New Qld RV Laws

New Qld RV Laws - ABC News Reports:-

New laws to stop retirement villages exploiting elderly residents passed in Queensland

"New legislation passed in State Parliament will stop retirement village operators from gouging elderly Queenslanders, Housing Minister Mick de Brenni says.

An investigation by the ABC's Four Corners program earlier this year found residents in retirement villages were being left vulnerable to exploitation by loopholes in legislation and underfunded consumer affairs bodies.

Mr de Brenni said the new legislation would enforce simplified contracts and would require ongoing fees and charges to be clearly declared upfront."

See full story here:- New laws to stop retirement villages exploiting elderly residents passed in Queensland

New Qld RV Laws

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Morning Tea with Vic Pollies

Morning Tea with Vic Pollies

"WE'VE HAD THE INQUIRY, NOW WE NEED RETIREMENT HOUSING REFORM!

JOIN US FOR MORNING TEA AT PARLIAMENT HOUSE ON 30 NOVEMBER TO HEAR FROM YOUR MP AND THEIR PLANS FOR RETIREMENT HOUSING.

MAKE SURE YOU CALL YOUR MP AND INSIST THEY ATTEND THIS EVENT!"

CALL HAAG 03 9654 7389 FOR YOUR MP'S CONTACT DETAILS

Housing for the Aged Action Group, Consumer Action Law Centre, Residents
of Retirement Villages Victoria and Council on the Ageing are calling on all Victorian legislators to join them for morning tea outside the Victorian Parliament House on November 30 to discuss reform issues, or lack thereof, around retirement housing.

Consumer Action, COTA Victoria, RRVV and Housing for the Aged Action Group will also launch their joint Retirement Housing Election Platform as all Victorians, particularly retirees, look toward the 2018 Victorian election.



Morning Tea with Vic Pollies

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Retiree Capital Wealth Smashed by Deferred Fee

The capital wealth of Australian retirees is being smashed by the deferred management fee business model used by a large part of the retirement village industry.



Both the retiree and the village operator bring identical capital wealth to the transaction, the retiree $850,00.00 in capital and the village operator a unit with an asking price of $850,00.00 for the right to occupy it but not own it.

The graph and the table below illustrate the dramatic reduction in capital wealth of the retiree over just a 7 year occupancy period within the retirement village.  Also illustrated is the even more dramatic increase in capital wealth gained by the village operator using the deferred management fee business model.

Two scenarios are illustrated using standard retirement industry parameters:-

Scenario 1.

• Deferred Management Fee of 35% on the in-going value of village unit.


• 100% of the capital gain to the village operator.


• Maintenance fees


• Unit refurbishment cost.

Results Scenario 1 -

Village Operator  Start - $850,000.00  Finish - $1,990,697.00

Village Resident   Start - $850,000.00  Finish - $242.773.00

 

Scenario 2.

• Deferred Management fee of 35% on the out-going value of village unit.


• 100% of the capital gain to the village resident.


• Maintenance fees.


• Unit refurbishment cost.

Results Scenario 2 -

Village Operator  Start - $850,000.00  Finish - $1,725,362.00

Village Resident   Start - $850,000.00  Finish - $508,107.00

 

Graph 1

 

Table 1

 

 

Capital Value Lost Percentage

Capital Value Lost Percentage - The table below show the loss of capital value suffered by a retirement village resident expressed as a percentage of the in-going amount paid.

Also shown is a comparison calculated at an identical growth rate in property value for those who may remain in the family home.

Governments through incentives and legislation encourage older Australians to make the move from the traditional family home into retirement accommodation such as a retirement village. Although there are aspects of life in a retirement village that are beneficial to the retiree, the reduction in capital value is clearly excessive and does not represent fair and reasonable value for those intangible benefits as claimed by the industry.





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Retirement Village Contract Rescission

The New South Wales Retirement Village legislation Section 33, rescission of contract requires a fix.

Retirement Village Contract Rescission - Retirement village residents are attending a Greiner enquiry community forum at Wagga Wagga to discuss industry issues such as above.

The ability of a retirement village resident in New South Wales to rescind their contract on grounds of a matter relating to the disclosure statement is almost non-existent as they are only granted 3 months after taking occupancy to put in place such an action. No retirement village resident would have an understanding of every actual or potential wrongdoing arising from the disclosure statement within that time frame. Many actions within the disclosure statement take place well outside the first three months of occupancy. The Victorian system (Section 42) has a 'must take action within 6 months of becoming aware of a wrongdoing' legislative provision.

Operators are well protected in that any hurt done to a resident must be clearly shown to be a material hurt.

Retirement Village Contract Rescission - If the New South Wales Greiner enquiry into retirement villages is truly looking to improve potections for retirees Section 33 of the Act should be amended inline with the Victorian provision.

Retirement Village Disclosure Statement

Retirement Village Disclosure Statement - The New South Wales Disclosure Statement opening page -  Bottom of the page states - *Other fees and charges may apply - 'for further details ask the operator or refer to the draft village contract'

That statement can lead to two of the very problems that brings retirees to the Greiner Retirement Village Enquiry community forum at Wagga Wagga, Mis-statements by sales people and costs buried in the gobble-d-gook of a legal document are two areas often complained about. The Greiner enquiry has the opportunity to insert a fix, there is the capacity to deliver to a prospective resident via the disclosure statement every known cost to them over their period of occupancy, or the current cost and the formula by which it will be increased over time. The NSW government must decide who has the clear priority here, the industry or NSW retirees.

The New South Wales government should not be seduced like some other state governments by the industry mantra that, “any increase in consumer protections can only come at the cost of industry growth and innovation”.

Governments have a responsibility to protect vulnerable consumers from financial products where a price is stated but the actual cost is not.

The philosophy of educate retiress rather than legislate operators has failed thousands of Australian retirees.



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Retirement Villages Fair & Reasonable?

There are various financial outcomes for retirees based on differing contractural provisions.

Retirement Villages Fair & Reasonable? - Retirement village developers argue that there are many social benefits for retirees from life in a retirement village, but is the capital cost to retirees of these social benefits fair and reasonable. Should vulnerable retirees be allowed to plunge head first into these contracts. There is no way with a Deferred Management Fee model governments and legislators can protect retirees from what they do not know or cannot identify at the time of commitment.

Legislative policy objectives for the retirement village industry have often been to educate not legislate.

The retirement village industry mantra that stronger consumer protection will come at the cost of industry growth has seduced legislators and failed Australian retirees.                                         

There are many complexities in the retirement village industry with a focus on contracts, legislation, consumer protections etc. Attention must be given to areas that current proposals for reform will not fix such as the grossly unfair accelerated transfer of capital wealth from retirees to village operators / developers under the guise of the Deferred Management Fee model. A model designed for charity organisations of decades past, not the modern private enterprise world of today.

Respected finance reporter Alan Kohler wrote in an article titled Retirement Village rorts: the booming scandal in 2014 -

"Taking them one at a time, deferred fees are where you buy a unit in a retirement village at full price, but when the time comes to sell you have to pay the village owner a large percentage of what you get."

"There are a variety of deferred fee schemes contained in retirement village contracts and they all rely on the fact that when an elderly couple signs it, they tend not to pay much attention to what might happen to the assets when they die."

Table 6 below shows 4 different outcomes for retirees based on differing contractural provisions. Legislators must examine are any of the four fair and reasonable when for the retiree there is no property ownership, only a conditional right to occupy.

Do these outcomes reflect a fair and reasonable cost to the retiree for the provision of residential accommodation. Many occupants in retirement villages across Australia would state that they do not.

Table 6

In this year of 2017 serious consideration must be given to the very existence of a deferred Management Fee.

 If there is no discount to the entry cost there is no justification for a Deferred Management Fee
 If there is a Deferred Management Fee then it should reflect only the applicable discount

For meaningful retirement village reform in the best interest of Australian retirees serious consideration should be given to the following:-

1. The use of a Deferred Management Fee be restricted to not-for-profit organisations and only in the circumstances where it reflects a measurable commensurate discount to the village in-going fee when compared to the value of a similar property within the community generally.
   If there is no discount to the in-going cost of a retirement village, there is no justification for a Deferred Management Fee.


2. Where a Deferred Management Fee is calculated on the outgoing unit value, the contract must state that the resident be granted 100% of any capital gain in the value of the unit occupied.


3. The Retirement Village model for private enterprises be amended to just two principles. A contract to purchase or a contract to rent. Both principles are well understood by retirees based on their own lived experience.

Retirement Villages Fair & Reasonable?



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Deferred Management Fee Hurts Retirees

Deferred Management Fee Hurts Retirees - The major problem with the DMF model is that it was created decades ago for charities and not-for-profit organisations.

Today in the modern business world the ingoing $ amount required to enter a retirement village is typically commensurate with similar properties within the general community. The result is that 2017 retirees are now in general terms paying entry and operating costs as if an owner, but without the security of ownership and without any of the ownership benefits.

Table 5a and 5b clearly show the detriment to retirees and the benefit to retirement village operators as the ingoing amount for retirement villages moves closer to 100% of a commensurate property within the general community. The use of the Deferred Management Fee model in these circumstances simply accelerates the transfer of capital wealth from retirees to private enterprise.

As retirement village entry costs get closer to commensurate properties generally,

the greater the Deferred Management Fee model fails Australian retirees.

Table 5a

Table 5b

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Risk to Retirees of Financial Ruin

Risk to Retirees of Financial Ruin - Attention is drawn to the potential for a retirement village resident to be completely decimated financially on departure and there is no legislative protection against it. A retiree with a long term stay in a retirement village is particularly vulnerable from two provisions of their contract of occupancy.

1. 
   

   Whether their Deferred Management Fee is charged on the in-going or the out-going unit value.

   
   


2. 
   

   Whether they share in any of the capital gain in value of the unit over the period of their occupancy.

   
   

Table 4 below shows that the value of the respective unit occupied by the retiree would only need to rise in value x 1.5 times for the resident to lose 100% of their in-going amount paid. Any further increase in value of the unit has the potential to place the retiree into a position where they are actually in debt to the operator based on the terms of their contract signed many years before realisation of the implications.

Consideration must be given by law makers to legislate that where the deferred management fee is calculated on the outgoing unit value, the outgoing resident must receive 100% of any capital gain.

Table 4

 

Risk to Retirees of Financial Ruin.

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