Reform retirement villages law, residents demand

Tuesday, 6 August 2024

More than 80,000 people will live in retirement villages by 2033, but is there adequate consumer protection for them? Not as the law stands, the Retirement Villages Residents Association says.

RVResidents vice president Di Sinclair said the current law was grossly unfair, and in no other sector could those providing a service get away with what retirement village operators do.

That led RVResidents, which has more than 11,000 members, to launch a campaign on Tuesday to push the Government to comprehensively overhaul the law governing villages.

So what’s behind RVResidents’ move, and what does it want?

What’s the problem?

The Retirement Villages Act has not been updated in 20 years, and RVResidents have long said it is not fit for purpose.

When people buy into a retirement village they purchase an occupational rights agreement (ORA). It gives them the right to live in a unit in the village and when they leave or on their death they, or their estate, gets back the capital they paid minus a deferred management fee.

But operators are allowed to hold onto the money interest-free and can continue charging fees until they sell a new ORA on the vacated unit.

That was a big issue for residents who considered it to be unfair, particularly if sales take a long time.

Another issue is the practice of charging residents for the cost of repairing and maintaining chattels.

The Commerce Commission issued a warning to the industry about this after carrying out a targeted investigation of 12 retirement village operators earlier this year.

But many operators have continued with the practice, according to financial commentator Janine Starks.

Sinclair, who looks after member complaints and speaks to hundreds of residents a year, said landlords could not get away with doing it.

“Imagine a landlord requiring a tenant to fix a hot water cylinder, and because there is no outside power to turn to, sometimes residents need to complain to the same person that is causing their issues.”

The average age of a retirement village resident was 82, and some of the residents were elderly and vulnerable, she said.

“People say residents just shouldn't sign these contracts, but there is often no choice, and contracts can be complicated and confusing; this is a sector of society that we should be protecting.

“The law has loopholes and an obvious industry-focus that is motivated by minimising compliance costs.”

What do residents want?

RVResidents wants to see substantial reform of the legislation, but the campaign has three key requests.

The first was that residents’ money should be returned promptly when they leave a retirement village, and that there should be a time frame within which operators had to return the money.

Secondly, residents should not be made to pay to replace items, such as chattels, fixtures or fittings, they did not own. For example, residents might have to pay to fix or buy new curtains, carpets, or hot water cylinders although they were actually owned by the village.

The final request was for the appointment of an independent ombudsman with investigative and enforcement powers to support an impartial complaints process.

Currently the sector does not have an independent body for disputes, and RVResidents said there was a power imbalance when elderly residents had to complain to well-resourced corporations.

As part of the campaign, a petition calling for reform of the legislation would be circulated nationwide, a co-signed document would be delivered to the key minister, and residents' stories would be shared online.

What’s the Government doing?

There have been years of lobbying by resident representatives, with support from the likes of Consumer NZ, The Retirement Commission, and the Aged Care Association on the need for reform.

Following the delivery of a petition signed by 11,172​ village residents and a Parliamentary select committee hearing, the previous government agreed to review the law last year.

A discussion document setting out options for law change to bring greater fairness to retirement villages practices was released, and submissions on it closed in November.

In July, the Ministry of Housing and Urban Development (HUD) issued an update which said it was now analysing more than 11,000 submissions and expected to complete the process late this year.

On completion, it would provide a summary of the key themes to ministers, and they would decide on the next steps for the review, the ministry said.

Sinclair said Christopher Luxon had championed the call for a full review of the legislation in 2020, and now the Government had an urgent role to play in future-proofing the sector.

“The New Zealand retirement village industry is the most profitable in the world and it’s time companies looked after more than just their shareholders.”

Is there support for law reform?

Retirement Commissioner Jane Wrightson will be speaking at the launch, and Consumer NZ chief executive Jon Duffy said his organisation was supporting the campaign.

“As our population ages, and more people go into retirement villages, it’s going to become increasingly important that the power imbalance between operators and residents is addressed.

“The current law does not do this. We do not think the Government should give in to industry lobbying and go with an option just to amend the code. There needs to be a full review.”

Retirement Villages Association executive director John Collyns has been approached for comment on the campaign.

When HUD’s discussion document was released, he said he was pleased it had picked up most of the substantial reforms the sector was already voluntarily rolling out in retirement villages across the country.

But his organisation has long opposed any mandatory capital return time frame.