1. CRICOS No. 00213J a university for the world real R Retirement Village Tenure – What is it? Dr Lucy Cradduck, Lecturer, QUT API NSW Country Conference 4-5 May 2012, Newcastle

2. CRICOS No. 00213J a university for the world real R PRESENTATION OUTLINE Research context Why is this important? What is a ‘retirement village’? What is a SCILU? Tenure Types Changes Issues

3. CRICOS No. 00213J a university for the world real R RESEARCH CONTEXT The number of retirees is increasing (ABS December 2011) Australia 2013 (est.) Australia 2031 (est.)

4. CRICOS No. 00213J a university for the world real R Considerations Fundamentals of RV industry remain strong but >80% retirees still live in ‘traditional’ housing (ABS 2006) Previous research has looked at - –Appropriate valuation methodologies (Elliot, Earle & Reed, 2002; McAuliffe, 2010) –Public housing/rental accommodation (McNelis, 2004) –Ability of aged care facilities to meet long term demand (Csesko and Reed, 2008) –Push/pull factors, i.e. health or death of spouse (Stimson and McCrea (2004) –Impact of tenure type in Qld (Blake and Cradduck 2010) and Australia-wide (Cradduck and Blake, 2012)

5. CRICOS No. 00213J a university for the world real R WHY IS THIS IMPORTANT? RVs targeted at lifestyle and ‘longevity’ i.e. moving in and living there until death But Some residents leave ‘early’ for reasons other than death Divorce, relocating after death of first resident, health Despite legislated disclosure obligations confusion exists over the tenure obtained and associated fees and when these are payable –Low ‘prose’ and ‘document’ literacy levels (ABS 2006a) –Lack of communication with children Retirees’ desire to preserve capital is at odds with many retirement village offerings

6. CRICOS No. 00213J a university for the world real R WHAT IS A RETIREMENT VILLAGE? Section 5 RVA – –… a complex containing residential premises that are: (a)Predominantly or exclusively … occupied, by retired [person who have entered into village contracts with an operator … Not Aged care Nursing home Residential parks and mobile home estates Boarding house Employee accommodation in RV Agreements with NSW Aboriginal Housing Officer or NSW Land and Housing Corporation

7. CRICOS No. 00213J a university for the world real R Relevant NSW legislation Retirement Villages Act 1999 Retirement Villages Regulation 2009 Strata Schemes Management Act 1996 –In a strata retirement village the residents are responsible for the capital items in their SCILU In other villages, the operator maintains capital items not belonging to residents –A strata retirement village bylaws can restrict occupation by under 18 year olds Other strata schemes cannot –A strata retirement villages’ financial statements are separate for those related to the provisions of RV services –A strata retirement village can restrict occupation based on age Other strata schemes cannot –Strata scheme financial statements separate from those for RV services

8. CRICOS No. 00213J a university for the world real R SCILU An RV is consistently defined as a complex of dwellings where older, or retired, members of the community reside or that which is used for the purpose of a RV scheme No definition of SCILU (self contained independent living units) –Can be stand alone villa, unit, duplex, OR townhouse –“Self care” or “serviced” Generally SCILU tenure is offered as one of – –Loan and/or License agreement –Leasehold/Freehold –Rental

9. CRICOS No. 00213J a university for the world real R TENURE TYPES Leasehold –Registered lease on RV title deed Licence to Occupy and Loan –Loan of funds with licence to occupy –Lesser rights Freehold/Strata –Individual title registered in residents’ name –In practice usually have agreement where resident will pay percentage of CG plus DMF on leaving Rental - rare Company title schemes – rare –Similar to strata operated under company title with shares to residents

10. CRICOS No. 00213J a university for the world real R Related matters Financial aspects associated with tenure – The ‘buy-in’ costs – Deferred management fees (‘DMF’) Also referred to as ‘exit’ fees as payable only on a resident ‘leaving’ – Participation in capital gains/losses – Ongoing recurrent charges Strata fees (if applicable) Service fees (various as applicable) May be payable until new resident takes up occupancy – need to check actual agreement

11. CRICOS No. 00213J a university for the world real R DMF Departure fee payable on exiting RV Not consistent –Can range from 4% to maximum 40% Information not easily accessible Terms of agreements change over time –Need to check the specific RV documentation for relevant unit to ascertain exact amount –Need to check relevant legislative provisions at time the RV documentation was signed

12. CRICOS No. 00213J a university for the world real R Capital gain/loss Not consistent –Range from no entitlement to 100% –Strata – may have obligation back to pay fee even if freehold title in residents’ name Information not easily accessible Terms of agreements change over time –Need to check the specific RV documentation for relevant unit to ascertain exact amount –Need to check relevant legislative provisions at time the RV documentation was signed

13. CRICOS No. 00213J a university for the world real R CHANGES New proposed Standard Form Village contract –Consultation ends 18 May 2012 –Will apply to all tenure types –If strata or freehold will also need a sale contract –See Fair Trading NSW website http://www.fairtrading.nsw.gov.au/About_us/Legislation/Comment_on_proposed_legislation/Standard_contract_for_retirement_villages.html Issue Existing contracts will continue to be valid

14. CRICOS No. 00213J a university for the world real R Extract from Standard Form Village Contract

15. CRICOS No. 00213J a university for the world real R ISSUES Does the ability to participate in capital gain/loss or related fees/DMF impact on value? Does the application of RV specific legislation impact on value? In a RV does the limited pool of potential residents impact on value? For a strata retirement village need to check both strata scheme and RV financial data Depending on tenure type – who owns capital items in the resident’s unit? Are you reviewing the correct version of the RV contract and law?

16. CRICOS No. 00213J a university for the world real R Any questions? Contact – l.cradduck@qut.edu.aul.cradduck@qut.edu.au