Dialogue: Concern for old is forever in the retirement business

Most retirement village operators go out of the way to ensure the happiness, security and peace of mind of their residents, writes CLIFF COOK*. But there is room for improvement.

Retirement villages have been getting some bad press recently, all too often from well-intentioned writers who express concerns about the possibility of elderly citizens being ripped off by unscrupulous retirement village operators.

Age Concern recently joined the call for stronger legal safeguards for older people who buy into retirement villages. And the Securities Commission and the Law Commission have proposed legislation to give legal protection to retirement village residents.

One of the first things critics of retirement villages should appreciate is that members of the Retirement Villages Association view their business relationship with their residents as a forever business.

There is no cut-off point. Because operators plan on having a long-term for life relationship with each resident, the great majority go out of their way to ensure the happiness, security and peace of mind of their residents.

This special forever relationship is in contrast to real estate developers who, for example, build houses or home units in a typical subdivision.

Once the houses or home units are sold, the developers' business dealings with the buyers are virtually over.

That is not so with a retirement village operator, who provides day-to-day management of a village for all the residents.

The elderly residents not only buy a licence to occupy a home unit or apartment within the complex, but also buy into numerous village services, such as access to health care, medical and social programmes, and gardening, housekeeping, maintenance, security, entertainment and recreational facilities.

Buying into a retirement village, therefore, involves buying into a bundle of day-to-day services that must be provided on a continuous and long-term forever basis for the village operator to survive.

Residents are buying a lifestyle, not just a property.

There are problems with developers. But some village developers are just that - developers - and not operators.

The Retirement Villages Association believes legislation is needed to safeguard the rights of elderly citizens, and the association has actively supported the Securities Commission initiative to bring everyone who claims to be a retirement village operator under a full legal disclosure scheme.

The association also agrees that the term retirement village needs to be defined in law and that operators should be subject to the association's code of practice.

This provides recourse for disenchanted residents through a dispute resolution process to a review authority, chaired by Dame Augusta Wallace, which is binding on all member villages.

Much has been made by some correspondents to newspapers about the licence to occupy a village unit. There have been allegations that this licence does not ensure security for residents. One columnist wrote that if the village goes under, they become an unsecured creditor.

This is not true. The licence to occupy is the most popular scheme of ownership, with roughly 60 per cent of the industry using this form of title.

The advantages are that the residents' rights are protected as equally as if they had a unit or strata title or lease to their property.

They also have a scheme supervisor who acts in a watchdog trustee capacity to protect the individual and collective interests of the village residents.

A deed of encumbrance (some hold a first mortgage) is held as security over the village property by the scheme supervisor.

This ensures residents' right to recover their investment in the village ahead of banks, construction companies or other creditors, and the continuance of the scheme.

While suggestions of villages going under might make for emotive reading, the reality is that the only big retirement village in the whole of Australia and New Zealand to fail did not offer its residents a licence to occupy. Rather it was a unit title village.

The Retirement Villages Association support the Securities Commission's initiative to bring everyone under the full disclosure scheme.

The most important aspect of any scheme is that full disclosure be made by the operator of all the resident's legal obligations, entitlements and services before someone buys into a retirement village.

It is also important that buyers obtain a prospectus or disclosure document so they can clearly see there are no hidden fees.

They can also evaluate the experience and financial background of the operator.

Members of the association recommend that prospective residents obtain sound legal and financial advice before committing themselves.

Finally, much has also been made about the fact that residents who wish to opt out of a retirement village lifestyle find their money is tied up until the unit is sold. This is the case whether someone has a unit title, lease or licence to occupy.

This is the same with any home in the community.

Anyone wishing to sell their family home and move elsewhere is dependent on the real estate market.

Even prospective residents are generally dependent on being able to sell their family homes before being able to invest in a retirement village lifestyle.

Association statistics show that village unit sales mirror the national and regional real estate market. If homes are slow to move in the local suburbs, units in the same area will be slow to move in a retirement village.

Association members strongly endorse legislative improvements to further protect elderly residents.

But genuine operators already strive to ensure the continuing welfare of their residents with the firm knowledge they are operating in a forever industry.

* Cliff Cook is chairman of the Retirement Villages Association.