Best practice guide Determining refurbishment and fair wear and tear in retirement villages
What is refurbishment?
Refurbishment is defined by the Code of Practice as to 'restore and redecorate a residential unit to no more than the condition it was in when the resident entered it, less fair wear and tear'.
The general nature of the refurbishment obligation will still be set out in the occupation right agreement, but the Code of Practice provides that residents cannot be required to pay for fair wear and tear, if their agreement was signed after 25 September 2006.
Irrespective of the date that occupation right agreements were signed, residents should ensure that they understand the specific contractual requirements relating to refurbishment. If, as a resident, you do not understand the specific requirements you should seek more information from your operator or lawyer.
Why is refurbishment necessary?
Refurbishment is necessary to make a residential unit attractive to a prospective buyer, and therefore benefits both the operator and resident and the reputation of the village.
Occupation right agreements before 25 September 2006
For those residents who:
- entered their occupation right agreement before 25 September 2006, and
- whose rate of fixed deduction or share of capital gain remains as the original occupation right agreement.
The nature and extent of the refurbishment required will be determined by what is in their occupation right agreement. This might require a resident to refurbish their unit to a condition described as:
- new
- a standard suitable for resale
- returning to the condition it was in when the resident took occupation
- a standard satisfactory to the operator
- pristine (meaning particularly clean and tidy).
Occupation right agreements after 25 September 2006
For those residents who:
- entered their occupation right agreement after 25 September 2006, or
- who entered their occupation right agreement before 25 September 2006, but after that date the agreement was varied to increase the resident's rate of fixed deduction or decrease the resident's share of capital gain.
They are able to apply the refurbishment clause set out in the Code of Practice.