The ARQRV sought legal advice on the following question. Four different members within a few months have asked this question and we speculate that it could become more frequent with time.
A single resident in a retirement village (either widowed or sole survivor of a lease originally taken out by a married couple or a single resident leaseholder from the outset) has, or is anticipating getting, married and wants to have their new spouse added to their lease. I have pointed out to members in this position that the operator is not obliged to allow the new spouse to live on a permanent basis in the unit because, not being listed as a resident on the existing lease he or she is classed as a visitor and most, if not all, leases place time limits on how long a visitor may stay. However assuming that the operator has acknowledged and permitted the new spouse to remain as described in s70B (1) (b) & (c) we are at the moment advising on the basis of s56 and s70B of the Act. This route is very expensive if the eventual surviving resident under this arrangement is the “relative of the resident”. In this scenario the reinstatement provisions are activated, the lease terminated, the DFM collected, and, if the “relative of the resident” wishes to remain, a new lease created and an ingoing contribution paid.
So, to the question!
To cover the possibility that the “new” spouse becomes the survivor of the couple is there available a more cost effective (that means cheaper to us mere mortals) way by which the new spouse of the established resident may be added to that resident’s lease or alternatively given the right to reside by some legal instrument to the point at which they in turn find it necessary to leave the unit?
The Response from Our Legal Advice
This is an increasingly common issue, and different operators deal with it in different ways. The main considerations seem to be cost, the ability for the incoming partner to remain in the unit if the existing lessee is deceased, and any estate planning implications if one or both of the parties to the new relationship have children from a prior relationship. The situation is less complicated in leasehold villages than freehold villages, so I will just consider leasehold for the time being.
If a sole lessee of a unit in a village marries (or enters into a defacto relationship with) someone who is not on the lease, and they both wish to permanently reside in the unit, it is usually necessary to seek to operator’s consent to the arrangement because of the visitor rules in most leases. Assuming the new partner meets any age restrictions in the village, then there are three possible solutions I have seen operators offer:
(1) A long term guest licence. This allows the new partner to reside in the unit indefinitely while the existing lessee is alive. However if the existing lessee dies, then the new partner will only be able to remain in the unit for 3 months (s70B(2)) unless they can afford to purchase the unit for themselves (s70B(3)). So this is not usually a viable solution if the intention of the parties is for the new partner to be able to remain in the unit if they survive the lessee. (However I have seen instances where this is the preferred option, eg if the new partner has alternative accommodation they can return to, and/or the lessee wants their exit entitlement paid out to the children before the new partner dies).
(2) A Collateral Deed. This is a tripartite Deed entered into between the operator, the existing lessee and the new partner that operates alongside the existing lease. It normally grants the new partner a right to remain in the unit after the existing lessee passes away (subject to the new partner complying with the terms of the lease) and delays payment of the existing lessee’s exit entitlement until after the new partner dies (or otherwise leaves the village). This is a good solution because it not only allows the new partner to remain in the unit but also allows the existing lessee a level of flexibility in their estate planning. The Deed can be drafted to specify what happens to the exit entitlement when the new partner ultimately leaves, eg it can say that the money goes 100% to the existing lessee’s children, or 50/50 between their children and the new partner, or even 100% to the new partner.
(3) A new joint lease. Sometimes an operator will insist that, if the parties want the new partner to have an ongoing right to reside in the unit after the existing lessee dies, then the existing lease must be surrendered and the parties must enter into a new joint lease on the operator’s then current terms (with continuity in relation to exit fees, date of first occupation, etc). This method requires the residents to bear the operator’s legal costs in relation to both the surrender of the existing lease and the entry into the new lease, which can be in the order of about $3000. The upside of this approach is that it gets the new partner’s name on the lease, guaranteeing their right to remain in the unit if the existing lessee passes away. The downside is that it is less flexible for the purposes of estate planning. Some operators will insist that the exit entitlement is paid 100% to the new partner if they outlive the existing lessee, which can prevent the existing lessee from leaving those funds to any children they have from a prior relationship. Sometimes an operator will allow the inclusion of a special condition in the new lease which dictates that the exit entitlement is to be paid to the existing lessee’s estate even if they die before the new partner (with payment delayed until the new partner dies or otherwise leaves) however I have seen operators irrationally object to such clauses.