31 July 2018

How to handle refurbishments

At Consumer Protection, we receive multiple calls and complaints about retirement village residence refurbishment costs, often relating to the timeframes involved or the costs being unreasonable. Excessive refurbishment fees are in the top three categories that we receive complaints about. These complaints frequently relate to villages renovating residences to a higher standard than is required by the legislation, and charging the resident for these works, without gaining their agreement first.

Costs and timeframes

The residence contract sets the framework for what work may be carried out and what proportion of the cost parties are responsible for.  A resident cannot be asked to pay more than the actual cost of the refurbishment work, regardless of what the contract says.

As the village administrator, before you commence any refurbishment work, you must provide the resident with a written statement that:

• Lists in detail each item of work you consider necessary;
• Itemises the estimated cost of each item or work; and
• Advises dates of commencement and completion.

If there is a material change to the initial estimates of work, time or cost, you must give the resident written notice of the changes. Before accepting or making any demand for payment, work must be completed and the actual cost itemised. The resident must be allowed a reasonable opportunity to inspect the work.

How can you best manage refurbishments?

Have a uniform and appropriate statement of what constitutes a ‘reasonable condition’ for units that are changing hands. Communicate the standards that apply in your village among residents and to prospective residents.  Remember, former residents are not required by law to fund upgrading of a unit they once occupied.

Sometimes a resident or their family is prepared to agree to a greater amount of refurbishment if they think their share of the increase in the upfront payment reflects the amount they will contribute. You can discuss the benefits of making further upgrades to a unit with a resident. However if you wish to proceed with a higher standard and want those additional costs to be shared with the resident, beyond the level of what is contractually required, you would need to gain the agreement of the resident prior to commencing any extra works.

If a unit is to be vacated, consult with any resident who must contribute to refurbishment at the earliest possible time. If the resident has died, you will need to tactfully negotiate the situation with the resident’s family.

If the refurbishment is creating concern, think about how you could minimise any loss for the resident. Consider contributing to the cost or increasing your contribution to the cost. 

Once work commences, keep the resident informed of the progress of the works, including the possibility of delays and cost overruns. Deal with any significant issues as soon as they arise and discuss them with all affected parties. Consider alternatives when significant delays or cost overruns occur. In all instances, provide a fully itemised account for the works.

From a resident perspective

Residents or their families may have to vacate at a difficult and emotional time. They can be reliant on return of their upfront payment to be able to relocate, enter residential aged care or settle an estate. They may also be concurrently paying both aged care costs and recurrent charges, placing them under considerable financial strain. This means that the speed with which a unit is reoccupied is important to them.

In a strata or purple title village, former residents may find it difficult to cope with charges and rates that continue to accrue as they are not subject to the cap on recurrent charges that applies to lease villages. They may prefer the unit to be re-leased or sold with minimal improvements because they believe that the refurbishment will not speed up the process or provide enough benefits once the costs are taken into account.

State Administrative Tribunal (SAT)

A resident can apply to the SAT if they think:

• The work is not necessary to return the premises to a reasonable condition;
• The proposed cost is too expensive;
• They are asked to pay too high a proportion of the cost; or
• The proposed commencement or completion dates are unreasonable.

This means that you need to give careful thought to what work is reasonable and how the costs will be apportioned. A clear explanation as to why you consider particular items of work necessary minimises potential for dispute.