Retirement Village Residents - The Power Of One

Retirement Village Residents - Making Your Complaint count.

                                                                                                                                                            Perseverance by one retirement village resident has paid off for around 50 residents of a Victorian retirement village. Although not directly affected the resident took up an issue on behalf of those residents who were facing a large collective financial impost. Potentially in the order of two million dollars plus the matter resulted from a breach of law by the village operator.

The Victorian State Government introduced new provisions into the Retirement Villages Act 1986 effective from July 1 2014.  Section 19 of the Act made it mandatory for retirement village operators to provide a prospective resident with a Fact Sheet before executing a contract.

For a period of approximately 18 months after July 1 2014 the village operator failed to meet this provision of section 21A of the Act. There is a legislated penalty in the order of $30,000.00 for each occurrence.

For a period following the above the village operator issued fact sheets with a material difference to the contract. The fact sheet advised prospective residents they will NOT be responsible for the refurbishment of their unit on departure from the Terrace whereas the contract states that they WILL be responsible for the refurbishment costs. There is a legislated penalty in the order of $8,000.00 for each occurrence where a person knowingly issues a fact sheet with details contrary to the contract.

Refurbishment costs were highlighted on page 55 of the March 2017 report of the Victorian State Government LSIC Committee inquiry into retirement living - Refurbishment costs could be as high as $60,000.00 per unit

June 2016 - The resident raised the issue with the Residents Committee who wrote and advised management of the problem. Village management subsequently advised the committee "We are checking the information contained in the Factsheet and Disclosure statement and will correct any information that is inaccurate as a priority".

July 2016 - Management refused to release to the Residents Committee a copy of a fact sheet and a contract currently being issued to any prospective resident. The committee wished to ensure the matter had been corrected.

August 2016 - The resident lodged a formal complaint with Consumer Affairs Victoria as evidence came to light that the matter had not been corrected.

January 2017 - The resident subsequently lodged a complaint with CAV as there had been no follow up from CAV with the resident over the matter. The resident was advised that as they (the resident) was not directly impacted by the matter and were merely raising the issue in the interest of fellow residents, the resident was regarded as an informant rather than a complainant and therefore not entitled to any further information.

March 2017 -  The resident advised CAV that as a result of information provided to the State Government inquiry into Retirement Living residents could be facing a refurbishment cost in the order of $50,000.00 per unit and the potential cost to residents from the breach of law by the operator was potentially in the order of two million dollars plus. The operator would receive a cash benefit of this two million dollars plus over time. The resident was advised in a telephone call with a CAV officer that the CAV priority in the matter was compliance.

May 2017 - The resident wrote directly to the Board of Governors as evidence continued to come to light that the matter had still not been corrected. The Board of Governors did not respond to the letter.

April 2018 - The resident wrote again and met with the new chairperson of the Board of Governors raising the matter and the substantial financial penalty flowing to the residents resulting from the breach of the Retirement Villages Act 1986 by the operator. The chairperson advised the matter would be raised with Board.   The Board of Governors and upper management had been transformed following suspension of aged care accreditation stemming from an influenza outbreak in the attached facility in 2017.

May 14 2018 - The resident raised the issue again directly with senior personnel from Consumer Affairs Victoria at a meeting of statewide retirement village residents held in Melbourne. The meeting titled 'Make Your Complaint count' was convened by the Housing for the Aged Action Group in conjunction with the Consumer Action Law Center, Residents of Retirement Villages Victoria and the Council of the Ageing Victoria.

May 18 2018 - The new chairperson of the village Board of Governors issued a letter to current residents advising that amendments would be made to any relevant contract, to reflect the statement in the fact sheet that a resident would not be responsible to pay a unit refurbishment cost on departure. Future fact sheets would be amended to reflect the terms of the contract in that new residents would be responsible for the refurbishment cost of the unit on their departure from the village.

Although a long drawn out process perseverance paid off for those residents who had entered the village post July 1 2014.

Retirement Village Contracts

What’s wrong with retirement village contracts -

Nestegg.com.au reports in an article by Lucy Dean:-

"Retirement village contracts can be so complex that Australians should seek legal advice before signing them, a consumer protection lawyer has urged.

The senior policy officer at the Consumer Action Law Centre, Katherine Temple said it can be “difficult” for retirement village residents and their families to understand their rights as a result of the complexity of the contracts.

Noting that some contracts can be more than 100 pages in length, she said: “I would suggest to residents and their families to get legal advice before moving into a retirement village.”

She highlighted three main “red flag” areas to “really be aware of”:

The deferred management fee

This fee is usually a percentage of the sale price of the unit. “Obviously, you don't know what the sale price of your unit will be so you don't know how much that fee will cost you,” she said.

The lawyer explained that due to the deferred nature of the fees, people often don’t have enough money to move somewhere else once the exit fees are taken out.

Reinstatement and refurbishment costs

“Although in the contract you'll be liable to pay them, you don't know what the amount will be until you go to move out,” she said.

The loan-lease arrangement

Ms Temple said the “other big trap” is understanding that many retirement villages operate under a loan-lease purchasing arrangement. This means that tenants are not actually purchasing property, rather the licence to reside in the village.

“That's not obvious a lot of the time in the sales pitches that people hear that talk about buying into a retirement village. You're not buying a unit, you’re just buying the right to live there and that's very different and so they can impose a lot of restrictions on what you can do while you live in the village.”

Full article here:- what's wrong with retirement village contracts "

Consumer Vic Responds to Criticism

Consumer Vic Responds to Criticism - Consumer Vic has responded to criticism from retirement village resident Mr. Les Scobie who claimed CAV were asleep at the wheel in relation to a matter he had raised with the department.

The full story can be read here (full story) but the outline is that the village operator breached the provisions of the Retirement Villages Act 1986. The result being that a group of village residents will be collectively out of pocket to the tune of 1.5 to 2.0 million dollars over time. The village operator will receive the financial benefit of this money by way of increased revenues.

Mr. Scobie lodged a complaint with Consumer Vic over the matter in 2016 and they advised in 2017 that they had looked into the matter but would not be taking action that would redress the matter on behalf of the 30 to 40 village residents affected. The impact of this decision is that each of these residents will pay in the order of $60,000.00 at present day values for the refurbishment cost of their units when the initial advice from the village operator was either non-existent or to the contrary. These actions contravened the provisions of the Retirement Villages Act 1986.

Consumer Affairs Victoria have advised Mr. Scobie that they will review their processes in this matter and seek further legal advice as to their powers of enforcement.

Mr. Scobie is hopeful of a positive outcome for these retirement village residents, he is seeking that given the breaches of the Act by the operator the applicable provision requiring payment of this $60,000.00 be struck from their contracts.

Consumer Vic Responds to Criticism.

Consumer Affairs Victoria asleep at the wheel?

A retirement village resident Mr. Les Sobie in Wangaratta Victoria claims Consumer Affairs Victoria have been asleep at the wheel when it comes to a matter raised by him with the authority. Mr. Scobie claims that inaction by Consumer Affairs Victoria will cost residents in the village where he resides in the order of $1.5 to $2.0 million dollars at today's values, the village operator however will benefit from increased revenues to the tune of this $1.5m to $2.0m dollars despite breaching the provisions of the Act.

At July 1 2014 the Victorian Government introduced new provisions making it compulsory for retirement village operators to issue a fact sheet to prospective residents which outlined certain provisions of the occupancy contract they would be offered for execution. One such point of clarification was who was responsible to pay for the refurbishment cost of the unit upon departure of the resident. The legislators felt strongly about this new provision and provided for a financial penalty in the order of $30,000.00 for each occasion that the village operator failed to issue such a fact sheet. Legislators also provided consumer protection provisions in the Act should a fact sheet with a material difference to the contract be issued.

Mr. Scobie states "For approximately 18 months after the introduction of these new legislative requirements the operator failed to issue a fact sheet to prospective residents as required by the Act. For the subsequent 18 month period the village operator issued a fact sheet with a material difference. The fact sheet advised prospective residents that they would not be responsible for the refurbishment cost of the unit they occupied upon their departure from the village whereas the occupancy contract they were subsequently given for execution states that the resident is responsible for this cost."

Refurbishment of units, the cost and who pays for it was highlighted at the Parliament of Victoria Legislative Council Legal and Social Issues Committee inquiry into the retirement housing sector . On page 55 of the report (see report) the committee was advised that refurbishment costs are in the order of $60,000.00 per unit at present day values.



In August 2016 Mr. Scobie wrote to Consumer Affairs Victoria advising them of the matter as outlined and as they had been charged by the Victorian Government with the responsibility and authority of administering the provisions of the Retirement Villages Act 1986 to step in and protect these consumers. Mr. Scobie states that he was subsequently advised in mid 2017 by the regional manager of Consumer Affairs Victoria that the matter had been looked at by Consumer Affairs but no action would be taken to redress the situation retrospectively on behalf of those residents impacted at a cost of $60,000.00 per resident.  In the Legislative Council Legal and Social Issues Committee inquiry into the retirement housing sector recommendation 2 was for the government to review the provisions of the Retirement village Act 1986, Mr. Scobie questioned "what is the the point of changing the law if the policeman can't or won't enforce that law, that is not consumer protection."

Recommendation 15 of the Legislative Council Legal and Social Issues Committee report was that the government consider the appointment of an ombudsman to oversee the retirement living industry in Victoria. Consumer Affairs Victoria was criticised amongst submissions (see submissions) to the enquiry, Mr. Scobie states he is of the firm belief that "examples such as above together with the industry revelations contained in the ABC 4 Corners program bleed them dry until they die are a clear indication that a new body with powers to act and a commitment to act is needed in Victoria.''

Refurbishment - Reinstatement

Refurbishment or Reinstatement - From the recently held Parliament of Victoria inquiry into the retirement housing sector. See also Page 7.

“An ongoing source of contention between retirement village residents and operators is the difference between the terms reinstatement and refurbishment.

‘Reinstatement’ refers to the repairs necessary to bring a unit to the same condition as when the resident moved in; ‘refurbishment’ refers to works that improve the unit beyond that level.

Although retirement village contracts stipulate what residents must do on departure, evidence received by the Committee suggests that many residents do not fully understand this part of their contract.

A view also exists that when residents pay for refurbishment village owners benefit through receiving a percentage of an increased sale price.”

Ms Rachel Lane, Author and Principal of Aged Care Gurus made the following statement to the committee:-

“There tend to be two words that the industry use which sound very similar but have very different connotations. The industry use ‘reinstatement’ and ‘refurbishment’. Reinstatement is what most people think refurbishment is, which is basically put it back the way you found it — so a lick of paint, any damage that you have done repaired and steam cleaning carpets. Refurbishment means bring it up to today’s standard, whatever that standard is. People do not understand that those two words have very, very different connotations…

…for a prospective resident you are talking about a difference in reinstatement of $1500 or $2000, something like that, versus refurbishment, which can easily be $60 000 by the time you pull out all the carpet and put in a new kitchen and a new bathroom. So it is very different.”

 

Prospective Retirement Village residents need to fully understand whether their contract requires unit reinstatement or unit refurbishment on their eventual departure from the retirement village.