Proposal to make retirement villages share capital gains with residents

Thursday, 3 December 2020

The Commission for Financial Capability has asked Housing Minister Poto Williams to launch a review of the retirement village sector to provide a better deal for residents.

A proposal to review and reform the retirement village industry, including making villager operators share capital gains with residents, has been criticised by village operators.

The Commission for Financial Capability has published a white paper calling for a full review of the sector, and sent it to Housing Minister Poto Williams.

But John Collyns, executive director of the Retirement Villages Association, said the industry was “somewhat disappointed” because the retirement village regime was world-leading and strucka balance between the interests of residents and village operators”.

The commission said in its white paper that most retirement village residents “appear content with their choice of living arrangements”.

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But there were issues that needed attention, it said.

Residents enter retirement villages by buying Occupation Rights Agreements allowing them to live in village units, the commission said.

Most sold their homes to do so, but when they left, they, or their estate, did not get to share in any capital gains made when the agreement was sold to the next resident.

And sometimes, residents, or their estates, were left waiting to get their money back for too long.

The commission suggested introducing a guaranteed timeframe for buy-backs, making village operators pay interest during vacant periods, and share any capital gain on sale with the resident, or their estate.

Sharing capital gains already happened in some villages, it said.

Retirement Villages Association executive director John Collyns says 100 people a week move into retirement villages.

The Retirement Village Residents Association, which lobbies for residents, provided “case studies” to the commission.

These alleged some terms and conditions in retirement village contracts were not fair, such as residents in some villages having to pay $1000 excesses on any insurance claims.

Several alleged instance of promises made in disclosure statements, which have to be given to prospective residents before they bought Occupation Rights Agreements, were later changed.

In one case an area for an astro-turf tennis court included in disclosure statement was instead used for an additional villa.

In another example, the promise of a 50 per cent share in the capital gains on houses at a village attracted most of the residents, only for them to discover that the offer had been a “marketing strategy” and the capital gains would no longer be shared.

”Why are operators allowed to present this document when it outdates and becomes a false document?” the association said.

Collyns queried the accuracy of the case studies.

“We’ve investigated a few of them, and essentially, we’ve found they were works of fiction, by and large,” he said.

Village operators knew not sharing capital gains had been a point of criticism of the industry, Collyns said.

“If somebody doesn’t like the loss of the capital gain, or the deferred management fee, they have every right not to move to a village, or to look for a village that does share capital gain, and there’s a reasonable number of them which do,” he said.

The commission also called for a new complaints process for residents.

The commission said it was 20 years since the laws and regulations governing the retirement village industry had been reviewed.