What is an exit entitlement?

An exit entitlement is the amount of money that is, under a residence contract, payable by the operator of the retirement village when a resident leaves their premises vacant, or when certain conditions under the residence contract are fulfilled, whichever occurs first [Retirement Villages Act 2016 (SA) s 4].

When does an exit entitlement become payable?

An exit entitlement may not become payable immediately. It may become payable when [s 27]:

The operator may apply to the South Australian Civil and Administrative Tribunal for the 12 month period to be extended where special circumstances exist to justify it [s 27(7)].

The operator must pay the exit entitlement within 10 business days after the resident becomes entitled to the payment, provided the resident has given the operator their payee details. It is an offence for an operator to fail to pay an exist entitlement on time [s 27(15)].

Can the exit entitlement be paid earlier?

The exit entitlement can be paid earlier than required if the operator agrees to pay it early.

A resident who moves from a retirement village to an aged care facility and demonstrates a need to use the exit entitlement to pay the required payments to the aged care facility may apply for early access to the exit entitlement [s 30]. The resident must apply to the retirement village operator within 60 days of being approved entry into an aged care facility, or within 60 days of vacating the retirement village (whichever is the later) [s 30(1)]. The retirement village can then make payments to the aged care facility on the resident's behalf towards the daily accommodation costs of the resident [s 30(3)]. The amount the retirement village pays to the aged care facility is then deducted from the resident's exit entitlement when it becomes otherwise payable [s 30(6)].

How is the exit entitlement calculated?

If an exit entitlement becomes payable and the contract says that it shall be calculated on the consideration paid on the sale of the right to reside in the retirement village, but that sale has not yet occurred, the resident may elect to either wait until the sale occurs, or receive the entitlement as if the consideration paid on the sale was the current market value [s 27(5)]. If paid in this way, the entitlement is not later subject to an adjustment after the sale occurs [s 27(6)].

The operator must provide residents, at their request and free of charge, with a statement of the amount to which the resident would be entitled, by way of exit entitlement [s 42(1)].

What if a resident disagrees with the proposed market value?

A resident who does not agree with the operator’s determination of the market value may require the operator to obtain an independent valuation (with the operator entitled to recover half of the cost of obtaining that from the resident) [s 27(16)].

Does a resident have to pay recurrent charges even if they are absent for a lengthy period?

A resident who is absent for a continuous period of at least 28 days is not liable to pay any amount in relation to any personal service that the retirement village no longer provides due to the resident’s absence [s 29(1)]. The same applies if a resident ceases to reside in the retirement village [s 29(2)]. A personal service is provided to the resident individually, rather than to residents generally.

A resident is taken to have ceased to reside in the retirement village when the person (or someone else on their behalf, including an executor or administrator of their estate upon their death) delivers vacant possession to the operator [s 4(2)]. If the person’s right of occupation is terminated, a person is taken to have ceased to reside in the retirement village at the end of the period fixed by the Tribunal for vacant possession. Vacant possession means that the residence is no longer occupied and all personal property has been removed from the residence [s 4(2)].

The operator of the retirement village may recover the costs of any other recurrent charges as a deduction from the exit entitlement (up to an amount not greater than the exit entitlement itself, and for a length of not more than 6 months, unless extended by SACAT or shortened by the residence being re-sold or re-occupied earlier) [s 29(3)-(6)].