Further changes to the Queensland Retirement Villages Act will commence on 11 November 2019. While some of these amendments will have an immediate impact, others will have no practical effect until associated Regulations and/or approved forms are made.
Background
The Housing Legislation (Building Better Futures) Amendment Act 2017 (Q) (HLAA) received royal assent on 10 November 2017 and amended a number of Acts, including the Retirement Villages Act 1999 (Q) (RV Act). Some of the amendments to the RV Act commenced on the date of assent, while others commenced by proclamation on 1 February 2019. As no further proclamation has been made to bring the balance of amendments into force, those remaining changes will automatically commence on 11 November 2019.
However, some of those remaining changes will have no practical effect until associated Regulations and/or approved forms are made.
Operators will recall that the Department of Housing and Public Works (Department) previously advised that the balance of changes would be implemented in two stages as follows:
- Stage 2 – Standardised residence contracts, village closures, redevelopment and changes of operator;
- Stage 3 – Standardised financial reports and budgets.
During 2019, the Department has been consulting stakeholders regarding draft plans for village closures, redevelopment and changes of operator. The latest drafts of these plans released by the Department (which are not necessarily final) can be found here:
- Closure plan draft version for stakeholders
- Transition plan draft version for stakeholders
- Redevelopment plan draft version for stakeholders
The Department has not yet made available any drafts of standardised residence contracts, financial reports or budgets. The Department’s website states that amendments to the Retirement Villages Regulation 2018 (Q) to implement these further changes will occur in stages through to 2020.
Accordingly, the Department’s demarcation between Stages 2 and 3 appears to remain broadly applicable, although their previous timetable has been delayed and Stage 2 may be implemented in more than one sub-stage.
Provisions having practical effect from 11 November 2019
Based on consultation with the Department to date, it appears that the following changes to the RV Act will have practical effect from 11 November 2019:
Redevelopment plans – Operators who propose to carry out a “running redevelopment” of a village must prepare and comply with an approved redevelopment plan. A running redevelopment is a redevelopment carried out without winding down the village or stopping the village from operating, including temporarily. “Redevelopment“ is very broadly defined and includes constructing or demolishing a unit, building or structure; expanding or reducing the area of a building, structure or the village; and changing the use of a building or structure. Based on the Department’s draft redevelopment plan, it appears this concept will be broadened further by Regulation to include expanding or reducing greenspace or parkland.
For some of these categories, minor works or changes are excepted. Also, an approved redevelopment plan is not required where every resident of the village was given written notice of the running redevelopment before becoming a resident, in their Public Information Document, residence contract, Village Comparison Document, Prospective Costs Document or the village by-laws.
Redevelopment plans will need to be in the approved form and may be approved either by special resolution of residents or the Department. The RV Act will set out a detailed procedure for having redevelopment plans approved.
Transition plans – Operators who propose to “transition control” of a village’s operation (e.g. by selling the village) must prepare and comply with an approved transition plan. Transition plans will need to be in the approved form and be approved by the Department. The RV Act will set out a detailed procedure for having transition plans approved. This new requirement will not apply to a transfer of control under a contract signed before 11 November 2019.
Closure plans – Operators who propose to close a village (including temporarily) must prepare and comply with an approved closure plan. Closure plans will need to be in the approved form and be approved either by special resolution of residents or the Department. The RV Act will set out a detailed procedure for having closure plans approved.
General services charge (GSC) – From 11 November 2019, operators will need to ensure that they establish a separate fund for GSC (GSC Fund). This fund will need to be a separate bank account. Some operators already elect to do so, but this will now be mandatory. The GSC Fund may only be used for the purpose of providing general services.
The RV Act already prohibits operators from including in GSC costs awarded against the operator by QCAT. This prohibition will be expanded to also include any legal costs incurred by the operator in relation to a “retirement village issue”. A “retirement village issue” is defined as a retirement village dispute or an application for an order under Sections 169 to 171 or 173 of the RV Act.
Currently, operators must pay the GSC for units that have not been occupied or for which there is no residence contract in force. From 11 November 2019, the RV Act will be amended so that this obligation is extended to units under construction or being renovated. This will also apply to Maintenance Reserve Fund (MRF) contributions. No clarification is provided as to when a unit is considered to be “under construction”. The report of the Parliamentary Public Works and Utilities Committee in September 2017 recommended that this provision be reviewed to ensure that operators are only liable to pay GSC for new units once they have been appropriately certified for occupancy. This recommendation was rejected by the Government. Attempts by industry to engage further with the Department on this issue have been met by disappointing responses.
Sections 106 and 107 of the RV Act (dealing with the CPI limit on GSC increases and associated exceptions) will be replaced and clarified, though their effect will be similar to the current provisions. One important change is that, consequent upon MRF contributions no longer being treated as part of GSC, the reference to MRF contributions in the Section 107 exceptions will be deleted. This means that, where MRF contributions for a financial year do not increase by more than CPI, this will no longer assist operators to satisfy the CPI limit in respect of total GSC for that financial year.
MRF contributions – The MRF budget process will be more restrictive. Currently, an operator is obliged to use its best endeavours to implement its quantity surveyor’s recommendations, in the context of any circumstances that were apparently not considered by the quantity surveyor. This discretion will be removed. Instead, the operator will be required to adopt an MRF budget that is consistent with and implements any recommendations in the quantity surveyor’s report, except to the extent that any part of the MRF budget has been agreed by special resolution of the residents. Failure to comply will now attract a pecuniary penalty.
Any resident will be able to request a copy of the draft MRF budget, not merely the residents committee. Failure to comply will now attract a pecuniary penalty.
Financial statements – Currently, quarterly financial statements must be given to a resident upon request. From 11 November 2019, operators will not be obliged to provide a quarterly financial statement that relates to a quarter earlier than the last two completed financial years.
The quarterly and annual financial statements will need to include income of the GSC Fund (in addition to expenditure, as currently required). For quarterly financial statements, this will only apply for the March 2020 quarter onwards.
Managers appointed by the Department – The circumstances in which the Department may apply to the District Court to have a manager appointed for a village will be expanded to also include breaches by the operator of certain requirements relating to redevelopment plans, transition plans and closure plans. More detailed provisions will also be inserted regarding the manager’s role and expenses they incur.
Provisions having practical effect from a future date
Based on consultation with the Department to date, it appears that the following changes will not have practical effect until a future date yet to be determined, once associated Regulations and/or approved forms have been made:
Requirement to use approved forms for certain purposes – In due course, it is expected that the Department will release the following approved forms, which operators will need to use:
- GSC budget;
- Capital Replacement Fund budget;
- MRF budget;
- Quarterly financial statement;
- Annual financial statement;
- Residence contract;
- Notice of intention to transfer control of a village’s operation;
- Notice of discontinuation of transfer of control;
- Notice to the Department of intention to close a village;
- Residents meeting notice, regarding a proposed village closure;
- Notice of discontinuation of village closure;
- Residents meeting notice, regarding a proposed redevelopment; and
- Notice of discontinuation of redevelopment.
While it is possible that the Department will release one or more of these forms on or before 11 November 2019, this would come as a surprise to industry, as no drafts have previously been released for consultation. The RV Act provides that any requirement in the RV Act to use an approved form does not apply if no such approved form exists.
Required and prohibited terms of residence contracts – Rather than (or perhaps in addition to) adopting a standard form of residence contract, the Minister will have power to create Regulations prescribing mandatory or prohibited terms for residence contracts. While it is possible that the Minister could do so with effect from 11 November 2019, this would come as a surprise to industry if done without further consultation.
Public safety equipment – The RV Act already allows the Minister to make a Regulation requiring the provision of equipment in a village for public safety (e.g. defibrillator). While no such Regulation has yet been made, the Minister could do so at any time.
What operators should do
Retirement village operators should:
- review their current templates, to ensure they remain consistent with these legislative changes;
- establish a separate GSC Fund for each village, if they do not already have one;
- ensure their calculation of GSC takes account of the new restrictions referred to above;
- liaise more closely with their Quantity Surveyor during the preparation of draft MRF budgets, before they are finalised;
- ensure their quarterly and annual financial statements comply with the new requirements referred to above;
- for village sales, ensure that the sale contract properly addresses the requirements of the new approval process and form;
- for developments or redevelopments, consider:
- the wording used to notify new residents of the development/redevelopment in their contractual and/or disclosure documents;
- the information to be included in the redevelopment plan, and the steps required to have it approved; and
- the new requirement for operators to pay GSC and MRF contributions for units “under construction” or being renovated (we have developed a contractual work-around for this purpose).
