Retirement villages warned about chattel charging - but is everybody listening?

Saturday, 1 June 2024

The Commerce Commission examined the contracts of a sample of retirement villages to identify potential unfair clauses. One area highlighted related to charges for repairing and maintaining chattels. (File photo)

Janine Starks is a financial commentator with expertise in banking, personal finance and funds management.

OPINION: One of New Zealand’s biggest retirement village operators, Metlifecare, has now agreed to stop charging residents for the cost of repairing and maintaining chattels.

By early June, the contracts in all 38 Metlifecare villages should reflect this change. Unsurprisingly, Metlifecare aren’t crowing about their capitulation. I’ve only discovered it via an Official Information Act request, but to be fair to them, they’ve done the right thing.

Congratulations must also go to the Commerce Commission, which carried out a targeted investigation of 12 retirement village operators earlier this year.

But the regulator's campaign has face-planted in terms of wider success.

Particularly notable, in my opinion, is that Generus Living Group has not changed the chattels clause in its contracts. Notable because Generus is owned by Graham Wilkinson who is also the president of the Retirement Villages Association.

Generus was not included in the commission's investigation, but it is obvious to me that the activity was intended to send a clear message to the entire industry.

It's with some surprise that I received letters from some Generus residents, complaining they’re still paying for chattels, despite the Commerce Commission making it abundantly clear to other operators such as Metlifecare in January that these charges risked breaching the Fair Trading Act and may be “unfair terms”.

On the schedule I’ve seen, Generus residents are - with some modest exceptions - responsible for paying the plumbing bill if the loo stops flushing and the repair bill if the garage door motor fails. They’re up for new seals on the shower door, pipe leaks and full replacement of drapes, tracks, kitchen cabinets, benchtops and splashbacks.

It’s an eye-watering list where Generus makes residents pay for repairs on 80% of its chattels and full replacement of over 50% of the list. It’s no wonder residents are angry. They own none of these items, give up all their capital gains and pay a handsome 30% of their licence fee to Generus on death or exit.

As president of the RVA, Wilkinson seems to consider that the expectations of the Commerce Commission as expressed to other RVA members to stop charging for chattel replacement don't apply to his business.

Consumer NZ chief executive Jon Duffy says there is little that individual residents can do about unfair terms in their retirement village agreements.

Bear in mind legal costs are taxpayer money and the regulator doesn’t want to drag every operator one-by-one through the courts. They pick a sample group and make it abundantly clear what they think. There’s no way Wilkinson could have missed the memo.

In other jurisdictions, “education” is effectively a gun to the head of the entire industry, but it seems as if in New Zealand it’s merely a water pistol. Even when a court deems a clause “unfair”, there’s no immediate fine (unlike Australia) and residents can’t use a disputes tribunal to reclaim money.

As Jon Duffy, the chief executive of Consumer NZ points out, “in practice, there is little consumers can do about unfair terms, because only the Commerce Commission can challenge these terms in court”.

“We've called for these issues and many others, to be addressed in the long-overdue review of the Retirement Villages Act”.

I’ve pointed out to senior staff that companies like Generus are still charging for chattels. I’ve suggested they widen the net on their “education” scheme and prod the rest of the industry with a pitchfork. Metlifecare were a big catch. The official response left my chin on the ground.

“The particular issue you have [raised] is not currently prioritised for further investigation at this time. That said, we will consider the wider issue you raise as to the position of current residents who signed contracts after March 2015 in any further enquiries the commission may decide to undertake in the future that relate to this sector.”

The president of the Retirement Village Residents Association, Brian Peat.

I could imagine the legal team at Generus and every other chattel-charging operator cheering at that news. The regulator has no appetite to round them up. A clause is not deemed unfair until a court makes a ruling, so Generus’s unlucky residents are forced to keep paying for chattels.

Commerce and Consumer Affairs Minister Andrew Bayly should be making an urgent phone call to the commission. Every operator should be written to and asked to explain how their contracts have responded to recent activity by the regulator.

Brian Peat, the president of the Retirement Villages Residents Association, says: “Unless these changes are legislated and mandated, then nothing will happen. We must push very hard for these improvements with the review of the act. All we are asking for is fairness, consumer protection and consistency”.

The woes of Generus residents don’t stop at the plumbing costs. Those living at Pacific Lakes in Papamoa tell me their village’s pavilion hasn’t been completed and there are further delays until 2025. With no community facilities, some have asked for a temporary reduction in their weekly fee, but been declined. An 80-year-old couple were told if they both died within two years, their family woud receive a refund. They are expected to pay for something they can’t use but have been offered a quick-death-rebate.

These fees are small fry and Generus should be placing its deferred management fee on hold, so it doesn’t accrue. These costs shouldn’t be clocking-up on an unfinished construction site.