Beverly Kligerand Associates)

Retirement village dispute resolution 23 January 2003

Resident participation 30 January 2003

Analysis of the relationship between ingoing 19 December 2002 & 07 March 2003contributions and deferred management fees (undertaken by Beverly Kliger)

Residential parks 01 May 2003

Issues for not for profit operators 19 May 2003

David Cousins Consumer Affairs Victoria, 07 February 2003Director

Sharon Barker Consumer Affairs Victoria, 19 December 2002

Policy Officer, Policy Branch 07 February 2003

07 March 2003

Lois Goodes Consumer Affairs Victoria, 19 December 2002

Manager of Policy Branch 07 February 2003

07 March 2003

Denis Fitzgerald Consumer Affairs Victoria, 07 February 2003

Assistant Director, Corporate Operations 07 March 2003

Damian MacDonald Consumer Affairs Victoria, 07 February 2003

Assistant Director, Policy & Dispute Reduction

Anne Cousins Consumer Affairs Victoria, 07 February 2003

Manager of Operational Policy

Alessandra Daly Consumer Affairs Victoria, 07 February 2003

Legal Officer

Jill Thompson Council for the Ageing, 19 December 2002

Policy Officer

Chris Daly Retirement Communities Australia 17 December 2002

07 March 2003

27 March 2003

Peter Nilsson Retirement Village Association Victoria, President 17 December 2002

The Village Glen 07 March 2003

27 March 2003

Peter Govan Retirement Village Association Victoria, Secretary 07 March 2003

Peter Inge Retirement Village Association Australia, President 17 December 2002

Zig Inge Group 07 March 2003

27 March 2003

58Appendices



59Appendices

Appendix 4Accommodation types and consumerprotection

Accommodation Options Specific Legislation Other Relevant Legislation

HOME/UNIT OWNERSHIP Sale of Land Act 1962 Fair Trading Act 1999

Subdivision Act 1988 Trade Practices Act 1974

HOME/UNIT Residential Tenancies Act 1997 Fair Trading Act 1999

PRIVATE RENTAL Trade Practices Act 1974

HOME/UNIT Residential Tenancies Act 1997 Fair Trading Act 1999

PUBLIC RENTAL Trade Practices Act 1974

RETIREMENT VILLAGE Retirement Villages Act 1986 Fair Trading Act 1999

RESIDENT FUNDED Subdivision Act 1988 Trade Practices Act 1974

(freehold title)

Sale of Land Act 1962 Fair Trading Act 1999

(freehold title) Trade Practices Act 1974

RETIREMENT VILLAGE Retirement Villages Act 1986 Fair Trading Act 1999

COMMUNITY AUSPICED Trade Practices Act 1974

SUPPORTED RESIDENTIAL SERVICES Health Services Act 1988 Retirement Villages Act 1986

(SRS) Trade Practices Act 1974

ROOMING HOUSE Residential Tenancies Act 1997 Health Act 1958

BOARDING HOUSE Trade Practices Act 1974

PRIVATE HOTELS ETC

(Prescribed Accommodation)

RESIDENTIAL AGED CARE SERVICES Aged Care Act 1997 (Commonwealth Fair Trading Act 1999

(low-level or high-level) Trade Practices Act 1974

CARAVAN PARK Residential Tenancies Act 1997 Fair Trading Act 1999

Own caravan Trade Practices Act 1974

Rented caravan

RESIDENTIAL PARK Residential Tenancies Act 1997 Fair Trading Act 1999

Own prefabricated dwelling on Trade Practices Act 1974

rented site


61Appendices

Appendix 5Legal structures of residence contracts

Strata Title OwnershipResidents who enter into a strata titlearrangement own the freehold title to their unit.The common property of the village is co-ownedby the residents as tenants-in-common.Residents are responsible for maintenance of theirown unit. Pursuant to the Subdivision Act 1988,a Body Corporate Committee (elected by unitowners) is responsible for the management andmaintenance of the common property. Often amanager will be contracted to carry out thesetasks.

Long-term Lease or LicenseAccording to the Retirement Villages Associationthis is the most common arrangement. In payingan ingoing contribution, a person is given a leaseor a license to live in a particular retirementvillage unit for anything ranging from 49 to 199years. When a resident eventually leaves thevillage or dies, the lifetime lease or license may betransferable and can be resold to another person.

Some leases/licenses are not transferable. In suchinstances, the residence contract will include aformula outlining the deductions that are to bemade from the original ingoing contribution.When units under this arrangement becomeavailable, another non-assignable long-termlease/license is granted to a new resident.

Shares in a CompanyIn this arrangement a prospective resident buys ashare or a number of shares in a company whoseArticles of Association permit that person to livein a prescribed unit in a village for the rest oftheir life or as long as they wish.

Units in a Unit TrustThis arrangement is very similar to a company sharescheme in that prospective residents buy a unit orunits in a unit trust. It is different from a company inthat a unit trust cannot own property in its ownright. The trustee on behalf of the trust confers onthat person the right to occupy a residential unit ina retirement village for the rest of their life or aslong as they wish (much like that of the Articles ofAssociation in a company structure).

Periodic tenancyPeriodic tenancy arrangements are sometimes usedby not-for-profit organisations running community-auspiced villages. This is a lease (written or verbal)between the resident and the owner in which thereis no fixed date for the end of the lease. In otherwords, the agreement operates from rental periodto rental period. In some cases a resident will pay aningoing contribution, some or all of which may berefundable at the end of the tenancy period. Therental paid by the resident gives them the right tolive in the unit and use any common facilities.


63Appendices

Appendix 6Comparison between Retirement VillagesAct and Residential Tenancies Act

Remedy thebreach

Notice to vacate:

Failure toremedy breach

No reason

Change of use

Special careneeded

Fixed

28 days

60 days(substantialbreach only)

N/A[Assumes

tenancy ends atend of fixed

term]

14 days (only ofcontract

provides for thisground)

Periodic

28 days

60 days(substantialbreach only)

6 months or endof rent period (if later than 6 months)

14 days (only ofcontract

provides for thisground)

Fixed

Usually 14 days

14 days on 3rd breach orbreach of VCAT

compliance order

120 days or endof fixed term

(if later)

60 days or end

of fixed term

(if later)

Tenant gives

notice: 14 days

or end of fixed

term (if later)

Periodic

Usually 14 days


compliance order

120 days

60 days

Tenant gives

notice: 14 days

Usually 7 days


compliance order

120 days or end of any fixed

term (if later)

6 months or

end of any fixed

term (if later)

Standard NITV:

7 days

Retirement Villages ActTenancy

Retirement Tenancies ActTenancy Caravan Park

Residency

Cancellation of RV notice required.Owner can apply to Director aftergiving residents 60 days’ notice to

make submissions


65Appendices

Appendix 7Benchmarks for Industry-Based ConsumerDispute Resolution Schemes

1 Accessibility – The scheme makes itself readilyavailable to consumers by promoting knowledge ofits existence, being easy to use and having no costbarriers.

2 Independence – The decision-making processand administration of the scheme are independentfrom scheme members.

3 Fairness – The scheme produces decisions thatare fair and seen to be fair by observing theprinciples of procedural fairness, by makingdecisions on the information before it and byhaving specific criteria upon which its decisions arebased.

4 Accountability – The scheme publicly accountsfor its operations by publishing its determinationsand information about complaints and byhighlighting any systemic industry problems.

5 Efficiency – The scheme operates efficiently bykeeping track of complaints, ensuring complaintsare dealt with by the appropriate process or forumand regularly reviewing its performance.

6 Effectiveness – The scheme is effective by havingappropriate and comprehensive terms of referenceand periodic independent reviews of itsperformance.

Consumer Affairs Victoria

Consumer Helpline

1300 55 81 81 (local call charge)

Website www.consumer.vic.gov.au

March 2004C-12-01-777

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