While protocols are not legally binding, there is an expectation that they will be applied.
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Protocol
The following applies as soon as practicable after you receive advice of the resident’s intention to vacate or of their death.
1. General
It is good practice to meet with the resident or their legal representative to explain how the marketing of a unit in a retirement village involves different considerations from those involved in the marketing of a conventional property.
In the case of a deceased resident, it is good practice to tactfully raise with the resident’s family that delays will be reduced if an administrator is appointed, where the resident left no will or, where there is a will, if probate is obtained as soon as possible.
It is good practice to consult with the resident or the resident’s legal representative (whether the resident’s attorney, executor or administrator) about inspections and measures to make the unit more marketable. For more information, view Protocol 7: Refurbishment and reinstatement of units.
2. Setting a selling price – where you set the price
It is good practice to detail in writing to the resident or their legal representative the process by which you determine the value of the unit and the selling price and then meet them to discuss any objections. Details of price ranges for recent sales/leases of other units in the village should be included, as this can assist in managing expectations among the parties.
If objections cannot be resolved, it is good practice to give the resident or their legal representative the opportunity to obtain their own valuation, or reach agreement on a process for valuing the unit and setting the price.
When the price is agreed, it is good practice to:
- advise the resident or their legal representative as soon as possible in writing
- include an explanation of any difference between the selling price and any valuation or estimation
- set out in writing the resident’s exit entitlement for each proposed selling price.
3. Setting a selling price – where the resident sets the price
It is good practice to consult with the resident or their legal representative about what reasonable time they need, including to obtain a valuation.
It is good practice to provide details of price ranges for recent sales/leases of other units in the village, noting that the eventual price is dependent upon market forces; it is also good practice to set out in writing the resident’s exit entitlement for each proposed selling price.
4. Selecting a selling agent
It is good practice to consult the resident or their legal representative about selecting an agent, the timelines for selling/leasing the unit, how offers will be dealt with, and the reporting process. If you propose to be the agent or to nominate one, it is good practice to advise the resident or their legal representative in writing of:
- the reasons why this is preferable to appointing a third party agent
- the proposed timelines for selling/leasing
- the proposed process for keeping them informed of progress
- the proposed process for dealing with offers (if you have the power to accept or reject offers, this should include that you will not refuse an offer unreasonably)
- your undertaking to use all reasonable endeavours to re-sell/re-lease the unit and not to impose unreasonable charges
- that your conduct is regulated by the Estate Agents Act 1980 and regulations (where applicable).
If the resident or their legal representative engages their own agent, it is good practice not to interfere with the sale/lease or request a commission on it. The resident/legal representative should provide reasonable information if you request it.
5. Advertising/marketing: general
If you or your agent is handling the advertising and marketing, it is good practice to consult with the resident or their legal representative about how much the advertising will focus on the village and on the unit; and to explain the:
- advertising schedule
- media and marketing strategy
- cost, including the resident’s share.
When the proposals are finalised, it is good practice to advise the resident or their legal representative in writing. If you propose a marketing strategy that prioritises certain units for sale, the document should explain the reasons for this.
6. Advertising/marketing: hard-to-sell units
If you or your agent is handling the advertising and marketing, good practice says that an increased level of communication is required and you should continue to engage with the resident, their legal representative or their family, despite increasing difficulties and complaints.
It is also good practice to confront problems at an early stage; marketing updates should include updates on the level of charge accruals and dates should be set with the resident or their legal representative to discuss and, if necessary, revisit the marketing strategy.
Give consideration to when you should discuss the pros and cons of handing control over to the resident or their legal representative (including the setting of the selling price and advice on advertising costs) or engage a third party agent.
Issues
- Setting the selling price
- Selecting the selling agent
- Advertising: whether the focus is on the village or the unit
- Marketing strategy: relative marketability of units
- Providing information to the resident on progress
Rationale
The re-sale or re-lease of a unit often happens at a difficult and emotional time for the resident and their family. The price obtained and the speed with which it can be re-sold/re-leased are critical to the resident’s ability to relocate or their family’s capacity to settle the estate.
However, other units in the village may also need to be re-sold/re-leased; and, as the manager, you will want to maintain a strong interest in the process.
The reality is that the marketing of a unit in a retirement village involves different considerations than those involved in the marketing of a conventional property. This includes the marketing necessarily focusing on the village – its services, amenities and lifestyle - rather than on individual units, which only feature when potential purchasers visit the village. Retirement villages also do not attract investor or ‘impulse’ buyers.
Nevertheless, there may be conflicting interests (or at least the perception of conflicting interests) about setting the selling price (particularly where you, as manager, have an option to purchase the unit), about selecting the selling agent and about which units should be the focus of the marketing strategy. The families of residents may not always understand the special nature of the market for retirement village units.
The residence contract may say that the resident’s contribution to marketing and advertising costs relates to the village, not their specific unit. However, this may not be the expectation of many residents or their families.
Misunderstandings can sometimes arise about the manager’s motivation and priorities. Where village and owners corporation charges are accruing, council and utility rates continue to be payable, and/or an aged-care accommodation bond is payable (with interest accruing), particularly with hard-to-sell units, the mutual interest in a speedy sale at the best price can be forgotten. Even without that problem, where charges are accruing and/or a bond is payable, the resident or their family may be less able than the manager to wait until the preferred selling price is met.
Residents who entered a village before 2006 cannot rely on the changes to the Retirement Villages Act 1986 enacted in that year. They are more vulnerable to lengthy sale delays (and therefore accrual of charges and delay in refunding exit entitlements) and to lower-than-expected sale prices/exit entitlements.
Balancing your interests with those of your residents, or their families, is the basis of this protocol.
Applicable law
Pre-1 August 2006 contracts (owner and non-owner residents)
The residence contract is the document that will contain your power to appoint the selling agent, set the selling price and market the property.
Post-1 August 2006 contracts (owner-residents)
Part 5A of the Retirement Villages Act 1986 (the Act):
- voids a contract term enabling you, as manager, to be or to appoint the selling agent, and stops you from interfering with the sale
- entitles the resident to set the price and to appoint the agent, and to require you to provide certain information
- requires a resident who appoints a third party agent to provide you with certain information
- prohibits you from requiring the resident to pay a commission, if you are not the agent.
Post-1 August 2006 contracts (non-owner residents with prescribed terms under section 26(2)(c) of the Act and regulation 5 of the Retirement Villages (Contractual Arrangements) Regulations 2017)
The terms and regulations state that:
- the resident is allowed to require you to appoint an agreed selling agent
- if you are the agent, you must use all reasonable endeavours to re-lease the unit or to instruct a third party agent to do so
- the resident has control over the asking price and veto over the selling price, but must not act unreasonably
- you are required to not unreasonably refuse an offer, to provide certain monthly information, and to not impose unreasonable charges.
Post-1 August 2006 contracts (non-owner residents without prescribed terms and where the refund of an exit entitlement is conditional on re-sale)
The residence contract is the document that will contain your power to appoint the selling agent, set the selling prices, conduct the marketing and accept offers.
Post-30 January 2006 contracts (non-owner residents without prescribed terms and where the refund of an exit entitlement is conditional on re-sale)
Under sections 38I(1)(d) and 26(2)(b) of the Act, you must refund the exit entitlement, at the latest, six months after the resident vacated the unit.
General
During the resident’s life, privacy considerations require you to deal only with the resident or the resident’s attorney regarding the matters under this protocol. Not all powers of attorney empower the holder to deal with the matters under this protocol; for example, a medical power of attorney.
The death of a resident automatically terminates any power of attorney. If the resident left a will, the executor becomes the resident’s legal representative. If the resident did not leave a will, the person appointed by the Court as the administrator of the estate becomes the resident’s legal representative.
Where the manager acts as the selling agent, the Estate Agents Act 1980 and regulations must be complied with.