86-year-old resident battles for 'fairer' occupation agreement with US retirement village owner

Tuesday, 23 March 2021

The review of the Retirement Villages Act 2003 is giving elderly people a chance to voice their views about living in retirement villages.

An 86-year-old Auckland retirement village resident is battling with his United States owner to have his occupation rights agreement changed to the same “fairer” terms as other residents have been getting for 14 years.

Elderly residents, like Knightsbridge Village resident Ian Robinson, are finding their voice as the Retirement Commissioner Jane Wrightson seeks their view on a white paper where she proposes changes to the law and codes governing the way retirement villages are run.

Robinson said he was “not cowering” in his boots by owner Arena Living’s refusal to offer him the same changes to his occupation agreement, which he paid for in 2001, as Arena had offered to two other residents.

The six Arena villages, most in Auckland, were bought by huge US investment group, Blackstone Group, in 2016. They were previously owned by Australian property giant Lendlease.

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Before 2006, the occupation agreements included a deferred management fee of 20 per cent, which was paid when the resident passed away or left, Robinson said.

Residents of most retirement villages pay a lump sum to occupy a retirement village unit, apartment or care suite. They do not own the property.

But other fees had to be deducted also. They were a high refurbishment fee estimated to be $85,000 at present, an administration fee of 2 per cent of the resale price to a new resident, and Arena’s legal fees to settle with him and the incoming resident, Robinson said.

Arena had since waived the 2 per cent administration fee for him, acknowledging it was unfair, Robinson said. If the resale price of his house at the village 19 years later was estimated about $1 million the 2 per cent would have been a $20,000 deduction.

He paid just over a $321,000 lump sum in 2001, for the right to occupy the house with his wife who passed away last year.

After 2006 the occupation agreements at the village required a higher 30 per cent deferred management fee deduction, but there were no other costs deducted, he said.

If he had the 70/30 contract he would be almost $55,000 better off.

He had copies of letters from Arena to two residents, with the same 80/20 contract as him, offering them a 70/30 agreement, but Arena was refusing to offer the same to him.

He said the letters from Arena to the two residents stated “to make this a more simplified and fair process for you,” they would offer a new licence with a 30 per cent deferred management fee.

He said the words “to make this a more simplified and fair process” was acknowledging that the 80/20 agreement was unfair.

“What they are saying is that I signed that contract and that therefore I must be caught with it”.

Arena kept saying he could have taken the 50 per cent capital gain option 19 years ago when he entered for another $10,000, but Robinson said he could not afford it at the time and had used all the proceeds from his and his wife’s house sale to buy the retirement village house.

It was a stand-alone, three bedroom and two bathrooms house with a double garage, and garden around it.

If costs continued to rise at the rate they were now “theoretically I would have to pay them to leave because the amount that I get goes down all the time”, especially because of the rising cost of refurbishment.

“I’ve got to say I’ve been here nearly 20 years, and I’ve got no regrets at having come into the village. I enjoy the positive things in this village. My only beef is that I have this dispute which I believe is unfair.”

The Retirement Village Residents Association has several thousand members of the about 45,000 people living in retirement villages. Pictured is association president Peter Carr talking to members.

“Although I have put that to them, they say no, there's a contract, you could’ve got a capital gain, so that’s your fault.”

“How come they acknowledge it is unfair and waive the contract for some and give them the benefit of the 70/30 and not others.”

He understood about 140 residents of the Arena villages were in a similar position to him.

“I will be 87 next month, but I’m not cowering in my boots. I feel quite strongly about this, and I don’t think I’ve lost my marbles just yet.”

Other elderly people in the village were giving up because it was too much of a worry for them to fight this, he said.

He had made a submission to the Retirement Commission’s white paper on review of the Retirement Village Act 2003 and code of practice, and had talked to the local MP about the issue.

Retirement Village Residents Association representative at Knightsbridge, Joe Greig, said Arena was enforcing the 80/20 contracts.

Greig said probably about the time Lendlease sold the business to Blackstone, and in the changeover period, a manager from Lendlease, who stayed a short time under Arena, told a group of residents that they would apply the 70/30 agreement to the 80/20 agreements.

He had spoken to the manager who had “moved on” and did not want to go into print but did confirm that they had been moving to the 70/30.

“But since then Arena have not wanted to come to the party. I think maybe there was confusion in the transition between one owner to another and the new owner had these old contracts and is enforcing these old contracts.”

He was on the residents' committee of the village and was in dialogue with the chief executive of Arena, Richard Davis, who was looking at the matter, but rather slowly.

The 80/20 contracts were “very harsh and oppressive and unfair”, Greig said.

Many people in retirement villages around the country had the 80/20 contracts with similar deductions and issues.

The more the value of the units rose and the more the cost of refurbishment increased, the worse off people in 80/20 contracts were becoming.

In a written statement in reply to Stuff’s questions Arena chief executive Richard Davis said, “An Occupation Rights Agreement (ORA) is a legal contract that both parties enter in good faith.

“We have always strongly advised all prospective residents to seek legal advice and guidance before committing to an ORA. It is imperative the terms of the agreement suit our residents both at the time of moving in, and on termination of the contract, which in many cases covers a span of several years.

“ORAs are subject to change over the years, and it is normal that a resident that has lived in a village for a period of years will have a different ORA to a person who joined us more recently.

“While we cannot comment on individual contracts, we recognise that all circumstances differ, and we are committed to working with residents who have raised questions or have issues with historic ORAs, many of which were in place over a decade before we purchased the retirement village portfolio in 2016.

“I am happy to say we have reached mutually agreeable solutions in almost all cases, and we will continue to engage with this resident in hope of reaching a resolution,” Davis said.