Key points
National Seniors’ government submissions call for urgent reform of retirement villages.
“Buyer beware” approach puts too much risk on older buyers.
Standard and consistent reform and laws governing the sector are needed now.
On the back of consumer anger, state and territory governments are probing the retirement villages sector. But National Seniors Australia is calling on the Federal Government to lead by standardising the laws and consumer rights nationally.
Our call comes as the Tasmanian Government looks to reform laws governing retirement villages.
In our submission to that state government, we agree that retirement villages have the potential to provide an important part of the housing mix. However, governments must ensure current and future residents’ rights are protected.
Many seniors tell us about their negative experiences, and even those who are positive about retirement villages question the lack of transparency of contracts, fees, and charges.
It’s very much “buyer beware” and we advise consumers to be fully informed, and careful, before signing contracts.
Many older people interpret the existence of dedicated Retirement Village legislation as conferring a degree of consumer protection. This can provide a false sense of security about the nature of retirement village contractual and financial arrangements.
It may, in fact, inadvertently, deter purchasers from taking a “buyer beware” approach because they wrongly believe they are automatically protected and may be less likely to either carry out, or finalise, due diligence before signing a contract.
We urge governments to continue to reform the sector.
It is vital that any amendments to improve retirement village legislation achieve the following outcomes:
Older people feel confident that retirement villages provide a suitable option.
Potential residents are provided with clear and consistent information to enable decision making.
Older people are protected from unethical or predatory behaviour.
Fact file
Buyer characteristics
Minimum entry age is 55 but the average entry age is 74-75.
Average age of residents is 81.
Average residency is 8-9 years.
The percentage of single female residents is increasing.
Being older, buyers and residents can often experience life-changing circumstances or live through a challenging/difficult time of life.
Why this matters
Contracts are long, detailed, and not reader friendly. Management agreements, individual to each village, tend to be long (more than 50 pages) and contain complex legal text that could require comment by a lawyer and/or a financial adviser.
Too often, potential buyers do not read the fine print or understand the detail and context, including the financial ramifications. Buyers often don’t seek family, financial, or legal advice before signing up to a retirement village.
Consumers, operators, and government can all benefit from nationally consistent retirement village legislation, which will create less confusion and reduce the costs of compliance.
In the absence of nationally consistent legislation, the states and territories should implement these changes to fix the current laws:
Create an independent retirement villages ombudsman to educate consumers, monitor the sector, and handle complaints.
Ensure fees and charges are clearly and consistently outlined in plain English terms in all contracts. If a contract does not specify a fee or charge and includes only the method of calculation, then an example must be provided to demonstrate what the fee might be, based on reasonable assumptions.
Retirement village providers can charge maintenance and service fees provided these are reasonable and clearly outlined in plain English in the contract, with examples.
Providers should not charge Deferred Management Fees. These should be illegal for any new retirement village contract.
Refurbishment fees should be applied only after a resident has been in a property for more than 10 years – unless they can provide evidence to the ombudsman there is a need for refurbishment with items clearly itemised. Refurbishment fees should be capped as a proportion of the entry fee, and this should be clearly communicated in plain English with examples in the contract.
The value of any exit fee should be clearly stated up front in the contract as either a dollar value or as a proportion of the sale value. A table outlining exit fees over time should be provided in the contract so the buyer understands future financial implications. It is critical that older people know how much they will have available from the refund of entry fees when planning for aged care.
Where a resident dies or vacates their premises, the operator must refund an entry fee within six months (as is already the case in Tasmania). If the former resident is accessing residential aged care, then the sale period will be set at three months, in line with the Refundable Accommodation Deposit (RAD) timeline or the operator should be required to meet the Daily Accommodation Payment until the property is sold or when the six-month limit is reached (whichever comes first). The DAP cost will be deducted from the exit entitlement, and this provision should be clearly communicated in contracts.
Advertising and accommodation information should be spelled out, in plain English. What is for sale? Are you buying property? Are you purchasing a right to reside? Are you entering a leasehold arrangement? It must be made clear exactly what the contract involves. These terms should be outlined in plain English in a one- to two-page attachment to the contract.
It should be made clear if a resident will not be eligible for the Home Equity Access Scheme as a village resident (unless the rules governing this scheme change).
A retirement village should not be on-sold (to a new corporate entity, company or individual) without the village provider giving residents written notice of the intention to sell/transfer ownership. Included should be an assurance by the new owners that the village would be maintained at its present or improved condition for at least five years.
