2018 Retirement Village Core Problems

2018 Retirement Village Core Problems - Will 2018 be the year the retirement village industry is finally fixed, where the commercial interests of the operators are balanced with a right of retirees to obtain residential accommodation in their retirement years at a price and value commensurate with the general property market.

We have been here before of course such as way back in September 2007.



 

Legislators and regulators simply do not understand the two deep-seated core problems:

• Retirement Village Operators are not required to offer a Residential Tenancy Agreement as part of any mix of occupancy contractural arrangements.


• The Deferred Management Fee business model hides a grossly excessive transfer of capital value from retirees to operators.

 

1. The following graphic show the weakness in the Victorian legislation that states that there must be an ingoing payment and it cannot be classified as rent.



 

2. The following graphic shows the grossly excessive transfer of capital value from a retiree to a village operator over the industry average occupancy period of 7 years. The table examines where an ingoing payment is $850,000.00, the Deferred Management Fee is 35% of the ingoing amount, any capital gain is retained by the operator, the resident pays fees to maintain and refurbish the asset owned by the operator, the retirees loses earnings and value on the refundable amount (ingoing amount minus the deferred management fee). This amount is held by the operator for their own use and is not repayable until the resident leaves the village.



Retirement Village residents all over Australia hope 2018 will be the year these core problems are fixed.  Yes have standardised legislation. Yes have easy to read and understand contracts. Yes have laws that are  policed and enforced but without a fix to these two basic core problems nothing will really change for Australian retirees.

Will 2018 be the year, history says it will not as legislators and regulators have been here many times and failed.  They are seduced by the well crafted words of the industry, they don't listen to the arguments put forward by people at the coal face the village residents, and don't have a real understanding of how the retirement village industry works themselves.

Let us hope the legislators and regulators surprise us but I won't be holding my breath, their track record is too clearly marked. Tinkering at the edges YES, real deep-seated reform NO.

2018 Retirement Village Core Problems.



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