Why retirement village residents seek an industry Ombudsman. The VCAT system is failing them.

This is the detail of a real situation over 4 years of village operation. The resident contends that these matters are all contrary to the provisions of Retirement Village, Contract and Consumer Law.

1. In 2020 the operator declared residents voted for a special increase in fees without counting the votes to substantiate the necessary resident support as required by statute. Total cost to residents in that year some $22,000.00.

2. Commencing in 2020/21 the operator incorrectly calculated resident fees. Cost to residents some $80,000.00 to date then compounding by cpi for every year into the future.

3. From 2019/20 the operator charged for ‘services’ claimed to have been provided but stating only the total amount. No details, no itemisation. Residents denied statutory right to examine validity of charges. In the order of $200,00.00 per annum.

4. In 2021/22 residents were charged for the cost of the operator’s own legal expenses. Total cost to residents in that year some $46,000.00.

5. From 2019/20 the operator failed to verify that the fee levied on residents met their statutory obligations. Total cost to residents accumulated to date, some $236,000,00.

6. From 2019/20 the operator overdrew the resident’s Major Maintenance Fund to pay costs that were the contractual responsibility of the operator to pay. Overdrawn balance of the fund to date, some $390,000.00.

7. From 2019/20 the operator included in resident monthly fees the wages cost of village maintenance staff for the refurbishing of village units owned by the operator and being prepared for resale. Most units were the contractual responsibility of the operator to pay those costs. $ uncosted to this time

8. From 2019/20 the operator included in the monthly fees of those residents without a contractual obligation to pay, staff wages plus the replacement cost of fittings, fixtures and furnishings for the unit maintenance where the occupying resident had a contractual obligation to pay the direct costs incurred. $ uncosted to this time

9. From 2019/20 new village residents on the operator’s new contracts were charged a monthly ‘maintenance charge’ greater than the statutory allowable maintenance charge. Total cost across all new residents in the order of $153,000.00 to date.

10. The total amount in dispute over just 4 years of village operation is $1,727,000.00 plus.

National Ombudsman Recommended for Retirement Villages

The Australian Urban Research Institute has recommended a National Ombudsman for Retirement Villages. 

Retirement Villages in Australia operate under varying laws of the State Governments, this as opposed to aged care facilities that operate under Commonwealth laws. 

AURI published a report on the industry in December 2022, the primary recommendations of the report were - 

• A national ombudsman
• More affordable housing solutions
• Greater transparency
• Better standards of service
• Accessible building standards
• Ethical and impartial dispute resolution processes
• Regulation of the financial management processes
• Repositioning of retirement village contracts as a financial product

The AURI report titled Business models, consumer experiences and regulation of retirement villages can be found via this link - https://www.ahuri.edu.au/research/final-reports/392 

Danger in Retirement Village Resident Fees

 

Evidence for many residents in retirement villages shows they are being taken advantage of for items in their units where they are arbitrarily being made responsible to pay for repair and/or replacement.

Retirement Villages come under Victorian law whereas aged care facilities come under commonwealth law. Regulation 11(1h) under Victorian law requires a village operator to list the relevant fixtures, fittings and furnishings in the contract before the contract is signed. 

A resident in a Victorian retirement village paying for repair or replacement of fixtures, fittings or furnishings not listed in your contract? Seek advice now from a local free legal advice service, your solicitor or Consumer Affairs. 

Currently the Retirement Villages Act 1986 is under review by the State Government, if this matter is applicable to you or there is another matter of concern to you make those concerns known to your local State Government representative.

Find you local state government representatives - https://www.parliament.vic.gov.au/about/people-in-parliament/members-search/search-members

RRVV Refreshes Member Website

The peak representative body for retirement village residents in Victoria, Residents of Retirement Villages Victoria has refreshed their web site with a bold new look.

Residents of Retirement Villages Victoria Inc. is an independent volunteer organisation serving and representing residents of retirement villages and similar housing communities within Victoria. RRVV as they are commonly referred to represent around 6,000 residents and growing.

The organisation is member-based and is managed by a committee of unpaid volunteer village residents who are elected annually at their Annual General Meeting. They do not receive any government funding and depend solely on fee subscriptions and member donations to operate.

New members are always welcome as the more members they have, the greater is their effectiveness, they encourage all retirement village residents to join as this will support all residents of retirement villages across Victoria. 

Take this link to their 'new look' web site - Residents of Retirement Villages Victoria

Retirement Villages = 'The transfer on intergenerational wealth'

 Retirement Villages = 'The transfer on intergenerational wealth, not to families, but into the hands of corporations. Shame about elderly people not having enough money for Aged Care.' - Tom Gait

Capital Gains - Retirement Village Units Perform Poorly

More evidence retirees get better financial results by staying in the family home and seeking a home care package than moving into a retirement village unit.

An article at The Weekly Source shows that retirement villages have taken  the last 5 years to reach a 22% increase in value whereas the family home has done that in just the last year.

Note - Industry data shows only 37% of new retirement village occupancy contracts offer an incoming resident a share of any increase in the value of the unit.

The full article can be read here - https://www.theweeklysource.com.au/in-five-years-village-home-prices-increased-by-22-vs-22-in-one-year-for-residential-prices-is-this-a-shame-on-village-marketers/ 

Retirement Village 6 Month Payout Rule Madness

Victorian loan/lease retirement village residents are trapped in a legislation nightmare. They may never get their money back on leaving a loan/lease retirement village if the unit in which they resided is not re occupied. Hard to believe but this is current Victorian state government legislation, legislation overseen by the Minister for Consumer. There are real life examples of retirees, their estates or their families that are still waiting over 4 years now for their money as a result of village unit sales slowing or in fact stopped. Incredibly they may never get their money back unless Victorian retirement village laws are changed.

The original law was changed so that village operators could place certain clauses in occupancy contracts. Clauses that allowed residents the option, note the option, to participate in the selection of a selling agent and in some cases the setting of a new lease price for the unit they once occupied but did not own. The impact of this on the outgoing resident is the removal of the 6 month maximum period payout rule, incredibly this happens whether an outgoing resident chooses to actively participate in the re leasing of their unit or not. What happens if the unit never gets a new lessee, there is no statutory or contractual obligation on the operator to ever repay them their refundable money. This could range of course from a few hundred thousand dollars to over a million dollars, all because of a piece of poorly drafted legislation.

The mere action of the village operator putting these Regulation 6 Schedule 1 or Schedule 2 clause in the contract negates the 6 month payout rule. Why would a loan/lease retirement village resident knowingly give up a maximum repayment period of 6 months in exchange for absolutely no limit at all. Such is the complexity of retirement village contracts that this is happening every day, contracts are continually signed without a clear understanding of what is in the document.

The Minister responsible to oversee Retirement Village law has the power to fix this. The power to return the six month rule to at least those retirees who do not or did not want to participate in 1. the process of selecting the selling agent and 2. in some circumstances the setting of the new village ingoing price for that unit.

Retirement Villages - State Governments Know The Core Problems

When it came to retirement villages the Victorian governments have known of the primary problems as far back as 2004. Successive governments since 2004 have failed to act to correct the resident owner/operator imbalance.

The following are excerpts from the 2004 state government report into retirement villages. They identified the core issues but those issues are still as relevant today as they were back then.

Nothing has really changed.

“Possible negative consequences for residents and prospective residents are also increased because of the effects of age-related characteristics on their ability to make informed and knowledgeable decisions about retirement village services.”

“Secondary markets that respond to the complex information requirements of the retirement village market (solicitors, financial planners, accountants and the like) have not developed to a level which adequately respond to market need. Consequently, the potential for consumer detriment is enhanced.”

” A considerable number of submission to the review raised concerns about the potential for financial loss when residents exit a village. Contracts that respond to the range of legal structures, services, facilities and fee are complex and residents find them difficult to understand. The problem is compounded by the large proportion of residents who are making a one-off decision, of significant financial nature, to enter a retirement village. Many of the legal and fee arrangements they must consider are unfamiliar to them and information and advice to help them make an informed decision appears to be limited.”

“Analysis of the retirement village market has revealed evidence for potential substantial consumer detriment arising from information asymmetry – the position where village owner/operators have superior knowledge of the services provided than do prospective residents.”

All this published in a Victorian state government report on retirement villages way back in 2004.

Finance Contracts - Retirement Villages The Most Complicated

 In a stinging critique Michael West Media exposes retirement village contracts as -

"the most complicated finance contracts in Australia"

The article exposes these contracts as "So devilishly complicated are retirement village contracts that an actuary and lecturer in applied finance, someone at the very pinnacle of mathematics and structured finance, reckons they are harder to understand than even synthetic collateralised debt obligations (CDOs)." 

The video below shows these retirement village contracts, which can stretch up to 500 pages, bewildered all but one of 20 university-educated, retiree-aged subjects in a 2020 study into the financial literacy of consumers looking to enter into retirement village contracts.

Retirement Village contracts - "the most complicated finance contracts in Australia"

The full article can be read here - https://www.michaelwest.com.au/retirement-villages-the-most-complicated-finance-contracts-in-australia/ 

Michael West Retiree Capital Destruction

Well respected independent media Michael West Media have published a strong article as to how occupancy in a loan/lease retirement village destroys retiree capital over the period of their occupancy, as opposed to staying in the family home.

Take the link to read the article - https://www.michaelwest.com.au/retirement-villages-the-destruction-of-retiree-capital/