Exit entitlements are the payments transferred to outgoing residents when they permanently leave a retirement village.
Details of an exit entitlement order
What is an exit entitlement order?
Applying for an order for payment of exit entitlements
Commencement of the six or 12-month prescribed period
Metropolitan local government areas
Limitations on former resident making application for an exit entitlement order
Calculation of the property value that forms part of the exit entitlement
When the property valuation is not the same as the sale price
Operators must not unreasonably delay the sale of the premises
Operators must comply with the exit entitlement order
Operators can apply to extend the period before an exit entitlement order can be made
How do operators apply for an extension of time to pay the exit entitlement order
The specific amount paid to a resident depends on the terms of their individual contract. The contract takes several factors into account to determine the exit entitlement:
- the length of tenancy (known component),
- the amount of the ingoing contribution (known component),
- the interest rate applied to the deferred management fee paid by the resident when they leave the village (known component), and
- any capital gain sharing arrangements (depending on whether there was capital growth experienced over the tenure period).This component is estimated either by agreement between the resident and operator or based on an independent valuation if the exit entitlement is paid through an order prior to the property being sold. This component is referred to as the agreed valuation under the Act.
The payment of exit entitlements to departing residents normally depends on the sale of the premises, and another resident entering the village.
Residents that are in strata schemes, company title and community title, are excluded from these particular provisions on exit entitlements under Part 10 AA of the Act.
What is an exit entitlement order?
Exit entitlement orders are orders made by the Secretary of the Department of Customer Service to retirement village operators to pay the former resident their exit payment early, if the premises are not sold within the prescribed period and as a result of the operator causing an unreasonably delay of the sale. Information about how to apply for an order and the requirements is provided below.
Applying for an order for payment of exit entitlements
There are specific requirements and steps a resident must take before applying to the Secretary for an exit entitlement order.
Please refer to the flowchart to check eligibility requirements.
If you believe that you are eligible to apply for an exit entitlement order, please fill in the following form.
Commencement of the six or 12-month prescribed period
The six or 12-month prescribed period commences 40 days after the following, whichever occurs first:
- the date the former resident’s premises are first advertised for sale,
- the date the former resident permanently vacates* the premises and returns all keys to the operator
- if the former resident does not intend to move out of the premises while the premises are for sale – the date the former resident gives written notice to the operator of that fact.
The 40 day period, is considered to be an optimum time period which will allow the operator to prepare the paperwork for the sale of the residential premises and to complete any necessary refurbishment
* Permanent vacation is defined as where the person moves out of the premises and provides vacant possession of the premises. It also includes where the executor or administrator of the person’s estate delivers up vacant possession of the person’s residential premises to the operator of the retirement village following the person’s death. In both circumstances this includes handing back the property keys to the operator so that it is clear the responsibility for selling the property falls to the operator. This can also signify the first day of the 42-day period leading up to the cap on recurrent charges.
Metropolitan local government areas
This table shows the local government areas that fall into the metropolitan local government areas that have a six-month time limit for application of an exit entitlement order.
All other local government areas have a 12-month time limit for application of an exit entitlement order.
| Bayside | Hawkesbury | Parramatta |
| Blacktown | Hornsby | Penrith |
| Blue Mountains | Hunters Hill | Randwick |
| Burwood | Inner West | Ryde |
| Camden | Ku-rin-gai | Strathfield |
| Campbelltown | Lane Cove | Sutherland Shire |
| Canada Bay | Liverpool | Sydney |
| Canterbury-Bankstown | Mosman | The Hills Shire |
| Cumberland | Newcastle | Waverley |
| Fairfield | North Sydney | Willoughby |
| Georges River | Northern Beaches | Woollahra |
Limitations on former resident making application for an exit entitlement order
A former resident can only put in an application for an exit entitlement order to the Secretary once in the prescribed period if their property has not been sold, the prescribed time limit has been reached, and the Secretary has not issued an order. The time periods are six months for metropolitan local government areas, 12 months for all other areas, or an alternative time limit approved by the Secretary upon application from the operator.
A former resident must only apply for an exit entitlement order if the application is accompanied with an agreed valuation that was made at least 30 days prior to the date of the application.
Calculation of the property value that forms part of the exit entitlement
The estimated sale amount can be the amount agreed between a former resident and an operator. If the parties agree on the estimated sale amount, this determines the capital gain component of the exit entitlement that the former resident can include in their application to the Secretary for an order for the operator to pay them the exit entitlement once the six or 12-month periods have been reached.
Agreed valuation is an estimate of the value of a former resident’s residential premises calculated either by agreement between the former resident and the operator of the retirement village, or by an independent valuer if the former resident and the operator cannot agree.
A former resident must only apply for an exit entitlement order if the application is accompanied with an agreed valuation that was made at least 30 days prior to the date of the application.
This agreed valuation will impact on the payment of the exit entitlement order but does not impact on the payment of accommodation payments under the aged care rule.
If a former resident and operator cannot agree on the estimated sale amount, the Act proposes that the value of the premises is determined by an independent property valuer who:
- has appropriate experience or expertise to undertake valuations, and
- is independent (does not have a conflict of interest).
The independent valuer will be appointed by agreement by the former resident and the operator, and if the parties cannot agree, the President of the NSW division of the Australian Property Institute will appoint the valuer. The cost of the valuation is split equally by both parties.
When the property valuation is not the same as the sale price
Where an exit entitlement is paid before the property is sold there may be a difference between the agreed estimated value of the premises and the actual sale price. No adjustment to the exit entitlement will be made upon sale of the property.
Where the actual sale price is less than the agreed estimated value of the premises, the former resident will not be required to pay the operator the difference in the values.
Where the actual sale price is more than the agreed estimated value of the premises, the operator will not be required to pay the former resident the difference in the values.
If a resident would like to take advantage of a rising property market and avoid any potential losses incurred through estimating the exit entitlement, they can forego applying for an exit entitlement order and instead wait for their property to be sold under the provisions of section 180 of the Act.
Operators must not unreasonably delay the sale of the premises
The responsibility is on the operator to prove that they have not unreasonably delayed the sale of the premises. If they cannot prove this, the Secretary may issue an exit entitlement order.
This approach recognises that the operator is in a much better position to be able to disprove unreasonable delay, as they have the documentation for the sale of the property and, in most cases, the resident has left their premises. It also provides more protections for former residents where the operator is solely responsible for the sale of the premises by creating an additional incentive to sell the property sooner.
When determining if an operator has unreasonably delayed the sale of a residential property, the Secretary must consider the following matters:
- whether the operator has taken reasonable steps to facilitate a sale of the premises and the time take to do this including:
- carry out or arrange an inspection of the premises,
- refurbishment of the premises.
- whether the actions of the operator delayed the use of other services, such as an Australian legal practitioner, licensed conveyancer, or selling agent.
Operators must comply with the exit entitlement order
An operator must comply with an exit entitlement order issued to them by the Secretary of the Department of Customer Service. If they do not comply then the corporation is liable for a maximum of 100 penalty units, equivalent to $11,000 and an individual is liable for 50 penalty units, equivalent to $5,500.
If an operator does not comply with payment of the exit entitlement following the sale of a property, they may be liable for a maximum penalty of $11,000 for corporations, and $5,500 for individuals.
Operators can apply to extend the period before an exit entitlement order can be made
There will be circumstances where an operator has done what they can to sell a property but still has not been able to sell the premises. Where this occurs, operators will need to provide the Secretary evidence to show they have not unreasonably delayed the sale of the property.
An operator can apply to the Secretary of Fair Trading requesting an extension of the prescribed period relating to when an exit entitlement order can be made. The operator may however make a request to the Secretary for an extension of time to pay the exit entitlement to the resident.
The operator must give written notice to the former occupant of the residential premises within seven days of making the request. Penalties for not complying with this requirement apply.
The Secretary will only grant an extension of time if satisfied that the operator has not unreasonably delayed the sale of the premises by doing everything in their power to enable the sale. The responsibility of proving they have not unreasonably delayed a sale will be placed on the operator. The operator will be required to provide reasons and documentation to support this claim.
Before making a decision, the Secretary will also give the former resident the right to respond to the operator’s application for an extension of time.
Operators must complete the approved request form when making the request. The form is available to complete here.
An operator may only make one application for an extension of time for the same residential property within a 12-month period.
How do operators apply for an extension of time to pay the exit entitlement order
The laws allow an operator to apply to the Secretary for an extension of time to pay exit entitlements when an order has been issued, and also for an extension of the prescribed period in circumstances where a resident has not yet sought an order for payment.