Leaving a retirement village – exit entitlement orders

Operators must not delay selling your home

Retirement village operators must not delay selling your home without a valid reason. If they unreasonably delay the sale, the operator can be ordered to pay you your exit entitlement.

What an exit entitlement is

Exit entitlements are the payments made to residents when they permanently leave a retirement village.

What an exit entitlement order is

An exit entitlement order is made by the Commissioner for Fair Trading. It orders a retirement village operator to pay a former resident their exit payment early if:

• the premises are not sold within the prescribed period, or
• the operator causes an unreasonable delay of the sale.

Checking for delays

The Commissioner for Fair Trading will:

• request information from the operator to see if they have taken reasonable steps to sell your home
• consider the impact of the operator’s actions on other service providers supporting the sale of your home, such as a conveyancer or selling agent.

This includes things like whether the operator took reasonable steps to:

• carry out or arrange an inspection of the premises
• refurbish the premises.

Note: If you engage an independent real estate agent to sell your home and cannot show how the operator has delayed the sale of the property, the Commissioner for Fair Trading may not make an exit entitlement order.

Extensions for operators

In some cases, a retirement village operator may not be able to sell a property, even after making reasonable efforts. If this happens, the operator can apply to the Commissioner for Fair Trading to extend the time before an exit entitlement order can be made.

The operator must show evidence they have not unreasonably delayed the sale of the property.

An operator can:

• apply to the Commissioner for Fair Trading to extend the prescribed period before an exit entitlement order can be made
• request more time to pay the exit entitlement to the resident.

The operator must:

• use the request for extension form
• give the former resident written notice within 7 days of making the request
• explain why the extension is needed
• provide reasons and documents to support their claim.

Penalties apply if the operator does not give written notice to the former resident within 7 days of making the request.

The Commissioner for Fair Trading will only grant the extension if satisfied that the operator:

• did not unreasonably delay the sale
• did everything possible to enable the sale.

The former resident will also have a chance to respond to the operator’s request before a decision is made.

An operator can only make 1 extension request for the same residential property within a 12-month period. 

Determining the exit entitlement amount

The specific amount paid to a resident depends on the terms of their individual contract.

The contract takes several factors into account to determine the exit entitlement.

These include known components such as:

• the length of tenancy
• the amount of the ingoing contribution
• the interest rate applied to the deferred management fee paid by the resident when they leave the village
• any capital gain sharing arrangements. This depends on whether there was capital growth experienced over the tenure period.

Estimating the capital gain component

The capital gain component is estimated either:

• by agreement between the resident and operator, or
• by an independent valuation under the Retirement Villages Act 1999 (the Act).

An agreed valuation is an estimate of the value of the premises calculated by agreement between the resident and the operator, or by independent valuation. A former occupant may apply for an exit entitlement order only if the agreed valuation for the exit entitlement was calculated at least 30 days before making the application. See more about agreed valuations below.

The payment of exit entitlements to departing residents normally depends on:

• the sale of the premises, and
• another resident entering the village.

Exclusions

Residents who are in strata schemes, company title and community title, are excluded from these particular provisions on exit entitlements.

Application form

If you believe that you are eligible, please fill in the exit entitlement application form.

Limitations on making an application for an exit entitlement order

A former resident can only put in an application for an exit entitlement order to the Commissioner for Fair Trading once in the prescribed period if:

• the application is accompanied with an agreed valuation that was made at least 30 days prior to the date of the application
• their property has not been sold
• the prescribed time limit has been reached, and
• the Commissioner for Fair Trading has not issued an order.

The time periods are:

• 6 months for metropolitan local government areas (LGAs)
• 12 months for all other NSW LGAs, or
• an alternative time limit approved by the Commissioner for Fair Trading upon application from the operator. 

Calculation of the property value that forms part of the exit entitlement

The estimated sale amount can be the amount agreed between a former resident and an operator.

Estimated sale amount and capital gain component

If the parties agree on the sale amount this determines the capital gain component of the exit entitlement. The former resident can include this amount in their exit entitlement order application to the Commissioner for Fair Trading.

Agreed valuation

The exit entitlement order application must include an agreed valuation. This valuation must have been made at least 30 days before the date of the application.

An agreed valuation is an estimate of the value of a former resident’s residential premises. It is calculated either by:

• agreement between the former resident and the operator of the retirement village, or
• an independent valuer if the former resident and the operator cannot agree.

This agreed valuation will affect the payment of the exit entitlement order. But it does not affect the payment of accommodation payments under the aged care rule.

If a former resident and operator cannot agree on the estimated sale amount, the Act requires that the value of the premises is decided by an independent property valuer who:

• has appropriate experience or expertise to undertake valuations, and
• is independent; that is, does not have a conflict of interest.

The independent valuer will be appointed by agreement by the former resident and the operator.

If the parties cannot agree on a valuer, the President of the NSW division of the Australian Property Institute will appoint the valuer.

The cost of the valuation is split equally by both parties.

When the 6 or 12-month prescribed period starts

The 6 or 12-month prescribed period starts 40 days after the following, whichever occurs first:

• the date the former resident’s premises are first advertised for sale
• the date the former resident permanently leaves the premises and returns all keys to the operator, or
• the date the former resident gives written notice to the operator that they do not intend to move out of the premises while the premises are for sale.

The 40-day period gives the operator time to prepare the paperwork for the sale of the residential premises and to complete any necessary refurbishment.

A person has permanently left the premises when either:

• a person moves out of the premises and provides vacant possession of the premises, or
• where the executor or administrator of the person’s estate delivers up vacant possession of the person’s residential premises to the operator of the retirement village after the person’s death.

In both circumstances this includes handing back the property keys to the operator so that the responsibility for selling the property clearly falls to the operator. 

Where the actual sale price is:

• less than the agreed estimated value of the premises, the former resident will not be required to pay the operator the difference in the values
• more than the agreed estimated value of the premises, the operator will not be required to pay the former resident the difference in the values.

Avoiding losses through estimation

You can take advantage of a rising property market and avoid any potential losses incurred through estimating the exit entitlement. To do this, you will need to forego applying for an exit entitlement order. Instead, you can wait for your property to be sold under the provisions of section 180 of the Act.