Retirement villages and manufactured homes: not an ordinary conveyance

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Kooky

Builder of Shaka, the payment router that pays every agent their commission on closing date.

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A client rings a Queensland law practice to say she is "buying a unit" and would like the conveyancing done. Two questions later it turns out the unit is in a retirement village, or the home stands on a rented site in a residential park. From that moment the file stops looking like a house purchase. The standard contract is not the document on the table, the cooling-off period is a different length, the price is called something else, and the most important clauses deal with a day many years away: the day the resident leaves.

Queensland regulates these two kinds of housing under two separate Acts, the Retirement Villages Act 1999 and the Manufactured Homes (Residential Parks) Act 2003. Each has its own approved forms, its own disclosure documents and its own timetable. This guide follows a property lawyer through both, using the Queensland Government's housing pages for residents, the Business Queensland pages written for village operators and park owners, and the opening sections of the Retirement Villages Act itself. It describes what the solicitor checks and explains to the client; no village or park is named.

Two regimes that sit outside the usual sale

The first job is to work out which regime applies, because they do not overlap. Section 5 of the Retirement Villages Act 1999 defines a retirement village as premises where older members of the community or retired persons live, or are to live, in independent living units or serviced units under a retirement village scheme. The same section carves out a site that falls within the Manufactured Homes (Residential Parks) Act 2003. A home in a residential park is therefore not a retirement village unit, however similar the brochure looks.

The table sets the two beside each other on the points a lawyer raises at the first meeting.

Neither column describes a transfer of house and land. That is the reason the Queensland Government's own buying steps tell a prospective village resident to appoint a solicitor who specialises in retirement villages and to go through the contract with that solicitor without feeling rushed.

What a retirement village resident actually acquires

The Act builds everything on one idea, the right to reside. Section 7 describes a retirement village scheme as one under which a person enters a residence contract, pays an ingoing contribution to acquire a right to reside in the village and, on paying the relevant charge, acquires a right to receive one or more services. Section 14 defines the ingoing contribution as the amount payable under a residence contract to secure that right, not counting recurring rent, fees or charges.

The residence contract is defined in section 10 as one or more written contracts about residence in the village between a person and the scheme operator. The same section lists what such a contract does. It gives an exclusive right to reside in a unit, gives a right to use communal facilities in common with others, includes a service agreement, and restricts how the resident may dispose of the right, or of freehold property, during the resident's lifetime.

That last element is the one a property lawyer dwells on. A person who owns an ordinary house may sell it to anyone at any price. A village resident's ability to pass the unit on is limited by the contract from the first day, and the terms of that limit decide how much money comes back and when.

Leasehold, licence or freehold: the tenure question

The right to reside can rest on different legal footings. Section 10 of the Act says a residence contract may be based on a freehold interest in an accommodation unit, and section 11A defines a resident's freehold property. Business Queensland's page on residents leaving a village refers to interests that are leasehold or a licence as the other forms a resident's interest may take.

The solicitor does not have to guess which one applies. Business Queensland's page on documents and contracts says the prospective costs document for a unit states the unit type and tenure, along with any encumbrances or endorsements on the village land. Reading that entry, and checking it against the contract, is an early step on the file.

The tenure matters most at the end of the stay, because the Act treats the outcomes differently:

• Where the interest is freehold and the unit has not sold after the resident's right to reside has ended, the operator's duty is to buy the property, under what Business Queensland calls the mandatory purchase of freehold property.
• Where the interest is not freehold, the resident's money comes back as an exit entitlement, with its own deadline.
• A spouse or relative who lived in the unit, and who wishes to stay on under a contract of their own, may do so only where the original interest was a leasehold or a licence, according to the same page.

A client who says "I own it" may be describing any of the three. Part of the solicitor's work is to replace that phrase with the accurate one, and to explain what it means for the estate later.

The two disclosure documents and the 21-day rule

Disclosure in a village sale comes in two prescribed documents, both in approved forms.

The village comparison document, Form 3, describes the village as a whole. The Queensland Government's page for buyers says it covers accommodation, facilities and services and the general costs of moving in, living there and leaving, and that its purpose is to let people compare villages. An operator must provide it within 7 days of a request, and it must be up to date.

The prospective costs document, Form 4, is about one unit. It sets out the ingoing contribution and other entry costs, the ongoing costs, the exit fee, reinstatement and other exit costs, and the estimated exit entitlement after 1, 2, 5 and 10 years of residence. The operator must provide it within 7 days once a person shows interest in a particular unit.

Then comes the waiting period. Both documents must be in the prospective resident's hands at least 21 days before the residence contract is entered. Business Queensland's page adds that the residence contract itself and the village by-laws are also to be given at least 21 days ahead. If the information changes in more than a minor way, the 21 days apply again from the time the resident is told.

For the lawyer, the 21 days are working time. The four exit figures in the prospective costs document are the nearest thing the file has to a price comparison, because they show how much of the ingoing contribution is forecast to come back at each point. A careful adviser sets them against the contract's own formula to see that the two agree.

Reading the residence contract

The Queensland Government page lists what a residence contract must contain, and the list doubles as the solicitor's reading order. It includes the start and end dates of the cooling-off period, the amount of the ingoing contribution, the exit fee and the resident's exit entitlement, the service charges with their amounts and due dates, the insurance held by the village and the insurance the resident must hold, the conditions of living in the village, the resident's right to resell the right to reside, the entitlement to audited and unaudited financial statements, the dispute resolution process, each party's rights to terminate, the funds the operator must keep, the village facilities and land, and whether capital gains or losses are shared and how.

The Retirement Villages Regulation 2018 may prescribe terms that must appear and terms that may not. The government pages say operators face penalties for a contract that is not in the approved form, leaves out a required term or includes a prohibited one.

Three checks stand apart from the reading of clauses.

• Registration of the village. The government page says residence contracts for unregistered villages are unenforceable and can be terminated. Business Queensland adds that a resident who learns the village is not registered may terminate on 14 days' notice, and that the ingoing contribution must then be refunded in full within 30 days.
• Where the money sits. On the text of the Act read for this guide, section 46 has the ingoing contribution held in trust until the cooling-off period ends.
• Ongoing charges. The government's fees page describes a general services charge, which the operator generally cannot raise by more than the CPI percentage increase unless residents approve by special resolution, a maintenance reserve fund to which residents alone contribute, and a personal services charge for optional services such as meals.

The cooling-off period itself is 14 days after signing. A resident who withdraws within it does so without penalty, and the operator must immediately refund any ingoing contribution already paid. Section 45A of the Act deals with the case where the period starts on a later event or another contract: the government page says the operator must then give written notice of the changed end date within 14 days.

Leaving the village: the exit fee and the charges that continue

Everything in the contract points towards the day the right to reside ends. Business Queensland lists the ways that happens: the resident dies, decides to leave, is asked to leave by the operator, or the operator is carrying out an approved closure plan. A resident who chooses to go gives one month's written notice.

The exit fee is defined in section 15 of the Act as the amount a resident may owe the operator on ceasing to reside or on settlement of a sale of the right. The fees page explains that its basis is set out in the residence contract, that it is usually a proportion of either the ingoing contribution paid or the sale price, and that the proportion generally depends on how long the person lived in the village. It is calculated on the day the resident vacates. A resident may ask for a written estimate of the exit entitlement, and the operator must supply it within 14 days unless one was given in the previous six months.

Leaving does not stop the charges at once. The general services charge and the maintenance reserve fund contribution stay payable in full for up to 90 days after the resident vacates, unless the unit sells sooner. After that, the resident and the operator share them in the same proportion as they share the resale proceeds, until the unit sells or, on Business Queensland's wording, up to nine months after termination.

The condition of the unit is the other moving part. The resident must leave it as it was on moving in, fair wear and tear and agreed renovations aside. Reinstatement work, which returns it to that state, may be done at an agreed time or within 90 days after the resident vacates. Renovation is anything beyond that. Where the contract shares a capital gain, renovation costs are shared in the same proportion; otherwise the operator pays. For contracts signed after 1 February 2019, an entry condition report is the reference point for the exit condition report.

When the money comes back

Within 30 days after termination, the operator and the former resident are to agree in writing on the resale value of the right to reside. If they cannot, a valuer is engaged within 14 days and the valuation becomes the agreed resale value.

Section 16 of the Act defines the exit entitlement as the amount the operator may owe the former resident. Business Queensland sets out when it falls due: on or before the earliest of four dates.

Freehold units follow a parallel rule. Where a former resident's freehold property is unsold, the operator must enter a contract to buy it and complete the purchase by 18 months after termination. Where the resident has died, the completion date may instead be 14 days after the operator is shown probate or letters of administration, if that is later, or a day fixed by the Queensland Civil and Administrative Tribunal. The price is the resale value if one was agreed in the previous three months, an independent valuation otherwise, or a figure the parties agree. The duty arises where the resident ended the right to reside by giving one month's notice or by dying. It falls away if the property sells to someone else first, or if the operator has a reasonable excuse, and Business Queensland's example of one is a resident who has not obtained a release of a mortgage.

In both cases the operator may ask QCAT for more time. The tribunal may grant it if satisfied that the unit is unlikely to sell before the deadline, that the operator would likely suffer undue financial hardship otherwise, and that the order would not be unfair to the former resident.

A manufactured home: the house is owned, the ground is rented

The second regime starts from a different split. Business Queensland describes a site agreement as an agreement between a residential park owner and a home owner that lets the home owner rent a specific site on which to place a manufactured home, with non-exclusive use of the park's common areas and communal facilities. The buyer pays a price for the home and then pays site rent for as long as the home stays.

There are consequently two documents to read, not one: the agreement by which the home changes hands, and the site agreement with the park owner. The site agreement is in an approved form, Form 2. It must state the parties and the park owner's ABN or ACN, the park and the site's location and size, the maximum number of people who may live in the home, the start date, the site rent with its frequency and method of payment, how and when the rent may increase, the cost of utilities and park services, whether pets are allowed, the standard terms, any special terms, and the park rules.

Special terms are where a lawyer slows down. They may cover matters such as who maintains the land, the fencing or the trees. The Manufactured Homes (Residential Parks) Regulation 2017 prohibits certain special terms, and Business Queensland says including one is an offence for the park owner.

Security of the site matters as much as the rent. A site agreement can end only in three ways: by mutual agreement on Form 4, by the home owner, or by QCAT on the park owner's application. The grounds open to a park owner at the tribunal include an unremedied breach after a Form 6 notice giving 28 days to fix it, and the park owner wishing to use the land for another purpose. In that last case the park owner must pay compensation.

Buying and selling a home in a park

A sale of a manufactured home on its site follows steps the Queensland Government sets out for sellers, and they show the buyer's solicitor what should already have happened by the time the file is opened.

1. The seller gives the park owner a notice of intent to sell, Form 15. Within 7 days the park owner must say whether it offers selling services and what site rent a new owner will pay.
2. Once there is a buyer, the park owner has 7 days to give that buyer the disclosure documents: the proposed site agreement on Form 2, the Residential Park Comparison Document on Form 16 and the Home Owners Information Document on Form 18.
3. The buyer enters a site agreement with the park owner.
4. Seller and buyer complete the approved sale agreement, Form 19. It must not be signed before the disclosure has been given and the site agreement entered.
5. Ownership passes on the date stated in both agreements. The seller's site agreement ends and the buyer's begins.

Two details are easy to miss. The government page says Form 19 is not a complete contract, so further terms go in Part 5 of the form or in an attached contract, which is drafting work. And the order of signing is fixed: site agreement first, sale agreement second.

The cooling-off period runs from the day the last person signs the site agreement. It is 7 days, or 28 days where the park owner did not meet the pre-contract disclosure obligations. The buyer ends the arrangement by giving a notice of termination, Form 3A for a new agreement with a park owner, to the park owner and to anyone with a financial interest in the home, with a termination date within 28 days of the notice. The sale agreement then ends automatically, ownership returns to the seller, and money paid is refunded.

A buyer does not ordinarily step into the seller's site agreement. Business Queensland's page says a home owner may assign a site agreement only to a relative, and only with the park owner's agreement. The incoming relative has a cooling-off right of their own, exercised on Form 3B within 7 days, or 28 days where disclosure was not met or the full period was waived.

The Act also gives a seller who cannot find a buyer a path that has no equivalent in an ordinary house sale. Under the buyback and site rent reduction scheme described on the government page, a home that is vacant and has been on the market for six months may be opted in, provided it was not brought onto the site by its current or a former owner. If the home is still unsold six months after joining, the park owner must reduce the site rent by 25%. At twelve months the park owner must buy the home at the agreed resale value. A park owner may apply to QCAT for an extension.

What the client should understand before signing

The work on these files is less about searches and settlement mechanics than about explanation. By the end of the 21 days in a village matter, or before the site agreement is signed in a park matter, a client who has been well advised can answer a short list of questions in their own words: what they are acquiring and what they are not; what they will pay each month and how that can rise; what is deducted when they leave; how long the money may take to come back; and who can live in the home after them.

In a house sale the lawyer's attention is on the day of settlement. In a village or a park it is on the day the resident leaves, which the contract has already priced.

The Queensland Government pages point residents to the Queensland Law Society, for finding a practitioner, and to the Queensland Retirement Village and Park Advice Service. Each matter turns on its own contract, its own tenure and its own figures, which is why the general rules above are a map of the questions and not an answer to any one of them.

Kooky, from Shaka

Kooky edits Queensland Estate and builds Shaka, the payment router he made for Queensland property professionals. One payment comes in, and every agent, agency and party in the deal receives their signed share on closing date.

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