The NSW government has introduced the Retirement Villages Amendment Bill which contains a number of changes that will, if passed, have a significant impact on the operation of retirement villages in NSW.

One of the highlights of the Bill is a new definition of 'capital gain'.

Defining 'capital gain' is a welcome response to confusion in the industry arising out of the decisions of the NSW Consumer, Trader and Tenancy Tribunal (Tribunal) in the cases of Hayes v Fernbank Developments Pty Limited (2006) and Turner as executors of will of late Lloyd Edgehill Turner (2007). The new definition removes the uncertainty as to how it is determined whether an outgoing resident is entitled to at least 50% of capital gains achieved in respect of their premises, which is integral to their classification as an 'owner' or 'non-owner' under the existing Retirement Villages Act.

Other proposed amendments of significance include:

  • The replacement of the concept of an 'owner' with the new term 'registered interest holder'. The change in terminology will have limited practical effect.
  • The automatic creation of a charge to secure the repayment of ingoing contributions to residents who are not registered interest holders. This could create issues for operators looking to refinance as the charge in favour of residents will have priority over any newly created charges.
  • The creation of a 90-day settling-in period during which residents may elect to terminate their resident contract. The operator will need to repay all amounts paid by the resident, less fair market rent, repairs for damage and a reasonable administration fee.
  • A requirement to notify the Registrar-General that land is used as a retirement village.
  • A requirement to provide prospective residents with a 'general inquiry document'. The content of this document will be specified in the yet to be published regulations, and will be in addition to the currently used disclosure statement which will need to be provided separately.
  • Where recurrent charges do not increase by a fixed formula, a right for operators to increase those charges by CPI without approval from residents.
  • A reduction in the time that former residents are liable to continue paying recurrent charges. There are new rules regarding former registered interest holders paying a proportion of recurrent charges based on their entitlement to a proportion of capital gains.
  • An obligation on the operator to make good any deficits in the annual accounts of the village, subject to some exceptions.
  • A right of a former resident to ask the Tribunal to recalculate a payment made by the operator to the resident in certain circumstances.

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