Reform to the regulation of the retirement village sector in Western Australia

December 16, 2024

Throughout 2024 the media has aired allegations about operators in the retirement village industry "gouging" and "ripping off" their residents by the exit and refurbishment fees that operators commonly charge when a resident leaves a retirement village. However, any perception caused by the media that the sector is not highly regulated is misconceived and the sector in Western Australia is about to become further regulated by reforms which parliament recently passed.

Retirement villages in WA are regulated by the Retirement Villages Act 1992 (WA) (RV Act) and the Fair Trading (Retirement Villages Code) Regulations 2022 (WA).

In addition, many retirement village operators in Western Australia are signatories to the Retirement Living Code of Conduct; being a voluntary industry code established by the Retirement Living Council and Leading Aged Services Australia.

On 5 November 2024, the Parliament of Western Australia passed the Retirement Villages Amendment Bill 2024 (RV Bill) which will again reform the RV Act.

The RV Bill implements the second stage of reforms recommended by the Statutory Review of Retirement Villages Legislation Final Report published in 2010 by the WA Government.

The WA Government says that the RV Bill reforms aim to promote confidence in the sector to support future development and ensure that residents of retirement villages are able to make well-informed choices about entering a retirement village and manage the transition to alternative accommodation or aged care if the retirement village no longer meets their needs.

The reforms predominantly target the entry and exit stages of retirement village living by introducing:

(a) new disclosure requirements that require operators to provide to prospective residents of a retirement village:

(i) a community arrangements statement in the approved form providing information about the services and amenities and the residential premises that are available or provided to residents which statement must also be made continuously available to the public on its website and updated if community arrangements change; and

(ii) a prospective resident information statement in the approved form providing a prospective resident with:

(i) a summary of the estimated costs of the person:

1. entering into occupation of a residential premises in a retirement village;
2. living in the retirement village; and
3. leaving the retirement village.

(ii) their rights under the RV Act.

(b) a public register administered by the Department of Energy, Mines, Industry Regulation and Safety (DMIRS) providing prospective residents with information about the retirement village and corresponding requirements for operators to provide information to the DMIRS for that purpose;

(c) a requirement for operators to prepare and provide a condition report of a premises within 7 days of a resident entering into occupation of a residential premises and within 14 days of a resident permanently vacating a residential premises;

(d) a new maximum time limit of 12 months after a resident leaves a retirement village:

(i) for the payment to them of their exit entitlements; or

(ii) completion of buybacks of freehold interests or interests from the purchase of any interests in a purple title scheme (schemes defined by holding a share of a landholding entity)

which period might be extended by the Commissioner conditionally or unconditionally by up to a further 12 months on application by the operator if the Commissioner is satisfied that exceptional circumstances make it unreasonable for the operator to otherwise comply with this requirement;

(e) the power for regulations to be made that require operators on the request of an exiting resident entering aged care to pay the cost of aged care accommodation from that resident's exit entitlement until the exit entitlement is paid to them;

(f) new restrictions on the ability of operators to require a resident to pay the costs of reinstatement and renovation of retirement village premises on departure from a retirement village which essentially provides that:

(i) the scope of reinstatement work is determined by the above referred to incoming property condition report;

(ii) any required renovation works must be carried out in accordance with an agreed renovation plan; and

(iii) the cost of the agreed renovation works must be agreed between the resident and the operator determined by the State Administrative Tribunal.

Other amendments include provisions about:

(g) the rights of residents to enforce contracts entered into with a former operator where the retirement village is subsequently sold to a new operator;

(h) the requirement for operators to maintain or replace village capital items, to maintain a capital works plan and maintain a dedicated fund for capital maintenance at the village;

(i) the modification, including redevelopment, of retirement villages and how operators must consult and obtain approval from residents or the State Administrative Tribunal unless the modifications are of a kind prescribed in the RV Act that does not require approval.

What do the changes mean for WA Retirement Village Operators and their Officers?

Operators in Western Australia should familiarise themselves with the reforms and start implementing changes to comply with the reforms which the WA Government has said will commence in the second half of 2025. The WA Government has also said that operators will have 12 months to comply with the new exit entitlement time limits.

Many of the new provisions include substantial penalties for non-compliance. For example, operators who do not comply with the above referred to disclosure obligations will be exposed to a penalty of AU$20,000 for individual operators or AU$100,000 for corporations.

Similarly, operators who fail to pay exit entitlements or complete buybacks in accordance with the new requirements face penalties of AU$20,000 or AU$100,000 for individual and corporations respectively.

However, liability for contraventions does not necessarily stop with the operator. Directors and other officers of body corporate operators are currently at risk of criminal prosecution in relation to 12 offences in the RV Act if they fail to take all reasonable steps to prevent the operator from commissioning an offence. The reforms increase this liability to 28 offences.

It is anticipated that regulations will be passed which prescribe details and give greater clarity about what operators will need to do to comply with the amendments to the RV Act. For example, the regulations are expected to prescribe the information that must be included in the above referred to disclosure statements and premises condition reports.

DMIRS is undergoing a consultation process about those regulations and Dentons will provide a further client alert when those regulations have passed through parliament.

Although an understanding of the regulations will be required to fully understand operator and resident's rights and obligations, operators should start planning for the changes to the RV Act.

Operators will need to ensure that they have the financial resources available to them to meet their increased obligations, particularly those obligations associated with the payment of exit fees and compulsory buybacks and the impact that will inevitably have on operators' cashflow.

Whilst achieving a sale of a residential premises in a retirement village within 12 months might not be difficult in buoyant market conditions, the changes could expose operators to substantially more risk in less favourable conditions. The introduction of compulsory buybacks in Queensland in 2019 was attributed to being the primary cause of an insolvency event and the subsequent appointment of receivers and managers of an operator of 5 retirement villages located in Queensland and Western Australia.

Operators who anticipate that they will not be able to comply with new buyback obligations should seek advice from a lawyer about their rights to obtain an exemption of the exit entitlement and buyback provisions.

The consolation for operators is that if they are required to buyback residential premises, because they cannot sell them to a third party within the stipulated period, section 112 of the Duties Act 2008 (WA) will be amended to ensure that operators will not be liable for duty on that transaction.

Western Australia is not the only jurisdiction in which there has been significant reform. Both South Australia and Victoria have recently introduced bills reforming their respective retirement villages legislation.

Dentons is available to advise retirement village operators about all aspect of compliance with their obligations under the RV Act and beyond. Further, with offices located across most Australian jurisdictions, Dentons can advise operators wherever they operate. Please contact us, we can and are here to help.