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We will discuss the new 2 stage disclosure process, including the form of fact sheet and disclosure statement, and the practical issues that we have encountered in practice. We will also discuss the form of residence contract required under the Regulations and how operators should have adapted their contracts to comply.
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Are you doing it right?
A_86947v1
Friday 12 September 2014
Wai Hwoon Low, Principal
Kathryn Elleman, Principal
Donna Rayner, Senior Associate
Wai-Hwoon LowPrincipal
> Within 7 days of request
> When "promotional material" handed out or sent to retired person
> 21 days before resident enters into any management contract unless:> previously provided; and
> no material change to information
Factsheet – when to provide
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> given to retired person or person acting on behalf of retired person; or
> addressed personally to retired person or person acting on behalf of retired person; and
> intended to promote particular retirement village as a place in which to live; but
> excludes material distributed generally in mail-out or letter-box drop
"Promotional material" is material:
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> Key questions:
> Is your material given to retired persons or persons acting on their behalf?
> Is your material addressed personally to retired persons or persons acting on their behalf?
> If yes to either question:
> Are you promoting your village?
Is it "promotional material"?
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> Contrast with:
> General letter drop or mail out
> Not addressed to any person in particular
> Not promoting village but promoting a particular activity
Is it "promotional material"?
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> Generic/mixed tenure village
> Strata titled villages
> Loan lease/loan licence village
Types of factsheets
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> Amounts in factsheet to be GST inclusive unless otherwise specified
> Formatting nightmare!
> Some inapplicable sections may be deleted, but sections with tick boxes must not be deleted
> Size of font cannot be changed
> Lengthy document – 11 to 13 pages
Common problems, things to note
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> Inapplicable sections may be deleted entirely
> Or, use "not applicable" for section no. to maintain numbering
> Revisit and update every 3 to 6 months
> Must revisit after AGM and new maintenance charges fixed
> Changes not allowed
Common problems, things to note (cont)
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> Factsheet 1 – mixed tenure:
> For villages with titled and non-titled units, or company share
> Sections of factsheet do not distinguish between them
Factsheet 1
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Microsoft Word 97 - 2003 Document
> Reference to in-going contribution being "refundable" or to be "refunded"
> Applicable to non-titled units
> Difficult to reconcile with titled units
Factsheet 1 (cont)
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> Reference to "Long term maintenance fund charge"
> Relevant only if LTMFC payable on a recurring basis
Factsheet 1 (cont)
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> Recognition that OC fees in titled village can be included in the maintenance charge
Factsheet 1 (cont)
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Factsheet 1 (cont)
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Factsheet 1 (cont)
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> What is the difference between sections 11 and 12 of factsheet?
Factsheet 1 (cont)
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> Same issues as with Factsheet 1
Factsheet 3 – loan/lease or license villages> No additional issues
Factsheet 2 – titled villages
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Kathryn EllemanPrincipal
> Second stage of disclosure:
> Pre-contract stage
> New form of disclosure statement
> Information as prescribed in the Regulations
> Must be in a form approved by Consumer Affairs Victoria
Pre-contract Disclosure
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> When is this?
> At least 21 days before the prospective resident signs a residence contract or management agreement
> What has to be provided?
> By the owner or manager - a Factsheet if it has not previously been provided, or if it has previously been provided but has materially changed
Pre-contract Disclosure
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> By the owner or owner’s agent – the residence contract
> By the manager – the management contract and village by laws
> By the manager - an expanded and individually tailored Disclosure Statement (in the form required by Consumer Affairs Victoria) which must be certified and signed by the manager
Pre-contract Disclosure
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> 6 different versions
> Loan-lease/loan-licence, rental, strata title, company title, unit trust, general – all villages
> A sample of the general statement is as follows:
Disclosure Statement
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4.6 Post-departure costs (cont)
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> Failure to comply:
> With pre-contract disclosure - right of rescission by the resident at any time up until 6 months after become aware of the breach
> Penalty fines
Pre-contract Disclosure – Offence
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Donna RaynerSenior Associate
> Regulations deal with residence and management contracts in 4 ways:
> Certain matters must be excluded from contracts
> Certain matters must be addressed in contracts
> Prescribed terms that must be included
> Standard or prescribed layout
Introduction
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> Regulations and preliminary agreements - contract for sale of land; agreements to lease
> Regulations and strata titled villages – option to purchase and deferred payment deed Important note: From 1 October 2014 – a new prescribed form of contract for the sale of land
Introduction (cont)
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> From 1 July 2014, operators must use 1 of the prescribed forms of contract
> 4 types of prescribed forms of contract:
> a residence contract
> a management contract
> a combined residence contract and management contract (where the entities are the same); and
> a combined residence contract and management contract (where the owner and manager entities are different)
New Prescribed Form of Layout of Contracts
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> A number of matters must be excluded from contracts. For example:
> Must not require resident to effect insurance other than liability insurance for any motorised wheelchair BUT may include a warning that resident should effect house contents insurance
Excluded Matters
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> Cannot have "entire agreement" provision in contract
> Cannot require resident to pay owner/manager costs of enforcing contract against resident
Excluded Matters (cont)
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> Regulations specify a number of prescribed terms including:
> Owner/Manager obligations
> Resident’s obligations
> Resident’s rights
> Legal matters
Standard or Prescribed Terms
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> Regulations require a number of matters to be addressed in the contract including:
> Basic information
> Use of unit
> Financial matters
Matters which must be addressed
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> Services
> Insurance & Maintenance
> Termination
> By-laws of the Village
Matters which must be addressed (cont)
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> Contracts may include additional terms provided they are not inconsistent with the RV Act or Regulations
Additional terms
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[SAMPLE OF PRESCRIBED FORM
OF RESIDENCE AND MANAGEMENT CONTRACT
(OWNER & MANAGER SAME ENTITY)]
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Sample RV Contract
> Adding or deleting information on page 2 of contract or the prescribed terms (generally clauses 2 to 6 of contract)
> Amending headings of prescribed terms or matters
> Inserting a table of contents
> Why use different terminology e.g. "resident’s premises", "maintenance charge"
> Other
Common Questions/Queries
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> May result in financial penalties (up to $7,000) and contract terms being implied or unenforceable
Failure to comply
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QUESTIONS
The information contained in this presentation is intended as general commentary and should not be regarded as legal advice. Should you require specific advice on the topics or areas discussed please contact the presenter directly.
Disclaimer
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Wai-Hwoon LowPrincipal
Telephone: 03 9609 1627Email: [email protected]
Kathryn EllemanPrincipal
Telephone: 03 9609 1633Email: [email protected]
Donna RaynerSenior Associate
Telephone: 03 9609 1503Email: [email protected]
