Retirement village residents claim vindication after operators put on notice

Friday, 1 March 2024

Twelve retirement village operators have been put on notice for misleading care claims, and for some of their contract terms.

A Commerce Commission warning to retirement village operators could open the door for residents to claim back some money they have had to unfairly pay, a financial commentator says.

Twelve retirement village operators have been put on notice by the commission for misleading care claims, and for some of their contract terms.

The commission investigated the operators - who run over 180 villages, and include Ryman, Arvida, Metlifecare and Oceania - after complaints from Consumer NZ and the Retirement Villages Residents Association.

In 2021, Consumer NZ complained some villages were misleading people with their continuum of care claims, while the residents’ association complained about unfair terms in some villages’ standard contract terms.

Letters released under the Official Information Act on Thursday revealed the commission told the operators that their conduct risked breaching the Fair Trade Act.

Six were warned that claims like “Nobody likes having to move” and “Thankfully you can enjoy a continuum of care” were potentially misleading because they contradicted the fine print of the contract terms.

The commission also found 52 contract clauses from another of the six operators were potentially unfair, and that issue was discussed in the letters.

Clauses of concern included residents having to pay for some repairs and maintenance of the operator’s chattels despite not owning them, and operators being able to change the charges for outgoings at any time even though some costs were in the their control.

The Commerce Commission has given retirement village operators a slap on the wrist, Janine Starks says.

But the letters did not represent a formal finding that the operators had contravened the law, it said. “Only the courts can decide if a breach of the law has occurred.”

Financial commentator Janine Starks said while the commission had only given operators a slap on the wrist, the correspondence was a victory for residents and could open a path for compensation claims.

One of the big things to come out of it were comments around the repair and maintenance of chattels, where the commission made it clear there was a significant power imbalance between operators and residents, she said.

“Even where changes had been made, the commission indicated it was not good enough because there are a whole lot of older people who have been paying for these things for years because they had no choice.

“I can’t see why residents would be happy with that. It would be good if they were able to take a claim about this to the Disputes Tribunal.”

But currently only the Commerce Commission was able to do that, and it did not seem to do it, she said.

“So it is an aspect of the law that needs to be changed to allow residents to take this route.”

It would mean residents could make a claim, for just a small cost, and that would help address the “blatant unfairness” of the situation, she said.

The letters should light a fire under the reform of the Retirement Villages Act, RV Residents president Brian Peat says.

Retirement Village Residents Association president Brian Peat said the letters were vindication for the association and for vulnerable residents who had said their contracts contained clauses that were grossly unfair.

Retirement villages offered residents a high standard of life and independence, but there were many fishhooks in contracts, he said.

“When misleading claims are also made by operators that can not only sour the experience, but have significant financial consequences for residents and their families.”

The identification of multiple potential breaches of the Fair Trading Act should light a fire under the Government to accelerate reform of the Retirement Villages Act to better protect residents, he said.

“While the commission has decided against pursuing action against operators at this stage, it is clear from the correspondence that it expects changes.

“We’re pleased it has taken a firm line on operators with a warning they need to change their contracts to be fair to residents and ensure they’re not making misleading claims about their rights and options.”

Consumer NZ chief executive Jon Duffy said it was significant the commission had put the operators on notice over their conduct, and spoke to the fact the sector was in urgent need of fixing.

The Commerce Commission has been educative rather than punitive, the Retirement Villages Association’s John Collyns says.

Retirement Villages Association executive director John Collyns said the commission had identified some historic clauses in a handful of operators’ ORAs, and those clauses were not used by most villages.

But the association was encouraging members to consider updating or clarifying these clauses and engage constructively with the commission, he said.

“The key point is that the commission says its role in this case is educative rather than punitive. No one is being prosecuted, and the commission makes the point that advertising and various clauses have been amended.”

The claims from some critics about a power imbalance between operators and residents were at complete odds with what members heard from their residents every day, he said.

“In our experience, residents are not shy about coming forward if they’re unhappy with an aspect of village living and operators work hard to meet their expectations.”

The Ministry of Housing and Urban Development is currently reviewing the Retirement Villages Act, and some of the key financial terms brought to the attention of the commission were part of the review.

Issues around the key terms in ORAs were also highlighted in the RVResidents’ recently released best practice scorecard.

About 50,000 older people live in retirement villages, including 14% of the 75+ age group, and those numbers were expected to increase as the population aged.