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Exit Entitlement

What is an exit entitlement?

An exit entitlement is the amount of money that is, under the 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 [see 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]:

  • specified conditions are fulfilled under the residence contract; or
  • 18 months have passed since the resident left the residence vacant; or
  • 18 months have passed since the resident gave written notice that they were leaving the residence, the last 3 months of which the resident did, in fact, leave the residence vacant; or
  • the operator otherwise agrees to pay the exit entitlement earlier.

The operator may apply to the South Australian Civil and Administrative Tribunal (SACAT) for the period of 18 months to be extended where special circumstances exist to justify it. Regard must be had to the financial hardship likely to be suffered by the operator if the period is not extended and whether the operator, has for example, made taken reasonable steps towards sale [ss 27(7)-(8)].

The operator must pay the exit entitlement within 10 business days after the resident becomes entitled to the payment. Failure to pay on time is an offence on the part of the operator [s 27(15)].

Can the exit entitlement be paid earlier?

The exit entitlement can be paid earlier than the time frames described above if the operator agrees to pay it early.

If a resident 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, then the resident can 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)].

Can a resident continue to occupy the residence during the notice period?

When giving written notice, a resident may advise the operator that they will remain in occupation for the following 15 months, allowing for 3 months of vacancy, before the 18 month period elapses, and their exit entitlement then becomes payable. The notice takes effect 10 business days later.

Can a resident participate in the sale of the premises?

A resident can participate in the sale of the premises, if:

  • payment of the exit entitlement depends on the sale of the resident’s right to occupy the residence; and
  • 9 months have passed since they left the residence vacant or gave written notice that they were leaving the residence.

This must be done through an agent and the operator of the retirement village must be kept informed of this and any developments in relation to the sale. The operator can also continue to remarket the premises concurrently in accordance with the operator’s remarketing policy.

[Retirement Villages Act 2016 (SA) s 32; regs 9 and 18]

What if a resident changes their mind after giving written notice?

Notice that a resident will be leaving the premises vacant may be withdrawn at any time with the agreement of the operator [s 27(4)]. The resident will, however, be responsible for any remarketing costs incurred since the notice was given (which may be deducted from their exit entitlement).

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?

If a resident does not agree to the operator’s determination of the market value, the resident 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?

If a resident is absent for a continuous period of at least 28 days, the resident is not thereafter 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 one which 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. If the person’s right of occupation is terminated, it is then the date that is fixed by SACAT 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) [ss 29(3)-(7)].

Exit Entitlement  :  Last Revised: Tue Jun 26th 2018
The content of the Law Handbook is made available as a public service for information purposes only and should not be relied upon as a substitute for legal advice. See Disclaimer for details. For free and confidential legal advice in South Australia call 1300 366 424.