Right to reside in accommodation unit

About this article

This article explains –

• what is a right to reside in an accommodation unit; and
• when your right to reside in your accommodation unit is terminated, rights held by you under your residence contract are not transferred to the new resident; and
• what is ‘sold’ when your ‘unit is offered for sale’.

For information about a scheme operator reselling a right to reside, refer to the following articles –

Resale of the right to reside in leasehold or licence accommodation unit

Sale of freehold unit and the resale of the right to reside therein

Background

The Retirement Villages Act 1999 (RV Act) provides that under a residence contract each resident in a retirement village has an exclusive right to reside in their accommodation unit.

Definition

Leaving an accommodation unit, means – terminating a right to reside in an accommodation unit, by either –

• voluntarily moving on
• going into full-time aged care
• death of a resident
• the scheme operator.

Right to reside is not unique to retirement villages

A right to reside is not unique to retirement villages.  Rights to reside are also often created under the terms of a deceased person’s will where a beneficiary is bequeathed the entitlement to occupy the deceased property for the term of the beneficiary’s life.  Obviously, a right to reside under a will is not paid for, which differentiate them from a right to reside in a unit retirement village.

What is a right to reside, generally?

A right to reside is a legal right to occupy a property (house or unit) in accordance with the conditions set out in the document/s which grant the right.

It is a creature of the law and only exists from time-to -time when that particular right is granted to a person.

It is a equitable entitlement to occupy a property for a specified time which is usually until the person/s granted the right no longer occupies the property by leaving or by death. 

A right to reside is usually given subject to certain conditions.

A right to reside does not constitute an interest in land which may be registered in the land registry.

A person who is given a right to reside in a property does not own the property.

A right to reside is extinguished or forfeited when the person to whom it is given, dies or ceases to occupy the property.

A right to reside cannot be transfered, leased  or bequeathed by a will to another person; nor is he or she entitled to receive income from the property.

Where two persons are given a right to reside in the same property, on the death of one person, the right to reside held by the survivor, continues.  However, the right to reside formerly held by the deceased does not vest in the survivor but rather, it is extinguished.

Right to reside in an accommodation unit in retirement village

In the case of a retirement village, in addition to the general nature explained above, a right to reside is the personal entitlement given to each resident under a residence contract, to exclusively occupy an accommodation unit for the time specified, and subject to the terms and conditions stated in the residence contract. A right to reside in an accommodation unit exists only when the right is given to a resident under a residence contract.

The right to reside of each resident in an accommodation unit is extinguished when the resident dies or forfeited when leaving the unit.

A right to reside is provided by a residence contract and is legally secured in some manner – for example –

• by a lease registered in the land registry; or
• by a licence in conjunction with a statutory charge over the retirement village land.

In the case of a resident having a right to reside while also owning the freehold interest in the accommodation unit, the right to reside may be secured by mechanisms other than that stated above.  These mechanisms are provided by the Land Titles Act 1994 with appropriate documents being registered in the land registry – for example, a lease, a sublease and/or a caveat.

Can a resident transfer a right to reside in an accommodation unit?

The answer is simply, no.

By virtue of the very nature of a right to reside, the right to reside is extinguished when the resident ceases to occupy the unit by either leaving voluntarily, by going into care, or by death – for example, 2 residents occupy a unit and 1 resident leaves dies, the right to reside held by the resident who ‘leaves’, is extinguished.  The right to reside held by the other resident continues until the time that resident ‘leaves’ the unit.

A ‘new’ right to reside will be given to a new resident when the person and the scheme operator sign the residence contract.

Can a resident transfer other rights provided by a residence contract?

Again, the answer is simply, no.

Various rights, other than the right to reside, are provided to a resident under a residence contract. Of note, a resident, is also given a right in common with other residents to use and enjoy village communal facilities.

The RV Act does not provide a legislative mechanism to enable a transfer of rights given under a residence contract, to another party.  Rather the RV Act provides mechanisms only to terminate rights held under an existing residence contract, and for the scheme operator to then give rights under a new contract to a new resident.

Notwithstanding the nature of contracts, the RV Act provides that a residence contract is enforceable even though the scheme operator or the owner to village land may change.

What is the real nature of things when an accommodation unit is so-called ‘offered for sale’ and ‘sold’?

This topic may help residents understand the real nature of things when their accommodation unit is so -called, ‘offered for sale’ and ‘sold’.

Leasehold and licence

Where you have right to reside in an accommodation unit secured by a lease or licence and you leave, you do not transfer the unit, the lease, the licence nor for that matter, your right to reside.  But rather, what happens, is as follows –

1. Your right to reside in the unit is terminated (voluntarily, by death or by the scheme operator)
2. here there is a registered lease, it will be legally surrendered or terminated by preparation of relevant documentation for lodgement in the Titles Registry.  On registration of the documents the lease will be removed from the title to the retirement village land.
3. You and the scheme operator agree on a resale value for the right to reside.
4. A right to reside is marketed, usually by the scheme operator.
5. A prospective resident is found.
6. A new right to reside for the new resident is given when the new residence contract is signed by the new resident and the scheme operator.

As you can see, nothing is transferred (including any leasehold or licence interest you held in the unit or any rights you had under your contract).  Put simply, your right to reside is terminated along with other rights under the contract.  A new right to reside is offered for sale, paid for and given on signing of the residence contract.

Freehold

Where you hold a freehold interest in your accommodation unit and you leave the unit, the freehold of the lot, which includes the unit, is sold to a new owner, and a right to reside is given to the new resident.

What happens, is as follows –

1. Your right to reside in the unit is terminated (voluntarily, by death or by the scheme operator)
2. You and the scheme operator agree on the resale value of the right to reside (the price for freehold sale and the value of resale of the right to reside are one and the same)
3. The freehold interest in the lot (which includes the unit), and a right to reside is marketed, usually by the scheme operator.
4. A prospective buyer is found for the freehold lot (which includes the unit) and a right to reside.
5. Documents to transfer the ownership of the freehold to the new owner and to restrict the way it may be later sold are prepared and registered in the Titles Registry.  At the same time a right to reside is given to the new resident on signing a new residence contract by the prospective resident and the scheme operator.

As you can see, only the freehold interest (which includes the unit) is being transferred.  The transfer of the freehold is a legal transaction under the Land Tiles Act 1994, and it is separate to the giving of a right to reside under the RV Act.  Put simply, you transfer your freehold interest in the property but your right to reside is terminated along with other rights under the contract.  A new right to reside is offered for sale, paid for and given on signing of the residence contract.