Retirement Village Definition Amendment Urged

Retirement Village Definition Amendment Urged - Savvy retirement village residents are urging resident representative bodies across all states to push for a change to the legislated definition of a retirement village.

Concerns come from the fact that various State legislation frameworks require an in-going payment to be made before a lease/licence of occupancy is permitted and that this payment is prohibited from being rent.

Residents believe this to be a key factor in the ability of an operator to camouflage the full cost of the conditional residential accommodation until exit from the village and protects the operator from market forces such as market driven residential rental costs. One examination ( renting can be cheaper than a retirement village ) has shown that the full weekly cost of accommodation in a retirement village can be almost twice the cost of simply renting a commensurate property within the general community.

The following letter was sent by a village resident to the Retirement Village Residents Association of NSW.

"Interstate* Retirement Village Contracts - Implications.
The definition of a retirement village in the Victorian Retirement Village Act 1986 produces many of the problems your state members have. That definition called for payment of an “ingoing contribution” before a lease would execute. The definition of ingoing contribution calls it a “donation” and in addition requires that the donation “does not include rent”.
Those two definitions together mean that lessees provide an interest free loan of the nominal value of the unit, for the duration of the lease. That is tantamount to buying the unit, but not getting ownership.
Very, very, very few lessees, resident committees, residents’ advocates or legal advisers appreciate the full implications of that combination of definitions. Even the relevant legislative oversight and village resident advocacy bodies in Victoria have struggled understanding the full implications. The main effects are:-
The resulting contracts prevent free market competition because there are so many variables in the costing that it is impossible to compare daily, weekly or monthly rentals between villages
Lease rates vary as the duration of the contract lengthens.
Contracts are so convoluted as to be incomprehensible for lessees, or experience shows, their legal advisers.
Costs are not calculated or disclosed until a couple of months after the contract terminates which shows the Act fails its stated purpose “to clarify and protect the rights of persons who live in, or wish to live in retirement villages”
The market is artificially limited, and restricted by the definitions, by means of the contracts.
The definitions produce contracts that make the Victorian Act not fit for its stated purpose of protecting lessees and prospective lessees. This applies to all Australian states and territories.
The definitions together mean the operators have the remarkable advantage of getting a cost free return on the lessees’ capital.
In the last 14 years, virtually all lessees’ complaints address the symptoms that result from the two definitions in this unique legislation, and the resulting contracts.
All of these issues would be exposed and solved with the cost rate disclosed before entry, and the only way known to do that is by requiring that all contracts must offer conventional residential tenancy with security, only then may other contract forms, such as loan lease be offered. Residential tenancy is the norm for retirement village contracts in the US."

The following graphic details the current definition basis and why the retirement village definition amendment is urged.



Retirement Village Definition Amendment Urged.



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RVRA Petition For Legislative Change

The Weekly Source reports:-

"The NSW Retirement Villages Residents Association is using an online petition to lobby government for legislative change.

RVRA Petition for Legislative Change -The RVRA is using the change.org petition – (see video below) – to propose changes to the Retirement Villages Act (RVA), including existing and future village contracts, to be delivered to the NSW Minister for Innovation and Better Regulation Matt Kean.

The letter outlines the primary changes the RVRA is requesting:

• Basing exit fees on the buy-in price of units instead of the selling price;


• Changing Registered Interested Holder Clauses so departing residents receive their refund sooner;


• Reversing the decision that makes external painting the responsibility of residents; and


• Ensuring quotes for capital works are supplied and allocated against specific maintenance projects.

RVRA President Tom Gait tells us that the current petition is one of a number the organisation has planned.

“Families need to be aware that what we are talking about here is the transfer of intergenerational wealth, not to families, but into the pockets of large multinationals. Shame about elderly people not having enough money for aged care,” he said."

https://www.youtube.com/embed/Q0-olauWNNQ

RVRA Petition For Legislative Change.



 

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Petition For Retirement Village Reforms

Petition For Retirement Village Reforms - Les Scobie an eleven year retirement village resident and advocate for retirement village reform has started an on-line petition to be presented to the Victorian State Government in the lead up to the Victorian state election later this year.

You can sign the petition here - https://www.communityrun.org/petitions/retirement-village-reforms

The petition asks for:-

Implementation of retirement village reforms inclusive of the following:-

• Create greater fairness in the financial outcomes for residents for what is primarily the provision of residential accommodation.


• Total revision of the Retirement Villages Act 1986.


• Easier access to the law for residents through the appointment of an industry Ombudsman.


• Simpler contracts.


• Greater clarity as to who is responsible for ongoing costs.


• Amendment to the legislated definition of a retirement village to enable occupancy by way of a Residential Tenancies Agreement.


• Outlaw the Deferred Management Fee model where the in-going fee does not reflect a relevant discount to the asking price of a commensurate property within the general community.

Les states in his petition,

"For decades legislators have attempted to define an appropriate balance between the cost retirees should pay for the provision of residential accommodation within a 'Retirement Village'. As the industry has moved away from the Not For Profit to the Private Enterprise sector the Deferred Management Fee model is now failing Victorian retirees. The transfer of capital wealth/value from retirees to operators in these later times is now grossly excessive and obscene when compared to the cost of residential accommodation within the general community. It is time for an end to this practice and we call on all Victorian Legislators to implement the changes as outlined above in the best interest of all current and future Victorian retirees."

The petition can be signed here - https://www.communityrun.org/petitions/retirement-village-reforms



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Retirement Village Legislators and Regulators

Retirement Village Legislators and Regulators should have an strong understanding of the issue upon which they are about to make or amend laws. It is doubtful this is the case when it comes to retirement village laws given the grossly different financial outcomes for each party and the current high level of angst among residents, advocates and professional advisors at this time.

Few retirement village  legislators and regulators understand the chart below, they are unable to fully grasp the financial destiny of the two parties in a retirement village, the operator and the resident. This destiny for each party is determined by legislation and business models sanctioned and encouraged by successive federal and state governments. It is easy to lay blame at private enterprise but they can only operate within a commercial environment permitted by laws that are made by governments.

"Any Retirement Village Legislator or Regulator with an understanding of the financial outcomes and how they occur for both the Operator and the Resident could not earnestly write or support the meager changes to the laws proposed" RETVILLDOTNET

It needs to be noted here that in the general residential rental market the return to a landlord is generally in the order of a 5% rental return plus any capital gain. There can be limited security of tenure for the resident although laws in Victoria have just been changed to improve this situation. The house/unit/complex in which the rental accommodation is provided as in the case of  a retirement village may have recreational facilities, the resident may or may not use these recreational facilities.

For a retiree wishing to enter the general residential rental market the cost of the accommodation is known up front and the process and market dynamics are well understood by both the retiree and their professional advisors. The retiree in the residential rental market DOES NOT have to pay a substantial in-going amount equal or near the value of the property, pay monthly maintenance and administration fees, pay refurbishment and administration costs on leaving the property nor have inflation decimate the present day value of any capital base of the retiree on executing an occupancy agreement. Any capital base held by the retiree on entering this type of accommodation contract is retained by the retiree and can be invested for a financial return.

However for a retiree wishing to enter a retirement village the full cost of the accommodation is not always known up front and the process and market dynamics are not always well understood by the retiree or their professional advisors. The retiree wishing to obtain residential accommodation in a retirement village DOES have to pay a substantial in-going amount equal to or near to the value of the property, pay a non-refundable fee in the order of 35% of the in-going amount charged, loan to the operator the remaining 65% of the in-going amount at 0% interest  not to be repaid until the retiree leaves the village, pay monthly maintenance and administration fees, pay refurbishment and administration costs on leaving the property, suffer the impact of inflation over the duration of occupancy on the present day value of the 0% loan amount.

The table below show the financial destiny of the two parties in a retirement village occupancy agreement. With an in-going charge of $850,000.00 and given the general parameters as described above the financial destinies of the operator and the resident after 7 years is:-

• $1,990,697.00 for the operator (Deferred Management Fee 35% of entry price - 100% of the capital gain)


• $    242,773.00 for the resident (Deferred Management Fee 35% of entry price - 0% of the capital gain)

Any Retirement Village Legislator or Regulator with an understanding of the financial outcomes and how they occur for both the Operator and the Resident could not earnestly write or support the meager changes to the laws proposed.

Retirement Village Legislators and Regulators.



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Amend the Retirement Village Definition

Amend the Retirement Village Definition - Long time advocate for reform to the Victorian Retirement Villages Act 1986 Mr. Charles Adams continued his push for amendments to the Act in a letter to the relevant minisiter Marlene Kairouz.

"Dear Hon Marlene Kairouz, Minister for CAV,
My disabled wife and I moved into a retirement village 14 years ago, and a month later the operator needed the monthly service/maintenance charge to rise by 50%. That got my attention, and I helped found the RRVV and was on the committee for a number of years.

Since then I have studied the state legislation and the resultant skewed contracts across Australasia, that allow developer operators to charge the costs of their incompetence to retirees, who have had no option but to pay an interest free capital loan, a ransom, to be granted a skewed contract to down size into a unit in a Retirement Village.

Those biased contracts are the result of the legislated definition of a retirement village mandating an interest free capital loan, the ransom.
I also took a trip to the USA to study their contracts. They have 15% of the over 65 year olds in retirement villages. They have simple clear residential tenancy contracts, which show the cost rate.

Australasian contracts mandating interest free capital for the developer/operators make the contracts so complex that as the LSIC inquiry found very few people think they understand theirs. Furthermore it is impractical to calculate a monthly rate because there are too many variables to consider. The contract cost complexity prevents free market competition. Those contracts are a serious disincentive to prospective retiree lessees such that the comparable percentage of Australasian over 65s in retirement villages is 5.7%, according to the Property Council Australia.

Retirement villages are great, except for the contracts. Victoria and Australia need more, if they had fair contracts.
As a result of 14 years investigation the attachment sets out the only essential changes to fix this unacceptable consumer legislation for your parents generation, future lessees.

The developer/operator PCA industry will put up some smoke and mirror explanation of why these simple changes are unacceptable. They have been able to convince CAV, or one person in it, that the interest free loan for capital, is the only possible way of funding retirement villages. So far they have been successful in stymieing every one of the 6 attempts to get fair contracts in a free market for over 30 years.

Whether Consumer Affairs Victoria don't understand the implications of the legislated Retirement Village definition, or worse, is impossible for consumers to say. The misinformation on this issue is a serious barrier for all of the people in independent quangos or other organizations trying to expedite a complete review of an Act to solve a simple problem, a skewed definition.

There is nothing to be gained by referring this letter to CAV to answer, they are the main barrier to retirement village progress.

Kind regards,Charles Adams."

Initial story here:- http://www.retvill.net/legislation/amend-retirement-village-legislation

Amend the Retirement Village Definition.

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Continued Push for RV Legislation Change

Continued Push for RV Legislation Change -   Long time advocate for reforms to Retirement Villages Charles Adams continues his push for amendments to the Victorian Retirement Villages Act 1986.

In a continued push for retirement village legislation reform Charles forwarded to the relevant minister Marlene Kairouz and selected Victorian politicians the following submission,

"The  service/ maintenance fee went up 50%, a month after the writer and disabled wife moved into a unit in a retirement village. This is his suggestion to make the Victorian Retirement Village Act fit for its stated purpose of protecting retirees who consider choosing to downsize by leasing a unit in a loan-lease retirement village.

Nothing much will change for the hundreds of dissatisfied lessees who submitted to the LSIC inquiry, those who presented to the hearings, or for all future lessees.

1. Revise the Retirement Village Act to mandate all future prospective lessees are offered a secure tenure residential tenancy contract**. This is the only known cost transparent lease, and therefore the only model compatible with a free market.This is not to preclude the offer of optional ”interest free capital loan leases”, (theinterest free loan is euphemistically called and ingoing contribution) as it may be more attractive to younger retirees who enter a village unit early and could have a long life expectancy, and a longer duration tenure . It is impractical to compare “Loan Lease” contracts as they obscure the declining cost rate so a free-market cannot exist. For some it offers taxation and or pension advantages.
   


2. Appoint a retiree-housing ombudsman to provide affordable enforceable dispute resolution.
   


3. Require all retirement village managers qualify, within 6 months of appointment, to an independent institution course, covering the RV Act, regulations, ethics, contracts and meeting maintenance needs.

** The village developer/operators will declare this unacceptable, saying they don’t have the capital to build villages without the availability of the zero cost capital, (provided by the “in-going contribution”) even tho they only have 5.7% of the over 65 years demographic. Secure tenure residential tenancy contracts are the norm, in the USA, where over 15% of the over 65s lease in retirement villages.

The zero cost capital is a subterfuge to disadvantage lessees for the benefit of the developer/operators management bonuses and shareholders.

While this is for the Victorian RV Act, the contract model that it generates is so lucrative that it is now the de facto Australasian standard."

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Retirement Housing Matters

Retirement Housing Matters - Advocacy groups Council On The Ageing, Consumer Action Law Centre, Housing for the Aged Action Group and Residents of Retirement Villages Victoria  are building on their demand for Retirement Village reforms in 2018 an election year in Victoria.

"Key points in the retirement housing matters campaign are:-

1. Establish a Retirement Housing Ombudsman - Retirement housing residents need access to an industry- funded ombudsman service, to provide free, fair and binding determination of retirement housing disputes, across the full spectrum of retirement housing types. Currently, residents must go to the Victorian Civil and Administrative Tribunal (VCAT) to resolve their disputes with operators, which is an expensive, lengthy and intimidating process. Running a substantial matter through VCAT is simply beyond the financial capacity of most retirees, and the process itself can be overwhelming. A case run by Consumer Action was independently assessed as costing over $250,000. As a result, many choose not to pursue legitimate grievances through VCAT, leaving those grievances unchallenged and largely unreported.


2. Put a Stop to Excessive Fees - Retirement housing exit fees are currently unregulated and open to exploitation by operators. These fees appear to have no relationship to the value of the services provided. Exit fees must be reformed and regulated to prevent excessive price gouging, to provide greater clarity around pricing, and to ensure that residents can compare options. There are different types of exit fees, including, deferred management fees (DMFs), refurbishment and reinstatement fees, legal costs, share of capital gain and long-term maintenance fees. One of the most problematic exit fees is the DMF. These exit fees are generally 20 to 40% of the sale price of a unit. DMFs are applied in both residential park and retirement village contracts. These fees may not be clear to residents when they move in, making informed choice and comparison
   difficult, if not impossible.


3. Introduce Mandatory Minimum Training and Accreditation Standards - Shockingly, there are no minimum training or accreditation requirements for retirement housing operators. Residential parks are not even registered with Consumer Affairs Victoria (CAV). The lack of minimum standards in retirement housing has a significant impact on the day-to-day lives of residents and their families, and it is simply unacceptable. Meanwhile, training and accreditation programs developed by industry have failed to meet appropriate standards, and lack credibility. Retirement housing employees should be required to meet minimum training and ongoing professional development standards. This training should be a minimum Certificate IV qualification under the Australian Qualifications Framework. This would not only improve the reputation and professionalism of the industry, but would recognise the unique skills and responsibilities required of managers. We also recommend ongoing professional development and banning managers who have significantly
   breached their duties. Police checks should also be mandatory for all staff.


4. Reduce the Complexity of Contracts - It is not uncommon for retirement housing contracts to exceed 100 pages in length. Lawyers at the Consumer Action Law Centre recently described these contracts as ‘some of the worst [they had] ever seen’. Older Victorians are often going through a traumatic and upsetting time of their lives as they
   leave their family home to enter a village or other retirement living community. They should not be expected to navigate complex and lengthy legal documents to make significant life decisions.
   Basic guidelines should be developed to ensure that contracts are expressed in plain English and meet a certain standard of readability. While the Retirement Villages (Contractual Arrangements) Regulations 2017 (VicIC) establish prescribed terms and layouts for management and residence contracts, they have failed to address the length and complexity of contracts. Consumer testing of any standard layouts or terms is essential."

The Retirement Housing Matters campaign was first launched on Thursday November 30 - We’ve had the inquiry, now we need retirement housing reform!


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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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Amend Retirement Village Legislation

Amend Retirement Village Legislation, long time advocate for reforms to the Victorian Retirement Village Act 1986 Charles Adams has penned a letter to Dr. Maree Petersen, a senior lecturer in Social Work at the University of Queensland.

Dr. Petersen led a University of Queensland School of Nursing, Midwifery and Social Work study into retirement villages  https://www.uq.edu.au/news/article/2017/12/you-can-check-out-any-time-you-you-can-never-leave .

Mr. Adams in his letter asks Dr. Petersen to give greater weight to a Victorian legislation problem which has permeated the industry.

"By far the most important deficiency of retirement villages in Australasia is the definition of a village legislated in Victoria in their RV Act 1986. That mandates entry requires the prepayment of an ingoing contribution also called a donation.

The resulting contracts are so skewed in the developer/operators favour that that model has been adopted Australia wide regardless of all other states and territories legislation.

That contract model does three things

1. Generates very complex contracts that are incomprehensible to, in my estimate, over 90% of all lessees, also called residents. Those contracts are a very serious impediment to many people considering villages and results in a very low uptake of 5.7% of the over 65 demographic, across Australia. This figure is quoted by the Property Council of Australia at a meeting I attended earlier this year. That compares with 15% in the US where conventional residential tenancy contracts apply, and are well understood


2. Frontloads the monthly equivalent rental rate into the first few years of contracts, which makes it effectively a ransom that prevents some dissatisfied lessees ability to leave. They can no longer afford to go into other comparable downsized housing.


3. This contract model hides the very high effective rental rate. It hides it by making it impractical to calculate because of all the variables and time spread across the duration of contracts."

Mr. Adams proposes a change to the legislative definition of a retirement village as below,

Proposed definition for a Victorian Retirement Village.

1. Retirement village means a group of leased, with secure tenure residential tenancy dwellings, forming a community, the majority of which is retired persons, with all services for the common property included in the rental price.


2. Residential tenancy contracts, with monthly rentals are mandatory. Other contract models may be offered optionally.

This would make it compulsory for retirement village operators to offer a residential tenancy contract being the most transparent as to pricing and the most easily understood by retirees, families and professional advisors.

Amend Retirement Village Legislation



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