The Government has today announced proposed reforms to the Retirement Villages Act 2003 (the Act). 

The announcement follows a lengthy review process (our previous article can be found here) and the reforms will impact both operators and residents, with some changes applying to existing occupation right agreements (ORAs). 

Of note:

• The introduction of a mandatory 12 month timeframe to pay outgoing residents their repayment sums
• In addition to the above, a requirement to pay residents interest on their repayment sums starting from six months following termination.
• Provision for former residents to have early access to their repayment sum in certain circumstances.
• Changes (broadly as expected) around fees, operator chattels and management of complaints and disputes.
• New regulations for disclosure statements and ORAs intended to simplify the documents and increase consumer protections around misleading statements and unfair terms.

These are discussed in further detail below.

Material changes to repayment obligations 

Likely to be the most contentious change announced, operators will be required to pay outgoing residents their repayment amount no later than 12 months after termination of their ORA. This requirement (has been mitigated by the prospective nature and potential exemptions but still has the potential to create issues around the sustainability of the financial model for some operators.

Operators will also be required to pay interest on residents’ repayment amounts from six months following termination until the date of repayment. This is on top of the 12 month mandatory repayment (rather than instead of, as many in the industry had lobbied for), providing for an unexpected double-up of costs for slow-selling units.

Residents will be able to apply for early access to their repayment amount in situations of need (such as transferring to aged residential care).

Importantly, there is a lead-in time for introduction of these changes, which are stated to apply prospectively only, to ORAs entered into one year after the amendment bill has been passed. Possible exemptions and extensions from the early-access applications and maximum repayment timeframe have been signalled – notably that the 12 month repayment timeframe will not apply to villages with less than 50 units.

These changes won’t ‘bite’ for awhile so there is time to consider – and a further opportunity to input on the scope of the changes and appropriate exemptions when the amendment bill reaches the Select Committee next year.

Fees, chattels and complaints

As expected, the announced changes include the following:

• Village fees will stop and fixed deductions will not accrue past the date the resident moves out of their unit. 
• Residents will not be liable for capital losses on resale of their unit unless they benefit from capital gains. 
• Operators will be responsible for identifying, and for the cost of maintaining, repairing and replacing, their chattels and fixtures in residents’ units. Additional rules will be introduced relating to ‘gifting’ chattels to residents (presumably prevent the maintenance and cost obligations being transferred to residents). 
• A new independent and externally provided disputes scheme will be introduced, funded by operators. Residents are expected to initially raise complaints with the operator with the scheme there to assist to reach a negotiated outcome or provide a binding decision where a resolution can’t be found.

These changes look set to be effective once the legislation is passed and, other than the changes in respect of chattels and fixtures (where retrospective application is unclear at this stage), will apply to both existing and new ORAs.

Legal documents, compliance and enforcement

• Regulations regarding ORAs and disclosure statements will be introduced with the stated aim of simplification and easier access, as well as ensuring operators are upfront regarding future services and facilities being offered.
• The Registrar of Retirement Villages will gain new enforcement powers related to misleading and deceptive documents and advertising.
• The Act will be amended to allow for regulations to be made to prohibit certain unfair terms from being included in ORAs.

These changes have the potential to significantly impact the commercial terms of ORAs and impose obligations on retirement villages operators materially over and above the Fair Trading Act 1986 requirements.

While we see benefits to be gained in simplifying (and hopefully reducing) the amount of information required to be included in disclosure statements and ORAs, these changes will need to be carefully considered to make sure they reflect the nature of retirement villages, in particular the need for villages to change over time and to remain financially and operationally viable. 

Conclusion 

While broadly consistent with what had been signalled to date (with noted exceptions above), the proposed changes have the potential to be much more far reaching than expected. It will be interesting to see what impact they may have on investment and development in the retirement village (and related aged care) sector.

We look forward to the introduction of the bill in mid-2026 and considering the detail of the changes proposed.

If you would like to discuss the implications of any of the proposed changes, please get in touch with our team of experts.