Thursday, 28 February 2019

High Retirement Village Lease Rate Costs

Long time advocate for Retirement Village reform Charles Adams states:-

Retirement village operators got their siphon into aged retirees’ savings, sanctioned by the Retirement Village Act Victoria in 1986. It is so skewed in operators favour, all Australia wide, immediately adopted the resulting contract format. That 1986 legislated definition of a Victorian “retirement village” mandates that you, the downsizing retiree, pay up front for a unit, as if you are buying it. That payment, defined in the Retirement Village Act definition, misleadingly as an “ingoing donation”, really is an interest free loan for the duration of the lease, and often months after. Five, or 25 years later, you, the exited lessee, in an aged care facility, or pushing up daisies, are unlikely to remonstrate successfully.

To get that government deal, the operators in Victoria in 1986, recommended to the Act drafters that having the capital, and a profit, provided by the prospective retiree resident, for a unit immediately, would enable them to build more retirement villages. That sounded incredibly attractive to state governments with ageing populations. Also, it would free up family housing so it was a win-win situation for the government, and for the operators. Now 33 years later only 5.7% of the over 65 year demographic are in Australian villages, while in the USA, where they mostly have simple residential tenancy contracts, the comparable figure is 15%.

After at least 6 ineffective Act reviews over the last 33 years, all dominated by the big operators and their corporate legal eagles, and also a 2 year Legislative Council Legal and Social Issues Committee (LSIC) inquiry 2016-7 into the retirement housing sector, it is time to fix the skewed definitions as follows:-

A retirement village is a managed group of dwellings intended for retirees over the age of 55 years and their partners. 

Replace the “in-going contribution” definition with Contracts Contracts 

(a) All people seeking entry to a retirement village unit shall be offered a residential tenancy contract with secure tenure, with daily rental costs inclusive of all service, management, municipal rates, external building maintenance costs, and common property maintenance costs. 

(b) Only then may alternative contracts be offered, including those requiring prepayment of an interest-free loan for the duration of the lease. 

(c) All maintenance and service fees shall terminate no later than 45 days after the unit is vacated. 

 (d) The terms “ingoing contribution” or “donation” shall be illegal in any retirement village contract.  

Evident from the LSIC review, the single most pressing other motion required of the Victorian legislature, would be the authorization for a “retiree housing ombudsman”. 

Another review, overseen by the operators and their slick city corporate lawyers would just be another lawyers’ picnic, like the previous six. This will not benefit us retiree lessees but will make future retirement villages contracts much more cost transparent and more affordable and attract a greater portion of retirees. This can be easily fixed now, by the Victorian and NSW governments.

Function of Government

The role of government is to create an environment for commerce to function whilst at the same time protecting retirees and particularly vulnerable retirees from both financial and emotional harm emanating from that function.

The Victorian Retirement Villages Act 1986 provides the environment for commerce to function but fails to fully protect retirees from financial and emotional harm as a result of it.

The Victorian legislative definition of a retirement village in demanding the payment of an 'in-going' amount without the transfer of property ownership is a major contributor to that financial and emotional harm suffered by retirees.

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