Consumer NZ warns of retirement villages' 'financial sting'

Tuesday, 2 February 2021

Jon Duffy, Consumer NZ chief executive, says a major concern in retirement village contracts is residents being responsible for maintaining and repairing items in their unit, even though they do not own them.

Consumer NZ wants an overhaul of retirement village regulations to protect residents from unfair terms.

Consumer NZ chief executive Jon Duffy said its review of retirement village contracts found terms that unfairly favour the village and risk leaving residents out of pocket.

Their call follows the Commission for Financial Capability publishing a white paper calling for a full review of the sector. The commission has sent it to Housing Minister Poto Williams. The commission provides financial education and information to New Zealanders and advises the Government on retirement income policy,

“Retirement villages promise the good life in your golden years. However, the agreements consumers must sign before they move into a village can have a nasty financial sting. Some also risk breaching consumer law,” Duffy said.

* Proposal to make retirement villages share capital gains with residents

A major concern was terms that made residents responsible for the costs of maintaining and repairing items in their unit, even though they did not own them, he said.

Most retirement villages offered a “licence to occupy”, which gave the resident the right to live in their unit but no ownership rights to the property. Despite this, some contracts made the resident liable for repairing the operator’s chattels.

Consumer NZ’s review of retirement village contracts looked at contracts offered by six major retirement village operators: Arvida, Bupa, Metlifecare, Oceania Healthcare, Ryman Healthcare and Summerset.

Consumer NZ head of research Jessica Wilson said Metlifecare had a wide-ranging clause in its contract, which gave residents just one month after the agreement began to advise the company of any repairs needed.

After that time, the resident was required to meet any costs, including paying for repairs to the unit’s stove, garage doors, plumbing and electrical fittings.

“In our view, these terms conflict with residents’ rights under the Consumer Guarantees Act to expect goods and services of a reasonable standard. If the oven in your unit fails, the village should wear the repair cost.”

In Consumer’s review report Metlifecare responded that it was common in the industry for residents to be responsible for maintenance of their unit’s interior. However, Metlifecare was “open to reviewing” the one-month period in which residents must notify it of defects.

Wilson said many residents also faced significant financial losses when their unit was sold because they did not receive any capital gains, despite paying towards the property’s upkeep.

Retirement Villages Association executive director John Collyns says its research shows 87 per cent of residents were satisfied or very satisfied with their decision to move to a retirement village.

Villages’ retention of the capital gain was a major cause of complaint. In a Consumer NZ survey of 1680 residents, 63 percent were unhappy their agreement did not allow them to get any capital gain when their unit was sold.

Consumer’s review of village contracts also found terms that gave the village wide discretion to decide what residents could and could not do.

Several contracts restricted residents’ rights to raise objections about village developments. Metlifecare and Summerset contracts included terms stating residents were not allowed to object to any dust, noise or other nuisance caused by the development.

Wilson said these kinds of clauses ignored residents’ rights to raise legitimate concerns.

Consumer NZ will be providing the findings of its review to the Retirement Commissioner Jane Wrightson, who is responsible for monitoring the sector.

However, Retirement Villages Association executive director John Collyns said retirement village operators were very careful about their obligations under the Consumer Guarantees Act.

Collyns said the association did not agree with Consumer’s view that some retirement village agreements risked breaching consumer law.

Collyns said most appliances were under guarantee and new when a resident moved in to a unit because most operators brought the unit up to an “as new” standard when it was sold.

There were basically two broad options. The first was that the operators provided the appliances and the resident met the cost of the consumables like light bulbs or residents supplied the appliances and met the cost of the consumables.

The first option was “certainly a lot cheaper” than the second option, he said.

The association told its members that contracts residents signed should be very explicit about what the resident paid for and what the operator paid for, and if that was unclear then the operator should meet the cost.

Every resident before moving in had to receive independent legal advice from a lawyer who went through the contract and explained what the parties were responsible for. If lawyers were unhappy with the contract they could negotiate on behalf of their clients for a better deal, Collyns said.

Residents moved to a village because they were warm, secure, comfortable and provided companionship and there was a pathway to further care later.

Collyns said the association's recent research carried out by UMR for it had shown that 87 per cent of residents were satisfied or very satisfied with their decision to move to a village.