The information in this fact sheet is based on Residential Lease Agreements used initially by Australian Retirement Communities (ARC) which transferred its rights and obligations to Stockland.
Not all ARC lease agreements are identical, but many are similar. The information in this fact sheet MUST therefore only be treated as a GUIDE, NOT AS LEGAL ADVICE. Any resident leaving a retirement village should get legal advice about their rights and responsibilities from a lawyer who is experienced in this area.
Ending the lease – the process
The agreement between the resident and the lessor covers many aspects of the rights and responsibilities of both parties.
One part of the agreement deals with the process where a resident wants to leave. This is usually called surrendering the lease.
The process involves:
- Telling the lessor that you are leaving
- Working out the amount you will be paid when you leave and when you will be paid this amount.
- Removal of any of your fittings
- Refurbishment of the unit ( if required).
Telling the lessor that you are leaving
You must give the lessor written notice that you want to leave.
How much will I be paid?
- Once you give notice, the lessor has 30 days to tell you the amount you will be paid (this price will assume any repairs or refurbishment is completed).
- If you are not happy with this price, you must write to the lessor and tell them this within 14 days of receiving their offer price .
- The price is then based on the percentage increase in the value of the unit. This percentage increase is assessed by a registered valuer, who is agreed to by both you and the lessor. If you cannot agree, then an independent valuer is appointed. The agreement says that you must pay the valuer’s fee, but you may be able to negotiate this.
- If you do not take the opportunity to have a valuation then the agreement says that the price offered by the lessor is final.
- The lessor must use their “best endeavours” to either re-let or resell the premises. The lessor can claim costs associated with improving the premises for re lease.
- Allowable deductions from the final price include:
- Stamp duty
- Amounts owing under the service agreement
- Refurbishment costs
- Other costs allowed under the agreement
Leaving the unit
- You must hand over possession of the premises on the date that the premises are sold by the lessor or the start of a new lease with another person (this is called the “turnover date”).
- You can remove any fittings you have installed. This must be done during a two week period between 30 and 14 days before the date that the premises are handed over to the lessor. You must not damage the premises when removing their items. If you do not remove your fittings, The lessor can do this and return the premises to the original condition at your cost.
- The lessor must inspect the premises within 90 days after the date that you give notice and prepare an inspection report, outlining the refurbishment required to bring the premises to a state that they can be sold. The report must also state the contactor who has been chosen by the lessor to carry out the works.
- The lessor must give you a copy of this report. You then have 14 days to object. Objection is limited to the cost of the works, not the scope of works and must be in writing. If you object you have 14 days to obtain another quote. The cheaper quote will then be used, provided the quality of the goods and services is that initially noted by the lessor.
When will payment be made?
The default position is that payment will be made on the “settlement date”. This is either 30 September or 31 March of the earliest of – the year being 8 years and 90 days after you notified the lessor that you were leaving or the number of years between entry and your departure notice plus 90 days.
For example, if you notify the lessor that you are leaving on 30 June 2009 and you moved into your unit on 30 September 2003. The “settlement date” will be 6 years (time between commencement and 90 days after notice of vacation) plus 90 days after notice of vacation. This will be 30 June 2009, plus 90 days plus 6 years – 30 September 2015.
There are other options BUT it is important to note that the agreement says that you only have 45 days after giving notice of departure to request these options. The options are:
- Payment on the date when the unit is sold or the start of a new lease with a new resident. In this case the price paid to you is set at 90% of the price (NOTE – you must choose this within 12 months of moving in).
- Payment to be made to the lessor’s solicitor in trust. In this case the income (ie interest) is paid to you (less reasonable costs) and a guarantee is provided that the full amount will be paid.
- You use the price paid to purchase another property (substitute property) which you then occupy until death or leaving the property.
Another option is to receive what is called a “discounted” price when the unit is sold or re-let. The price is discounted by the Commonwealth bond rate x the time between the turnover date and the settlement date (see above).
What happens if there is a dispute?
First get legal advice. These agreements are very complex and you will need assistance in understanding your rights and the options available to you.
One option may be making a claim at VCAT. For example, you may have a dispute about refurbishment costs, a dispute about the meaning of a term in the lease agreement, or a consumer protection claim (eg. misrepresentation).
The law dealing with these issues is complex. You should obtain legal advice to clarify your options.
- Between entry and 12 months after entry, residents needs to elect if they want 90% payment option.
- Resident to provide written notice (called 1st notice in this checklist) to advise when they want to leave their unit.
- After 1st notice, lessor to advise resident within 30 days of “fair price”.
- After resident advised of “fair price’, resident has 14 days to give notice requesting a valuation based price.
- Resident to clarify cost of valuation and request their choice of valuer.
- Lessor must inspect premises within 90 days of 1st notice and prepare a report about required refurbishment and give this to the resident.
- Resident has 14 days after being given the report to object and a further 14 days to obtain an independent quote.
- Resident must elect within 45 days after 1st notice about payment of surrender consideration for:
- 90% payment option
- Receive income and defer lump sum payment
- Purchase substitute property
- Resident to consider discounted price to access funds when unit is sold or relet.
- Resident has opportunity to remove fittings installed by them 30-14 days before the date that the premises are sold or the start of a lease with a new resident.