Get InvolvedNew spouse living with a resident
About this article
This article provides 3 options, which a scheme operator may agree to, for a new spouse to live with a resident with varying levels of security, where the right to reside of the resident is secured by a registered lease.
This article does not explain procedures where a relative was already approved by the scheme operator to live with a resident who has died or vacated a unit and the relative is given a limited right to reside under 70B of the Retirement Villages Act 1999 (RV Act).
Background
ARQRV sought general legal advice on the following question –
‘To cover the possibility that a new spouse becomes the survivor of a couple, is there a cost effective way by which the new spouse of the established resident may be added to that resident’s lease or alternatively given the right to reside by some legal instrument to the point at which they in turn find it necessary to leave the unit?’
The question has been paraphrased, to read –
‘What formal arrangements may be made, with the scheme operator, for a new spouse to live indefinitely in an accommodation unit with the existing resident, and then after the existing resident terminates their right to reside?’
The advice given to ARQRV applies to a spouse or a de facto but, providing the part of the advice is relevant in the circumstances, it would appear that it would apply to any relative.
This article is general information only. You must seek legal advice specific to your circumstances.
After you have sought legal advice, ARQRV will assist members with any negotiations.
Information provided by ARQRV
Definitions
Relative, of a resident, means the resident’s spouse, mother, stepmother, father, stepfather, sister, stepsister, half-sister, brother, stepbrother, half-brother, child or stepchild.
Spouse, includes for the purpose of this article, a de-facto partner.
Terminate a right to reside means the resident terminates a right to reside by vacating the unit or by their death.
What does the law provide?
Firstly, there is no legal mechanism under which another party, including a spouse, may be simply ‘added’ to a registered lease. Section 67 (2)(b) of the Land Titles Act 1994, under which the lease is made and registered, strictly forbids it.
In addition, the RV Act does not provide any mechanism under which a relative may co-habit permanently or even long-term with a resident, it does however, contemplate that this circumstance may arise. The notion of a relative living long-term with a resident is shown by, at least, s 70B which gives protections and rights to a relative (who has not already been given a right to reside (see option 3)), including a 3-month right to reside, provided the relative, approved by the scheme operator, has lived for at least 6 months, and is still living in the unit, when the right to reside of the resident is terminated (see option 1).
No obligation on the scheme operator
Regardless of the relationship an existing resident has with another person, a person who is not a party to a residence contract (the contract includes the registered lease) is not a resident and is classed a visitor.
A scheme operator is under no obligation whatsoever to allow a visitor to live with a resident, other than what is provided in the resident residence contract. In most cases, if not all, the lease places strict time limits on how long a visitor may stay with the resident.
Therefore, agreement must be sought, and appropriate arrangements made with the scheme operator for a relative, including a new spouse, to live long-term with a resident. It is reasonable to expect that the scheme operator may enter into more permanent and more secure arrangements with a new spouse, over what may be available to another relative, but this may not necessarily be the case.
Costs and payments
Some options may attract professional legal costs – for example, your solicitor costs and the scheme operator’s solicitor costs) and possible government fees.
More secure arrangements may be subject to other conditions which may also include the payment of money (e.g. some part of an ingoing contribution) or the relinquishment of future exit entitlements. These conditions are imposed to offset any financial disadvantage caused to the scheme operator by the changes to the original residence contract. These new conditions must be negotiated with the scheme operator.
Response from ARQRV’s legal advisor
This is an increasingly common issue, and different scheme operators deal with it in different ways.
The main considerations seem to be cost, the ability for the incoming partner to remain in the unit if the existing lessee is deceased, and any estate planning implications if one or both of the parties to the new relationship have children from a prior relationship. The situation is less complicated in leasehold villages than freehold villages, so I will just consider leasehold for the time being.
If a sole lessee of a unit in a village marries (or enters into a de facto relationship with) someone who is not on the lease, and they both wish to permanently reside in the unit, it is usually necessary to seek the scheme operator’s consent to the arrangement because of the visitor rules in most leases. Assuming the new partner meets any age restrictions in the village, then there are three possible solutions I have seen operators offer:
- a long-term guest licence
- a collateral deed
- a new joint lease
Option 1
A long-term guest licence
This allows the new partner to reside in the unit indefinitely while the existing lessee is alive. However, if the existing lessee dies, then the new partner will only be able to remain in the unit for 3 months (s 70B (2)) unless they can afford to purchase the unit for themselves (s 70B (3)). So, this is not usually a viable solution if the intention of the parties is for the new partner to be able to remain in the unit if they survive the lessee. (However, I have seen instances where this is the preferred option, e.g. if the new partner has alternative accommodation they can return to, and/or the lessee wants their exit entitlement paid out to the children before the new partner dies).
Option 2
A Collateral Deed
This is a tripartite Deed entered into between the scheme operator, the existing lessee and the new partner that operates alongside the existing lease. It normally grants the new partner a right to remain in the unit after the existing lessee passes away (subject to the new partner complying with the terms of the lease) and delays payment of the existing lessee’s exit entitlement until after the new partner dies (or otherwise leaves the village). This is a good solution because it not only allows the new partner to remain in the unit but also allows the existing lessee a level of flexibility in their estate planning. The Deed can be drafted to specify what happens to the exit entitlement when the new partner ultimately leaves, e.g. it can say that the money goes 100% to the existing lessee’s children, or 50/50 between their children and the new partner, or even 100% to the new partner.
Option 3
A new joint lease
Sometimes a scheme operator will insist that, if the parties want the new partner to have an ongoing right to reside in the unit after the existing lessee dies, then the existing lease must be surrendered, and the parties must enter into a new joint lease on the scheme operator’s then current terms (with continuity in relation to exit fees, date of first occupation, etc). This method requires the residents to bear the scheme operator’s legal costs in relation to both the surrender of the existing lease and the entry into the new lease, which can be in the order of about $3000. The upside of this approach is that it gets the new partner’s name on the lease, guaranteeing their right to remain in the unit if the existing lessee passes away. The downside is that it is less flexible for the purposes of estate planning. Some scheme operators will insist that the exit entitlement is paid 100% to the new partner if they outlive the existing lessee, which can prevent the existing lessee from leaving those funds to any children they have from a prior relationship. Sometimes a scheme operator will allow the inclusion of a special condition in the new lease which dictates that the exit entitlement is to be paid to the existing lessee’s estate even if they die before the new partner (with payment delayed until the new partner dies or otherwise leaves).