Troy Churton, former Commission for Financial Capability retirement villages national manager shares tips on factors to consider. Video / NZ Herald
A long-awaited review of the much-complained-about Retirement Villages Act is underway, potentially improving the lives of more than 40,000 residents, overhauling the financial model and demanding places meet healthy homes standards.
Te Tūāpapa Kura Kāinga The Ministry of Housing and Urban Development announced the law probe this week into themulti-billion dollar sector following widespread calls for change from Consumer NZ, the Retirement Commissioner, the Retirement Village Residents Association and many residents.
Owner/operators keeping 20 to 30 per cent of retirees’ capital via deferred management fees will be one area under the spotlight.
Potentially changing the law on contentious issues like who repairs, replaces and maintains operator-owned chattels like stoves, heat pumps, etc is also up for discussion.
Retirement buildings might have to meet healthy homes standards just like rental properties, as governed by the Residential Tenancies Act 1986.
How long weekly fees are charged once people die or leave their retirement village places and rules around resales and returning capital will also be examined.
“Minimum standards for specific financial exit matters concerning termination of weekly fees once the unit is vacated; resale and return of residents’ capital after exiting including whether exit repayments to residents should go through the statutory supervisor; and treatment of deferred management fees and capital gains and losses,” was how the ministry worded its review of these aspects.
Residents have complained about losing 20 to 30 per cent of their capital, fees being charged months after they leave and having to pay for repairs to chattels when they don’t own items like appliances which have to be left behind when they leave.
“Adequate consumer protection” will be at the heart of the review, the ministry said.
Two years ago, Retirement Commissioner Jane Wrightson issued a discussion paper on a law change, noting lack of significant reform in 17 years. Guaranteed retirement unit buyback periods when residents move or die, limits to how long weekly fees are charged when people leave, more voice for residents and a consumer protection probe are mooted.
The commission got 3000 submissions when it said many aspects of villages should change to make it fairer for residents and beneficiaries of family estates.
Villages can keep charging weekly fees for months after residents die. They are not forced to repay a family estate or beneficiaries the money paid for a unit or bed once their relative has died. Nor are there any specific time constraints on these two aspects, which comes as a shock to some families, grieving after a relative’s death.
Adequate consumer protection to be at heart of review. Photo / Supplied
Woodlands Boutique Retirement Village, Carmichael Rd, Bethlehem, was reported in September to be keeping a widow’s $790,000 for 10 months after she had left. But it said it had cut her weekly fee by 50 per cent and was trying to re-sell her unit, yet house sale contracts had failed meaning it couldn’t repay her, the business said at the time.
Consumer NZ last year lodged a Commerce Commission complaint about what it said were “misleading” retirement village claims. Chief executive Jon Duffy said a major selling point for many retirement villages was the rest home facilities they provide if a resident can no longer live independently. Advertising and marketing create an impression that care was guaranteed, he said.
In this week’s discussion paper, the ministry raised the prospect of a better system to sort out fights between owners and residents, citing “the provision of a simple and effective dispute resolution system, where a dispute cannot be resolved between the parties”.
It also raised the spectre of the need for an independent body to oversee the complaints and disputes to shine more transparency and accountability on this aspect which is seen as a massive power imbalance.
Sales contracts might need changes too: what is contained in them like information about transferring to higher levels of care? Some say the contracts are so complicated, not even lawyers can understand them. In 2019, Troy Churton who was then the Commission For Financial Capability retirement villages national manager, described the contracts as difficult to understand.
“They are so complicated we found that even some lawyers who work in the field could not understand them,” Churton said three years ago.
Simplifying disclosure statements and making them accessible for intending residents could be needed, including whether statements should be provided in other languages for people where English is not their first language was another area cited.
More financial and care information might be needed so people looking at villages could compare them.
The ministry said it had been nearly 20 years since the law was introduced.
“The review aims to address issues and strike a balance between the rights and responsibilities of residents and operators of retirement villages. The review will also consider specific aspects related to the main phases of retirement village experience, such as moving in, living in and moving and on, and some wider issues,” the ministry said.
But not everyone wants the law changed.
John Collyns, executive director of lobby group the Retirement Villages Association, said today the sector had announced a blueprint for change and unveiled the most significant voluntary reforms to the industry in two decades.
“Generally the retirement villages model works and that’s backed up by the number of New Zealanders moving into a village, but like any sector, there are some wrinkles to iron out and that’s what we’re doing. The vast majority of residents in retirement villages are satisfied with their decision to move in, and score their villages highly for security and safety, peace of mind and a hassle-free lifestyle,” he said.
Retirement village operators now had the flexibility to differentiate offerings and provide choices, he said.
“We do not see any need to further prescribe the commercial terms under the act, such as weekly fees, deferred management fees or sharing in relicensing gains. Increased prescription would reduce choice and increase costs in other areas, which we consider is not in the best interests of older New Zealanders,” Collyns said.
The sector was clearly what New Zealanders wanted.
“The criticism we see from a small minority of residents do not reflect the positive experiences of the vast majority of village residents,” he said.
The ministry said it was working towards releasing a discussion document on the law reform by September, 2023.
