Page 1210 - Week 04 - Tuesday, 2 April 2019
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report, lease conveyancing inquiry documents and energy efficiency rating statement will not need to be prepared until later in the process. Sellers are still obliged to do their due diligence, and buyers remain protected. The seller must make the latest stage documents available to the buyer no later than 14 days before the contract of sale is agreed.
As Ms Lawder has touched on, the bill also changes the definitions of capital maintenance and replacement. This issue featured prominently in the review. The government received multiple submissions seeking clarification of the terms “capital maintenance” and “capital replacement”. This issue also arose in a 2017 inquiry into the New South Wales retirement village sector conducted by Kathryn Greiner AO. This inquiry found that more clarity was needed on funding arrangements for ongoing maintenance costs in retirement villages.
Under The Retirement Villages Act here in the territory, residents fund the maintenance of capital items through their recurrent charges, while operators fund the replacement of capital items. The distinction between the two concepts has led to disputes between residents and operators, and different villages interpret these terms differently. It is clear that the status quo is not acceptable. Residents and operators need certainty and consistency about who pays for what.
As I said when I introduced this bill, the devil is in the detail. The review advisory group and my directorate have considered this issue thoroughly. The government has conducted targeted consultation in requirement villages and considered a range of different scenarios. This bill is a result of that consideration. The bill makes two key improvements to capital maintenance and replacement.
First, the bill amends the definitions in the act. The definition of “capital item” is amended to clarify that a capital item includes any part of the item. The bill also amends the definition of “capital replacement” so that it does not include replacing a part of a capital item unless replacing the part substantially improves, adds to or alters the item. The effect of these amendments is that the definitions in the bill now recognise that the distinction between replacement and maintenance is one of fact and degree. Where a component is being replaced, whether this constitutes maintenance of the item or replacement of the item, depends on how integral the component part is to the item as a whole. This approach aligns with current case law on capital maintenance and replacement.
The second improvement in the bill is the creation of a guideline-making power. The bill provides for the minister to make guidelines about capital maintenance and replacement by signing a notifiable instrument. Our consultation has confirmed that residents and operators want the legislation to give more detail about particular scenarios for capital items, for example, whether replacing an element in your stove is capital maintenance or capital replacement. It is not practical to use an act to spell out every possible scenario. However, guidelines offer the flexibility to provide this level of detail and allow the government to move quickly to update these laws when necessary.
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