Sale of freehold unit and the resale of the right to reside therein
About this article
This article is general information only and briefly explains the process where you hold the freehold interest of your accommodation unit and the unit is to be sold and the right to reside therein is offered for resale, when you voluntarily, or by death, terminate your right to reside.
Important information – your rights and obligations may differ from those explained in this article owing to the terms stated in your residence contract. See article – The importance of referring to your residence contract
Former resident – includes the personal representative (executor) under the will of a deceased former resident.
Legal advice and the law
It is important to obtain proper legal advice that is specific to your circumstances.
The Retirement Villages Act 1999 (the RV Act) is the law about retirement villages. In relation to your residence contract, it provides the general rights and obligations applicable to you and the scheme operator. However, your residence contract may provide you with more beneficial conditions than those in the RV Act.
The Body Corporate and Community Management Act 1997 provides the law about matters relevant to all community title schemes including those which are established in retirement villages.
What is being ‘sold’
Refer to article – Right to reside in accommodation unit
Your rights and responsibilities
Your specific rights and responsibilities when terminating your right to reside are set out in the documents which make up your residence contract. You must refer to these documents to ascertain the things to be done by you or by the scheme operator, and any fees and charges you have to pay.
Most scheme operators will have documented procedures that you will follow. They will also provide the necessary paperwork to be completed.
You may find that you are restricted in the way you can dispose of your freehold interest.
Estimate statement of exit entitlement
If you are considering leaving your village you are entitled to ask the scheme operator for an estimate statement of your exit entitlement.
You must not request a statement within 6 months of receiving a previous statement.
You must give the scheme operator a written notice which –
- states you are considering terminating your right to reside; and
- asks the written statement to be estimated as at the date you have dated your notice.
The scheme operator must give you the statement within 14 days of your notice.
Notice to terminate right to reside
The RV Act provides that you must give the scheme operator at least one month written notice, you are terminating your right to reside.
Note – certain timeframes for matters under your residence contract and the RV Act do not commence until your right to reside is properly terminated. To clarify, the 18-month period for payment of the exit entitlement does not commence where you remain living in your unit without terminating your right to reside but merely have your ‘unit for sale and marketed’. However, you may be able negotiate acceptable arrangements with your scheme operator.
Agreeing on resale value
Within 30 days after the right to reside is terminated, the former resident and scheme operator are to negotiate in good faith and, if possible, agree in writing on the resale value of the right to reside in the accommodation unit.
The value of the right to reside and the selling price for the freehold of the unit are one and the same.
After agreement is reached, the scheme operator will give you an exit statement showing the estimated final amount of money you will receive when the right to reside is resold and all the costs you will have to pay.
Resale value where agreement not reached
If the former resident and scheme operator cannot agree on the resale value within 30 days, the scheme operator must obtain a valuation from a registered valuer within a further 14 days
The valuation is taken to be the agreed resale value of the right to reside for the accommodation unit.
You and the scheme operator must share the cost of the valuer in the same proportion as the gross ingoing contribution on the sale of the right to reside, is shared under your residence contract.
After the valuation is provided the scheme operator will give you an exit statement showing the estimated final amount of money you will receive when the right to reside is resold and all the costs you will have to pay.
Condition of accommodation unit when leaving
You may be required to under the terms of your residence contract, or in some cases you may choose to, pay all or part of some type of work to be carried out by the scheme operator, or in some cases arranged by yourself, to have the unit returned to a marketable condition. The work may entail reinstatement or renovation depending on the terms of your residence contact and when it was signed.
Some requirements for reinstatement and renovation under various residence contracts and the RV Act, include the following –
- which matters may need your agreement
- what work may or must be carried out
- who pays for the work
- when the work must be completed by
- what you may do if you do not agree to the work, the completion date or their costs.
For more information, refer to the articles below.
Reinstatement and renovation work – contracts dated between 15 Mar 2006 & 31 Mar 2019
Reinstatement and renovation work – contracts dated from 1 Feb 2019
Who is entitled to market the right to reside in your accommodation unit?
The residence contract may restrict the way in which the freehold property may be disposed of.
Even though you are offering, for sale, the freehold property, it is usually the scheme operator who markets this together with a right to reside in your accommodation unit.
If the right to reside is not resold within 6 months after the termination date, you may engage a licenced real estate agent. You will be responsible for all costs associated with this.
Your residence contract may also allow you engage a real estate agent earlier than 6 months or to privately find a buyer.
Costs and expenses when selling
For all residence contracts dated from 1 July 2000, the RV Act prohibits the scheme operator from charging a fee, commission or other charge no matter what the fee is called for reselling the right to reside in your accommodation unit. However, a REIQ commission is usually payable to the agent who sells the unit.
The resident may have to pay a proportion of the costs for reselling a right to reside including that of a registered valuer engaged by the scheme operator where agreement cannot be reached about the selling value.
There will be various professional legal cost for preparation of relevant documentation, and Government fees relating to registration of various documents associated with the ownership of your unit and your residence contract – for example, terminating a registered lease, terminating a registered sublease and removing a registered caveat.
There will be professional costs associated with a solicitor you engage.
There may be costs associated with reinstatement work and/or renovation work which must be undertaken as provided by your residence contract.
Ongoing payment of charges after termination of right to reside
General services charges
Unless your residence contract provides more beneficial conditions you will be liable to pay 100% of general services charges until the following happens –
- 90 days has elapsed after you vacate (not terminate) your accommodation unit; or
- the Queensland Civil and Administrative Tribunal orders payment of the exit entitlement.
After 90 days has elapsed you are liable to pay general services charges for up to 9 months after you vacate your unit in the same proportion you and the scheme operator are to share the ingoing contribution on sale of the right to reside as provided by the residence contract. The scheme operator may accrue general services charges as a book debt against your exit entitlement. Interest must not be charged on this debt except for residence contracts made before 1 July 2000.
You do not pay general services charges after the right to reside is sold.
Maintenance reserve fund contribution
You do not contribute to the maintenance reserve fund after the right to reside is terminated.
Where you are liable to pay for personal services you do not pay for the service after the termination date of your right to reside where you have given notice. However, you may be liable to pay charges for personal service for up to an additional 14 days if you extend the termination date.
Body corporate fees and charges
You will be liable to pay body corporate fees and charges until your freehold unit is sold.
You may be liable for other fees and charges under your residence contract.
Scheme operator to tell resident of all offers
The scheme operator must promptly provide details of each offer received to purchase the former resident’s right to reside. There are penalties under the RV Act where the scheme operator does not do this.
You are also entitled to ask the scheme operator to provide the following information as soon as practicable after the end of each month while the right to reside remains unsold–
- all sales inquiries relating to the right to reside
- what steps the operator is taking to promote the sale of the right to reside
- particulars of all other rights to reside for sale in the village, including, the number of rights for sale, the size of the units, the selling prices of the rights and how long the rights have been for sale.
There are penalties under the RV Act where the scheme operator does not comply with the above request.
Limited grounds for scheme operator to refuse to accept offer
A scheme operator may refuse to accept an offer to purchase a right to reside in an accommodation unit only if –
- the operator reasonable believes the prospective resident is not within the age limits for residents as stated in the village comparison document; or
- the type of unit to which the right to reside relates is unsuitable for the prospective resident; or
- the right to reside was terminated because the operator is implementing an approved closure plan.
Updating agreed resale value of right to reside
Every three months
The former resident and scheme operator must, at least every 3 months, reconsider the resale value and, if possible, agree in writing on a new resale values (the updated value may be same as the previous value).
Where the resident and the operator are unable to agree, the operator must obtain a resale value from an independent valuer.
The valuation will be considered the agreed resale value of the right to reside.
If exit entitlement is payable before right to reside is sold
Where a right to reside remains unsold and the scheme operator and the former resident have not otherwise agreed on the selling value for the purpose of calculating the amount of exit entitlement, the scheme operator must obtain a valuation from a valuer, 14 days or less before the date the exit entitlement must be paid.
The valuation is taken to be the agreed resale value.
Accepting offers at less than agreed resale value
By scheme operator
If the scheme operator accepts an offer for a right to reside less than the agreed value, the former residents exit entitlement must be worked out as if the right to reside was sold at the agreed value.
By former resident
If the former resident accepts an offer for a right to reside less than the agreed value, the exit entitlement is worked out on the amount of the offer.
Appointment of a valuer
The valuer must be a person who is a registered valuer and is agreed on by the scheme operator and the former resident.
A valuer must be independent and must state any connection to, or an agreement with, the scheme operator that may call into question the independence of the valuation.
Where the scheme operator and former resident can not agree on the valuer, the scheme operator or the former resident must immediately inform Regulatory Services, Department of Housing and Public Works the by written notice. The department will decide the registered valuer within 14 days after the notice was received
Costs of valuer
The cost of the valuer is to be shared in the same proportion as the gross ingoing contribution is shared between the scheme operator and the former resident, under the residence contract.
Submissions to valuer
The valuer must inform the former resident and the scheme operator that submissions by the parties may be given to the valuer about the valuation, before a day decided by the valuer. Each party must also give a copy of their submission to the other party. Each party may also provide a response to the valuer by the date decided by the valuer, and reasonable in the circumstances, about the other party’s submission.
Matters to be considered by valuer
In preparing a valuation, the valuer must take into consideration –
- submissions and responses from the scheme operator and the former resident
- must conduct the valuation on the basis that the retirement village is operating and will continue to operate, normally
- the amount of the exit fee payable; and
- capital gain sharing arrangements.
The valuer must not take into consideration a different exit fee that would be payable by, or different capital gain sharing arrangements that would apply to any person who purchased the right to reside in the retirement village from the former resident.
Capital gain sharing arrangements means the provisions of the residence contract that state how the resident or former resident and the scheme operator are to share any capital gain on the sale of the right to reside.
Valuer may require information from scheme operator
The valuer may request certain information about the retirement village, the accommodation unit or the residence contract that the valuer reasonably requires to carry out the valuation. If the scheme operator does not comply with the valuer’s request within 14 days of the due date, the valuer will give you and the scheme operator a written notice of non-compliance.
Where a notice of non-compliance is given, a retirement village dispute exists between the former resident and the scheme operator. Remedies provided by Part 9 of the RV Act may then be relied upon.
This is the amount that you are liable to pay to the scheme operator when you terminate your right to reside in your accommodation unit. The exit fee is usually a percentage of either the ingoing contribution or the selling value and is calculated for the period of residency. Your exit fee will be calculated on a daily basis unless your residence contract was made before 1 July 2000.
The exit fee is retained by the scheme operator as revenue under the residence contract. The exit fee is credited to the account of the scheme operator when an exit entitlement is being calculated.
If the freehold interest in your property is being purchased by the scheme operator due to it not being sold before the expiration of 18 months, you do not have to pay an exit fee to the scheme operator completion of the purchase.
How is the exit entitlement calculated?
This is the amount due to you after your right to reside is terminated. A simplified example is shown below –
A. [ingoing contribution + capital gain/loss]
B. [exit fee + selling agent’s commission + reinstatement costs + renovation costs + scheme operators professional fees and Government charges for documentation + selling costs (e.g. proportional costs of valuer) + ongoing GSC charges + ongoing body corporate charges + charges for personal services + other payments provided in your contract]
C. exit entitlement
Note – some items in the above calculation will be included only where they are provided for in the residence contract.
When must an exit entitlement be paid?
For information, refer to the article – When exit entitlement is payable
You must be given a written statement
At the same time, you are paid your exit entitlement the scheme operator must give you a statement showing how the exit entitlement was worked out and also the particulars of any of the following that are payable by you –
- any exit fee
- any accrued general services charges
- any outstanding services charges and fund contributions
- any expenses relating to the resale of the right to reside
- any payments provided for in the contract.
There are penalties under the RV Act for a scheme operator who does not comply with the above requirement.
Relative of resident living in accommodation unit on termination of right to reside
For information see article – Relative of resident living in accommodation unit on termination of right to reside (not yet available)