Minister Delivers Both Praise and Concern

Minister Delivers Both Praise and Concern

The Weekly Source reports:-

"The Minister for Innovation and Better Regulation, Matt Kean, spoke to the retirement village sector at our LEADERS SUMMIT last Friday for the first time since he received Kathryn Greiner’s Inquiry report in December.

He identified that the Four Corners/Fairfax program, which led to his establishing the Greiner Inquiry, revealed “the stress, anger and misery” that is apparent in the retirement village sector, plus a “power imbalance” when it comes to contracts."

The full story is available here - NSW Minister Matt Kean delivers both praise and concern

Minister Delivers Both Praise and Concern

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Aveo's existing retirement unit sales slump 42 per cent

 

Aveo's existing retirement unit sales slump 42 per cent.

Melbourne age reports:-

"Controversial listed retirement village owner Aveo has reported a 42 per cent dive in sales of existing retirement village units while the company conceded it had done little to improve the financial outcomes for the thousands of its residents still on old and allegedly unfair contracts.

The sale slump came after a joint Fairfax Media and Four Corners investigation in 2017 uncovered a litany of questionable business practices at Aveo including churning of residents, fee gouging, safety issues and misleading marketing promises, such as safety and emergency services.

Mr Grady said the declines were driven by "negative media sentiment" about the retirement sector and the drop off in existing residents willing to recommend buying an Aveo unit to their family and friends.

"It’s not that they’re not happy, they’re just very cautious about making that recommendation to friends and family," Mr Grady said.

In response to the media reports, Aveo sunk $3 million into advertising to salvage its brand and another $8.5 million on advertising on new development projects. It expects to spend $17 million by the end of year on advertising.
During the first half of 2018, the company's profit contribution from its established retirement business fell 25 per cent to $26.4 million."

Aveo's existing retirement unit sales slump 42 per cent.

Read the full story here:- Aveo sales slump

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Retirement Village Story Wins Walkley

Fairfax’s Adele Ferguson has won a Walkley Award for her retirement village investigative articles.

Retirement Village Story Wins Walkley - Regarded as the pinnacle for quality journalism, Ferguson, together with Sarah Danckert and Klaus Toft, were awarded a Walkley Award for Investigative Journalism last week for their “Bleed Them Dry Until They Die” project, a joint Fairfax Media/ABC investigation into Aveo retirement villages.

ABC Story here:- http://www.abc.net.au/4corners/bleeding-them-dry-promo/8643348

SMH Story here:- http://www.smh.com.au/interactive/2017/retirement-racket/bleed-them-dry/




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Hundreds for Aveo Class Action

Hundreds for Aveo Class Action - Melbourne Age reports,

"Hundreds of former Aveo residents have signed up for two separate class actions against the retirement village giant following a media investigation that uncovered a series of questionable business practices at the company.

Lawyers for Levitt Robinson are charging ahead with a class action they estimate at $30 million after securing a litigation funder and lodging formal paperwork in the Federal Court last month."

Full story available here:- http://www.theage.com.au/business/banking-and-finance/hundreds-sign-up-for-aveo-class-action-20171124-gzscfz.html

Hundreds for Aveo Class Action



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Abandoned residents spark village warning

Brisbane Times in an artcle by Adele Ferguson reports -

'Steer clear' - abandoned residents spark village warning

" "Stay well clear of retirement villages," say the families of residents and former residents at Berkeley Living, a retirement village that saw state authorities forced to intervene on Friday evening after unpaid staff walked out.

What is equally shocking is that the retirement village has been dogged with issues for years, yet the regulators have been missing in action.

Earlier this month Fairfax Media revealed that Berkeley, run by convicted criminal Stephen Snowden, stands accused of not paying more than 30 families when the units sold. In some cases they were on-sold to new residents, who didn't get paid when the units were re-sold. Snowden denies the allegations and has called the families "scumbags". He denies not paying staff.

A recent media investigation into one of the biggest operators Aveo laid bare concerning business practices including punitive fees, churning of residents, complex contracts, misleading marketing promises and questionable safety and emergency services. In the case of its Aveo Way contract, the exit fees are 35 per cent after three years, and its Freedom Aged Care contracts exit fees are 40 per cent after two years. This means if a resident pays $600,000 for a Freedom unit, then leaves or dies after two years the exit fees are $240,000.

It is why the federal government needs to stop procrastinating and launch an inquiry into the sector or adopt recommendations made back in a 2007 parliamentary inquiry and regulate the sector federally.

If there was any doubt, it should take a look at the Victorian government, which recently held a parliamentary inquiry then outlined a set of industry reforms that are a damp squib.

The Andrews government's idea of what reform looks like prompted various housing residents and advocates to issue the following scathing statement: "The pleas of residents have fallen on deaf ears, with many of the proposed reforms pushed off into the long grass of more reviews."

What was particularly flabbergasting was the decision not to create an ombudsman to help residents resolve disputes, despite the overwhelming evidence. The report said "significant further analysis and evidence are required before a position on this recommendation can be determined". "

Full story available here:-  'Steer clear' - residents spark village warning

Has Aveo Killed The Golden Goose?

Has Aveo killed the Goose that lays the Golden Egg?

Recent ABC 4 Corners presentation and Fairfax media articles drew attention to problems within the retirement village industry and highlighted issues within some Aveo villages. Since these presentations aired there has been public outcry for reforms with state governments, regulators, and even the commonwealth government making noises about immediate and long term reforms to the industry. Ongoing fees, complex contracts and the complexity of the Deferred Management Fee calculations have now come to the attention of legislators through television, newsprint, and the public response to them.

The focus on the industry has been so strong that welcome reform may now come to the Deferred Management Fee model used by most retirement village operators. The Deferred Management Fee model of retiree living was initially designed for charitable groups where residential accommodation for retirees was made available at an entry cost below general values, the deferred payment being part 2 of a two step payment plan. The concept works well so long as retirees obtain accommodation at an initial cost well below market values. Today the DMF model is still used but retirees now pay an entry amount more commensurate with a purchase price but without obtaining ownership of the property.

In 2007 a House of Representatives Committee report into Older people and the law recommended that the matter of exit fees be fully reviewed including consideration as to whether they should be abolished. In light of current industry revelations and how far the Deferred Management Fee model has moved from the original çharity organisation concept, it is clear an opportunity was missed by legislators and regulators to improve protections for retirement village residents from as far back as 2007.



 

The amount of attention drawn to the plight of Australian retirees in retirement villages by the Aveo exposure begs the very question, why the deferred management fee model is still permitted given the accelerated transfer of capital value from retirees to operators as a result of this model.

Australia generally uses the well understood property ownership or property rental models, both these models of residential accommodation deliver dramatically better financial outcomes for retirees.



The table below quantifies the capital value lost by the retiree and the capital value gained by the operator in just one 7 year occupancy period. Just one unit in one village plus the operator has the capacity to repeat this scenario over multiple occupancies of this one unit during the life of the village. The average occupancy of a retirement village unit is around 8 years.

The Deferred Management Fee model is truly the goose that lays the golden egg for the retirement village industry.

The following table quantifies the options for a retiree of staying in the family home or renting residential accommodation and compares them to entering a retirement village using the deferred management fee model. The numbers speak for themselves but of course each retiree has to consider issues outside of just dollars and cents when giving consideration to entering a retirement village. The tables show that there is a substantial cost to living in a retirement village beyond just the entry price. Many retirees who have entered retirement villages now consider this cost to be far too high and claim they and/or their professional advisers were unable to identify these punishing impacts before entering.



 

SUMMARY.

The question for legislators and regulators is:

• 
  

  Continue to make reforms to retirement village legislation, regulation, contractural, explanatory information, consumer protections. Reforms made in the hope that retirees will eventually identify the impacts of the deferred management fee model and the sizeable negative impact it will have on the value of their capital base.

  
  


• 
  

  OR

  
  


• 
  

  Create retirement villages that are the same as any other residential accommodation where you either buy it to own outright or you rent it. A residential accommodation model already fully understood by the great majority of retirees with existing legislative and regulatory frameworks and consumer protection mechanisms.

  
  


• 
  

  OR

  
  


• 
  

  Totally reform the current legislative framework that facilitates the deferred management fee model while at the same time prohibiting the rental of retirement accommodation within a legally defined retirement village.

  
  

 

Aveo accused of breaching contract

ABC News reports:-

"Embattled retirement village provider Aveo is fighting another battle over its standard of service and an alleged breach of contract.

Residents at an Aveo retirement village on the Gold Coast are in revolt over the company's decision to stop providing an onsite manager.

The company had come under fire after a joint Four Corners-Fairfax investigation revealed its complicated contracts and exorbitant fees.

Shelagh Williams has been living at Aveo's Southport Gardens facility since 1989.

She said one of the complex's attractions was its provision of an onsite manager to help if there were any accidents, health issues, or maintenance problems.

But in 2014 Aveo called a meeting to discuss permitting the manager to live offsite. Ms Williams' son Greg said residents were outraged.

"It meant first of all that the manager wouldn't be there, secondly if anything happened at the facility there may not be anyone there to assist," he said.

"There's been some incidents down there in the past and more recently in relation to some health issues, and the water was cut off and people didn't know what was going on."

Mr Williams is trained as a barrister and wrote to Aveo stating it had obligations under his mother's contract to provide a resident manager.

He said at that point Aveo stopped the process to remove the onsite manager.

However the issue arose again at the start of 2017 when the manager resigned due to ill health.

Aveo called residents to another meeting.

One attendee told the ABC that Aveo's territorial manager Mark Eagleston told them if they had an offsite manager they could offer a higher salary and therefore attract a higher calibre of applicant.

Mr Williams helped the residents draft another letter of protest, this time to Aveo's chief executive Geoff Grady saying as far as they were concerned the matter of an offsite manager was closed.

The ABC has seen a letter from Aveo to Mr Williams that says there is no reference in Ms Williams' contract "that stipulates and outlines any obligation to have the Resident Manager live on-site at the village".

However, the ABC has seen Mrs Williams' contract and it states: "The Operator shall employ a resident Manager.""

Aveo responds to media coverage from Fairfax and ABC

"Recent Fairfax media articles and ABC 4 Corners have featured accusations regarding Aveo, our staff and the costs associated with living in our retirement communities. Much of that commentary has concentrated on the industry business model and the contractual arrangements within retirement communities and has ignored what Aveo has done to improve its own contracts. The articles also ignore the rapidly growing accommodation and care needs of senior Australians and what Aveo is doing to proactively address them.

Since 2014, Aveo has led the retirement industry through its commitment to our residents, their families and the needs of senior Australians by developing new state of the art retirement communities and housing, and by investing in care businesses and services including aged care, physiotherapy, occupational therapy and podiatry and by improving the delivery of other ‘in demand’ services for our residents including food and telecommunications. Aveo is investing over $700m in retirement products and services to ensure residents are provided with increasingly high service levels and quality at Aveo.

In 2015, in an industry first, Aveo completely restructured its standard purchaser contract that residents sign when moving into an Aveo retirement community. This was done following extensive consumer research to address ways we could better serve our consumers interests. In an industry leading first, the ‘Aveo Way‘ contract developed as a result of that research process now provides customers with clarity on the costs of living in, and subsequently moving out of, an Aveo retirement community.

The main benefits of the Aveo Way – each one an industry leading position:

• A ‘guaranteed buyback’ promise for units that remain unsold for 12 months (and a lesser period of six months in NSW and Tasmania)


• Aveo offers an extended cooling off period of 21 days, and a 120 day settling in assurance for peace of mind


• There is no charge to the resident on exit for reinstatement or refurbishment costs associated with improving their property, and no charge for commissions, or costs of sale or marketing fees


• Aveo supports all residents with a care offering that is tailored specific to their individual care needs


• Aveo offers residents the freedom to transfer within accommodation types in meeting their care needs, within the village, or to any other Aveo community nationally


• No exposure to the real estate market where Aveo controls and facilitates the sale process. As a result, there is no capital loss or gain for the resident taking away uncertainty with fluctuating property prices and providing certainty of the sale price, before the need to sell

Our detailed response to the 29 questions forwarded to us last week can be accessed via the Aveo Statement link below"

Read more at: Aveo Statement

Govt examines retirement village rules

News.com.au reports:-

 

"The Turnbull government is facing pressure to have two federal watchdogs oversee the retirement village industry.

The ABC's Four Corners program on Monday night exposed what Aged Care Minister Ken Wyatt described as "exploitation" of retirement village residents.

The program and related reports in Fairfax Media detailed overly complex contracts, misleading marketing, lengthy delays in dealing with health and safety issues and massive fees.

"I will take the necessary steps that are appropriate. We certainly have to prevent exploitation of senior Australians," Mr Wyatt said on Tuesday.

One of those steps could be greater harmonisation between states and territories because legislation fell within their jurisdictions.

However, the peak body representing older people, COTA Australia, says national regulation is needed because of gaps in state regulations.

They should be subject to regulation by the Australian Securities and Investment Commission and the Australian Competition and Consumer Commission and not under-resourced and inappropriate State tenancy tribunals, COTA Australia chief executive Ian Yates said.

"When it boils down to it, older Australians deserve the utmost clarity and consumer protection when they are choosing where and how they should live in the latter stages of their life," he said.

While most retirement village residents were happy with their living arrangements, contracts still remained too complex and far too many people became residents without fully understanding the rules.

Age Discrimination Commissioner Kay Patterson, a former federal health minister, says all levels of government need to work together, starting with taking another look at recommendations from a 2007 parliamentary report.

The report recommended governments consider appointing a statutory supervisor, greater harmony of legislation and a joint project between the ACCC and state fair trading offices to examine retirement village contracts and fees."

 

Take this link for full details at news.com.au

Retirement villages that swallow vulnerable people’s money

The Newcastle Herald reports:-

"Despite a groundswell of complaints, problems in retirement villages remain rife – particularly at Aveo, where even the savviest customers can end up defeated. So who’s in charge of the sector and how accountable are they?

The “get poor quick” scheme

Tim Allerton is no pushover. From his office on Kent Street in Sydney’s CBD, the experienced public relations professional is often called in when companies and big names are in crisis, including Seven West Media during its public relations disaster with former staffer Amber Harrison.

But he came up for an unwinnable battle when sorting out the sale of his aunt Joan’s retirement village unit.

He was pitted against retirement village giant Aveo – and in the end, he and his family had to surrender more than $150,000 in exit fees, capital losses and other fees.

Allerton is one of the many Australians who are left to pick up the financial pieces for relatives who have purchased a retirement village unit.

A Fairfax Media-Four Corners investigation has uncovered harrowing stories of financial loss experienced by some of our most vulnerable citizens who have bought into the retirement village sector. And many of these people are residents at villages operated by listed retirement village giant, Aveo.

Allerton’s aunt, Joan Buswell, bought a unit in Aveo’s Lindfield Gardens village in Sydney’s lush upper north shore in 2008 for $250,000. A single woman with a long career as a teacher, she moved into the retirement village after she could no longer look after herself. It was only when she died, at the age of 86, that Allerton learned of the financial mire his aunt had landed herself in.

“The original lease contract was 172 pages, and it contained very dense definitions, charges and so forth, and perhaps at our fault, we didn’t investigate it as heavy as we should have, but we were looking for accommodation for her at the time, and that was our main priority,” he says.

Fairfax Media-Four Corners spoke to numerous current and former residents, their children, lawyers, former Aveo staff and lobby groups, and found some questionable business practices including churning, gouging, safety issues and misleading marketing and advertising. It uncovered a legislative framework that leaves the responsibility for regulating the sector to the overworked, underfunded consumer affairs bodies, NSW Fair Trading and Consumer Affairs Victoria, which don’t appear to have enough powers to help the people it is supposed to represent.

The media investigation found that “churn” is a key part of the business model with Aveo targeting and achieving a “turnover” of as much as 12 per cent per year, or 1200 residents.

That tactic is leading to calls by residents and consumer lobby groups for the competition and consumer watchdog, the ACCC, to intervene."

For full details take this link:- http://www.theherald.com.au/story/4751957/the-retirement-racket-part-2/?cs=4219

Calls for federal inquiry into retirement villages

The Sydney Morning Herald reports:-

Labor, the Greens and former Australian Competition and Consumer Commission chairman Allan Fels have called on the government to urgently review the retirement village sector following allegations elderly Australians are being ripped off.

In a series of stories, Fairfax Media and ABC's Four Corners uncovered questionable practices by one of the biggest listed operators, Aveo, while it was raking in huge profits.

Opposition Leader Bill Shorten blasted the exploitation of vulnerable people in aged care and flagged a willingness for bipartisan reform following the revelations.

Mr Shorten said on Tuesday he was willing to work with Prime Minister Malcolm Turnbull on solving the sector's problems and warned that "large companies who treat vulnerable older Australians in the manner in which we saw last night are not part of the solution".

"A nation that treats its old people in the manner in which we saw on television last night should be ashamed of itself," Mr Shorten said.

Go to the SMH web site for full details.

Retirement village regulation lacking, residents open to exploitation

ABC News reports:-

"Residents in the nation's retirement villages are being left vulnerable to exploitation by a hotchpotch of legislation, regulation and underfunded consumer affairs bodies.

Key points:

• Retirement village residents are not in any federal minister's portfolio


• Several people say they've had trouble selling property


• Concerns raised over dense contracts, high fees and lack of resources to instigate change

A joint investigation by the ABC's Four Corners and Fairfax Media into retirement village company Aveo has found that residents are slipping through the regulatory cracks.

They are not in any federal minister's portfolio and a series of recommendations and reforms that came out of an inquiry into the sector a decade ago were never implemented.

Tim Allerton, a hardnosed crisis management professional and PR expert, believes his aunt was taken for a ride by Aveo after she was forced to move out of a unit in Aveo's Lindfield Gardens village in Sydney after she got sick.

Mr Allerton's aunt Joan Buswell bought the property in 2008 for $250,000.

It was only when she died that Mr Allerton realised the contract she had signed and how difficult it would be to sell the property.

"The original lease contract was 172 pages, and it contained very dense definitions, charges and so forth, and perhaps at our fault, we didn't investigate it as heavily as we should have," Mr Allerton said.

"But we were looking for accommodation for her at the time, and that was our main priority."

The joint ABC investigation spoke to numerous current and former residents, their children, lawyers, former Aveo staff and lobby groups, and found some questionable business practices.

The bodies that are supposed to protect the residents, NSW Fair Trading and Consumer Affairs Victoria, do not have enough powers.

Mr Allerton said he put the unit on the market after his aunt became sick, appointing Aveo as the real estate agent.

Then after his aunt died in early 2013 it became more urgent to sell the unit and wrap up the estate, particularly given the family were being charged monthly maintenance fees.

"The maintenance fees, despite the fact she'd passed away at that time, were around $10,000 to $13,000 for each year, so it was just eating a hole in our pockets," Mr Allerton said.

'They weren't even showing the apartment'

Finally, the family dropped the sale price from $270,000 to $199,000, but still it did not sell.

So the family decided to investigate.

"What we did discover in a range of visits that we undertook was that the agents weren't even showing people the apartment," he said.

"There was dust on the floor and on the fixtures and fittings, as well as a very musty smell in the apartment."

The unit finally sold two-and-a-half years after being put on the market at a 20 per cent discount to the purchase price of $250,000.

After exit fees and other fees, including agency fees, Aveo cut a cheque for $94,000.

Aveo: Exploitation of the elderly rife in retirement villages

ABC News states their 4 Corners program reports:-

"Residents of the multi-billion-dollar retirement village industry have described buying into a retirement village as a "financial sinkhole".

A joint investigation by the ABC's Four Corners and Fairfax Media into retirement village company Aveo has uncovered exorbitant fees and complex contracts.

One former resident describes Aveo's business practices as "totally rapacious, I don't know how they get away with it".

Fairfax Media and Four Corners spoke to current and former residents, their children, lawyers, former Aveo staff and lobby groups and found several alarming business practices at Aveo — including safety issues, misleading marketing and advertising and property sales.

The joint investigation obtained numerous Aveo contracts, which included clauses some lawyers described as complex and draconian.

Chief executive of the Consumer Action Law Centre Gerard Brody described some of Aveo's contracts as among the worst he had seen.

"Not only are they over 120 pages in length, they're dense, they're hard to understand, they're legalistic," Mr. Brody said.

Current and former residents also described the company's model — which takes an exit fee as high as 40 per cent of the original purchase price, leaving outgoing residents often forking out in excess of $100,000 — as "financial abuse of the elderly".

Aveo has 13,000 residents across Australia and is expanding at a rapid rate. It expects to increase its resident numbers to 20,000 in coming years.

Those residents live in just over 11,000 units in 89 villages.

The company is rolling out two new contracts, the Aveo Way — which has exit fees of 35 per cent after three years — and Freedom Aged Care — which charge exit fees of 40 per cent after two years.

An exit fee is unique to the retirement industry. It is calculated as a percentage of the purchase price charged by retirement village operators when a resident sells the property.

Company documents and presentations state a targeted turnover of 10 to 12 per cent of residents each year — or 1,200 units a year.

Other large operators have a lower turnover of residents."

ABC Four Corners Critical of Aveo Group

In an ABC Four Corners program to be aired on Monday June 26 2017 the program lifts the lid on the retirement village industry and the Aveo group with the web site promoting the program stating "Residents of the multi-billion-dollar retirement village industry have described buying into a retirement village as a financial sinkhole."

The Four Corners program is titled Bleeding Them Dry Until They Die.

Take this link for details -  http://www.abc.net.au/news/2017-06-24/elderly-exploited-in-aveo-retirement-villages/8645876

The ABC web site advises "A joint investigation by the ABC's Four Corners and Fairfax Media into retirement village company Aveo has uncovered exorbitant fees and complex contracts."

You can watch 'Bleeding Them Dry Until They Die' on Four Corners at 8:30pm on ABC TV on Monday night June 26 2017.

Deferred Fee Myth

Retirement village operators will defend the deferred fee structure on the basis that every resident should make a contribution toward the village communal hall and recreational facilities. What they fail to detail however is that they get a contribution (deferred fee) from every new resident over the entire life of the village.

The table below shows in a 100 unit village the operator will turn over each unit every 7 years based on the industry average occupancy period.  With an entry price averaging say $500,000.00, a deferred fee rate of 30% and a deferred fee period of 3 years, the operator has the capacity to generate a deferred management fee sum of up to $15.0 million dollars in the first 7 years of the life of the village.

As the value of the units sold increases so does the amount received by way of deferred fees. In the example below with capital growth of just 20% over the 7 year cycle in the years 1 to 7 total deferred fees received were $15.0 million dollars. In the years 8 to 14 $18.0M, in years 15 to 21 $21.6M and in years 22 to 28 $25.92M giving a total for the 4 x 7 year cycles a whopping eighty million five hundred and twenty thousand dollars ($80.520,000.00). It is difficult to argue that the operator was not compensated for the cost of the village communal hall and recreational facilities by year 7 let alone year 28.