Retirement village sector self destructs with dumb decisions
LOS ANGELES: The retirement village sector will continue to lose public confidence in its business model when it offers its critics recurring cases of financial abuse.
Consumer NZ is calling for an urgent review of retirement village consumer protection, after an elderly woman was stranded in “financial limbo” when she had to leave a retirement village as her husband went into care.
The woman had given notice on her unit a year ago, and left it 10 months ago, but had still not got back the capital she paid for her Occupation Right Agreement (ORA), because the village operator still had not resold her unit, said Jon Duffy, Consumer chief executive.
She had to move out when her husband contracted cancer, and needed hospital level care, but the couple could not afford fees for both care and the retirement village, he said.
The woman, who was 80 and now widowed, remained liable to pay weekly management fees to the village operator until it sold a new ORA on the unit she had vacated, Duffy said. “It’s not right that residents have to wait for operators to relicense a unit before getting their money back,” he said.
ORA contracts, which usually cost between $200,000 and $1.5 million, could be heavily weighted in favour of village operators, he said.
An ORA gives a person a right to live in a retirement village unit, but it also sets out what happens when a person wants to leave a village, including when they get their capital back (less a deferred management fee) after moving out.
Both the Government’s own Retirement Commission Te Ara Ahunga Ora, and the Retirement Village Residents’ Association (RVRA) are pressing for law change.
But the Retirement Village Association (RVA), a lobby group for villager operators, has countered by saying the changes proposed could force smaller villages to close.
The RVRA wants a law change to force village operators to pay people their capital back soon after they have left a village, perhaps in as little as 28 days.
This will end what its president, Brian Peat, said amounted to village operators hanging on to former residents’ capital as if they were getting free loans from the “Bank of Grandma and Grandad”.
The RVRA also wants village operators prevented from continuing to charge weekly fees, or accruing deferred management fees, after people have moved out.
The RVA says satisfaction surveys show the vast majority of village residents are happy, and that most units had new ORAs sold for them quickly.
It says 71% of its members’ units that were vacated in 2019 had new ORAs sold within six months, 26% took longer, but just 3% were unsold after a year.
Consumer’s call for change has also reignited a war of words between the RVRA and the RVA.
Both have made presentations to Parliament’s Social Services and Committee select committee.
The RVRA went first in early August, and its chief executive Nigel Matthews got MPs to play the made-up game of ‘villageopoly’ to illustrate the costly fishhooks in retirement village contracts.
The game angered the RVA, and its president Graham Wilkinson, hit back at the end of the month, telling MPs that the game presented a “misleading and inaccurate portrayal of village living”.
One of the scenarios from Villageopoly was of a person left waiting for their capital back, and trapped into paying weekly fees, because the unit they had vacated had still not been sold.
Matthews said that scenario based on the woman who took her story to Consumer, and who Consumer gave the pseudonym “Mary” to protect her identity.
“The situation Mary has ended up in – she would not wish on anyone else – which is why she has spoken out with the help of a support person,” Matthews said.
“The fact is the story did happen, and is still happening now,” Matthews said.
Consumer, the RVA and the RVRA are all refusing to name the village at which Mary lived, but say it is a small village in the North of the country. She and her husband paid $790,000 to buy their ORA, Consumer said.
The select committee is preparing to report back on a petition from the RVRA for urgent law change.
Duffy will present to the select committee on Wednesday.
“Residents have had enough of their stories being simply dismissed by the RVA as ‘contrived’ or ‘ignoring reality’,” Matthews said.
“The ‘self-regulation’ reforms that the RVA is proposing is merely window-dressing. It does not even come close to addressing the real concerns and issues in Retirement Villages.”
Wilkinson said he stuck by his comments to the select committee.