Retirement village residents call for quick changes to give them slice of capital gains
Wednesday, 31 March 2021
Residents of retirement villages are digging in against owners, calling for quick changes to the Retirement Villages Code of Practice including sharing capital gains.
Their representatives, the Retirement Villages Residents’ Association, say changes to the code can be made reasonably quickly that would enable them to share in the capital gains on the resale of their units, require owners to repay them in a guaranteed time, and stop owners charging weekly fees when the resident has passed away or moved into care.
Changing the code was quicker than changing the Retirement Villages Act 2003 which can take years, they say.
The code changes could happen while a full review of the retirement villages legislative framework was carried out. It was “absolutely overdue”, the association’s submission to Retirement Commissioner Jane Wrightson said.
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Residents’ submissions overwhelmingly support a full review of the act, the code and regulations, as proposed by Wrightson.
More than 3000 submissions have been received in response to her white paper discussing a full review and proposed changes.
Residents called for ”interim relief” soon through changes to the code.
“If 98 per cent of the resident responses received agree that a full review of the retirement villages' framework needs to be undertaken, then we would hope the Government listens,” national president of the residents’ association Peter Carr said.
'We want to know who and what framework is protecting the vulnerable and elderly in these villages.
“When legislation can allow for a resident to lose up to 30 per cent of their capital, receive no share of capital gain, but have to pay any capital loss, plus continue to be charged weekly fees ad infinitum after exit, and still not have any money refunded until the village has sold the licence of the unit to someone else, then something is seriously wrong,” Carr said.
A number of operators had lifted the industry's game by stopping fees on exit.
However, operators were not willing to discuss a guaranteed return of funds to a resident or sharing capital gain.
“We have cases where it has taken 12 to 24-plus months for some people to see money returned and fees stop being charged,” Carr said.
The residents’ association’s submission is calling for a guaranteed time for village operators to buy-back the unit from the resident or their estate, an option proposed by Wrightson.
Typically 70 per cent to 80 per cent of the original sum is repaid, but some residents can wait for months for that while the right to occupy the unit is resold. Owners keep the capital gain from the resale at present.
Residents also support Wrightson’s suggestion that interest be paid to residents or their estates while the unit is vacant.
They do not support restricting these changes to only the larger, for-profit retirement village operators, because it meant residents in villages run by smaller operators or not-for-profit organisations would not be protected.
They want a minimum percentage of the capital gain returned on their exit from the unit. That would help with their costs if they were shifting into care. That should be linked to shared capital gain as well.
They recommend that weekly fees after a resident has left a unit be reduced by 50 per cent immediately on exit and only be paid for a maximum of three months.
The association is also calling for an authorised advocate, like a commissioner or ombudsmen, with the legislated powers to enforce decisions without a stressful, drawn out process. That was also a key request from residents, Carr said.
Discussions had recently started between the Retirement Villages Association, advocating for owners, and the residents’ association, with the drafting of an initial 12-month Memorandum of Understanding.
While both associations agree that the majority of residents were happy with village life, Peter Carr said the issues were not about ‘warm fuzzies’.
“Bottom line: Legislative change is needed to ensure vulnerable village residents are protected,' Carr said.