s 18B(1) the term
The tenancy protection provision
The Code gives the protection a name in section 18B. It applies where a proposed reverse mortgage contract:
“does not include a provision (a tenancy protection provision) for a person other than the debtor to have a right against the credit provider to occupy the reverse mortgaged property.”
National Credit Code, section 18B(1)This guide reads “the debtor” as the borrower and “the credit provider” as the lender. The right in question is one held against the lender, to occupy the home.
s 17(15A) included
If the contract includes it
Section 17 lists what a contract document must contain. For a reverse mortgage that lets someone else live in the home, subsection (15A) adds this:
“(15A) If the credit contract for a reverse mortgage is to make provision for a person other than the debtor to occupy the reverse mortgaged property, the contract document must contain provisions that have the following effect (whether or not the document also contains other provisions relating to such occupation by such a person):”
National Credit Code, section 17(15A)The provisions it then sets out deal with a nomination. Its paragraph (a) lets the debtor act “at any time (before, when or after the contract is made)”, naming, in the Code’s words, “a person who is to be allowed to occupy the property (whether alone or with other persons)”. It also covers revoking “such a nomination by notice given to the credit provider”. Paragraph (b) gives the nomination its force:
“(b) while a nomination described in paragraph (a) is in force, the nominated person has the same rights (against the credit provider) to occupy the property as the debtor has or would have apart from the death of the debtor or vacation of the property by the debtor.”
National Credit Code, section 17(15A)(b)Put plainly: while the nomination is in force, the nominated person has the same rights against the lender to live in the home as the borrower has, or would have had if the borrower had not died or moved out.
s 18B(2)–(5) left out
If the contract leaves it out
Section 18B deals with a proposed contract that has no tenancy protection provision. The borrower must then be told so in writing, and the duty falls on two kinds of person:
| Who | When the duty bites | Penalty |
|---|---|---|
| A person providing a credit service relating to the contract, other than the person who is or will be the credit provider | Must not provide the credit service until they have told the debtor | 50 penalty units, strict liability |
| The credit provider | Must not enter into the contract until it has told the debtor | 50 penalty units, strict liability |
In both cases the telling must be “in writing in the form (if any) prescribed by the regulations”. Subsection (5) makes both offences ones of strict liability.
s 67A void changes
Changes the Code makes void
Once a contract makes provision for someone else to live in the home, section 67A protects it from being weakened later. A change to such a contract is void so far as it tries to do any of these three things:
- Take out what section 17(15A) requires, in the Code’s words: “remove a provision required by subsection 17(15A) to be contained in the contract document”.
- Narrow the borrower’s power to nominate, described as “the ability of the debtor to nominate to the credit provider a person who is to be allowed to occupy the reverse mortgaged property (whether alone or with other persons)”.
- Narrow the nominee’s position, described as “the rights of a person nominated by the debtor to the credit provider to occupy the property.”
The section speaks of a “purported change”, and makes it void so far as it does any of these things.
s 185A the record
The lender’s record of nominations
“(1) A credit provider under a credit contract for a reverse mortgage that provides for the debtor to nominate to the credit provider a person who is to be allowed to occupy the reverse mortgaged property, and to revoke such a nomination, must keep in accordance with the regulations a record of any such nominations and revocations.”
National Credit Code, section 185A(1)The record is the credit provider’s duty. It covers nominations and revocations alike, and the regulations set how it is kept.
Occupancy and the grounds for enforcement
Two of the events that section 18A bars as grounds for enforcement are about who lives in the home: not giving evidence that the borrower or a nominated person occupies it, while the borrower lives there, and leaving the home unoccupied while it is the borrower’s principal place of residence. They are read in full in what the contract must not include.
Summary
The four sections at a glance
Each section answers a different question about someone else living in the home. Read in order, they follow a contract from before it is signed to the years it runs.
| Question | Section | What the Code says |
|---|---|---|
| Does the contract give anyone else a right to live there? | s 18B(1) | If not, it has no tenancy protection provision. |
| If it does, what must it contain? | s 17(15A) | Provisions on nominating a person and revoking a nomination, and the nominated person’s rights against the lender. |
| If it does not, who must say so? | s 18B(2)–(4) | The credit provider, and any other person providing a credit service on the contract, in writing. |
| Can a later change take the protection away? | s 67A | A change is void so far as it removes the provisions or limits nominations or a nominee’s rights. |
| Who keeps track of nominations? | s 185A | The credit provider, in a record kept as the regulations require. |
“Before it is signed” is the Code’s own timing: the person providing a credit service must not provide it, and the credit provider must not enter into the contract, until the borrower has been told.