More than 250,000 Australians over the age of 55 live in retirement villages. For many, they’re a convenient and comfortable way to enjoy retirement.
But an ABC investigation has found complex contracts and inordinate exit fees and refurbishment costs have left residents confused, frustrated, and, at worst, financially trapped.
At the heart of criticism directed towards the retirement village industry is a lack of effective and unified regulation.
Stronger oversight of retirement villages at a national level has been touted as an alternative to the state-based model that currently exists.
So, what could that look like and how would it work?
Firstly, how is the sector managed?
Unlike aged care, which is the responsibility of the federal government, the retirement village industry is governed by a complex patchwork of legislation, with each state or territory regulating retirement villages under its own retirement village laws.
There is no national ombudsman to ensure consumer protection, and the Australian Competition and Consumer Commission (ACCC) doesn’t get involved in individual disputes.
Instead, states and territories legislate the responsibilities of retirement village operators, and the consumer protections afforded to residents.
Retirement villages are often operated by commercial businesses and charge residents for costs associated with managing the property, set out in a contract.
Residents will generally buy in to a retirement village property, and the types of contracts that define the occupancy and ownership structure can vary depending on the provider.
The ABC has heard complaints from residents that contracts are often complex, opaque, or require a high degree of financial literacy.
Retirement villages charge exit fees, also known as deferred management fees (DMF), when a resident leaves.
These fees can vary between operators, but can be as much as 35 per cent of the price of the retirement property.
To put that in perspective, if a retirement village sells an outgoing resident’s unit or apartment for $500,000, the outgoing resident would get $375,000 from the sale.
And that’s without taking appreciation and selling costs into consideration.
Operators in some states, such as New South Wales, also charge a fee based on capital gains made on a retirement village property.
And then refurbishment fees and administrative costs while the property is up for sale need to be factored in.
In the case of 89-year-old Joan Green, that meant a return of $81,000 after buying a retirement village property for $384,000 11 years ago.
Exit payment buyback time frames are another factor that varies from state to state.
When a resident leaves their village, their property can be sold by the operator.
If it isn’t sold within a specified time period, then the retirement village operator is obligated to repurchase the property.
But the time frames in which operators will buy back the unit can vary between states.
Exit payment buyback time frames
- Tasmania: 6 months
- Victoria: 6 months, for contracts after 1 August 2006
- NSW: 6 months plus 40 days in metro areas, 12 months plus 40 days elsewhere
- Western Australia: 12 months (proposed legislation currently before parliament)
- South Australia: 18 months (proposed legislation to reduce this to 12 months)
- Queensland: 18 months, with recommendation for lowering to 12 months included in Queensland Housing and Homelessness Action Plan 2021–2025.
During that period, the outgoing resident may also need to continue paying costs to the operator.
What could national oversight look like?
Independent MP Rebekha Sharkie, a staunch advocate for reform within multibillion-dollar sector, wants retirement village housing to be consistently regulated like other financial products.
National Seniors Australia (NSA) chief executive Chris Grice said that meant introducing uniformity, transparency and accountability across the sector.
Much like banking products, or credit and insurance products, Mr Grice said treating the sector like a financial product would make it easier to regulate and implement reform.
“There would need to be a financial services guide, a product disclosure statement, and then a contract,” Mr Grice said.
“With it would come the rigour and teeth of ASIC, and also a complaints mechanism in the form of the Australian Financial Complaints Authority (AFCA).”
The NSA also wants states and territories to introduce legislation under nationally agreed protections to:
- establish an independent retirement villages ombudsman
- outline fees and charges in plain English terms in all contracts
- ensure refurbishment fees are applied only after a resident has been in a property for more than 10 years
- ensure exit fees are provided in the contract as either a dollar value or as a proportion of the sale value.
“We need to create confidence in the sector that older Australians know exactly [what] they’re buying when they enter into a contract with a retirement village,” Mr Grice said.
Can states and territories manage the industry?
Financial services minister Stephen Jones has promised to raise issues within the sector at a meeting with state and territory consumer affairs ministers in December.
For now, any regulatory changes are the responsibility of the state and territory governments.
Retirement Living Council executive director Daniel Gannon said any example of poor experiences suffered by residents was “unacceptable”.
However, he said the experience of residents within the industry was “overwhelmingly positive”, and noted legislative changes made by states to ensure appropriate regulation and consumer protection.
“Any claim or suggestion that Australia’s retirement living industry is not properly regulated and suffers from systemic problems is simply not correct,” Mr Gannon said.
“This sector is not an ‘us versus them’ industry. With this in mind, we are absolutely open-minded and supportive of future complaints bodies.”
Mr Gannon said the introduction of a code of conduct for the industry and the low number of complaints made from code-compliant villages was evidence of the satisfaction felt among residents.
Where are the states and territories at?
In Victoria, draft legislation detailing a wide range of reforms was put out for consultation in 2021, with a second round of consultation opening up in 2023.
These laws are expected to be put before parliament this year.
The New South Wales government introduced reforms in 2021, and said it is currently reviewing retirement village regulation.
Retirement legislation amendments are currently before parliament in Western Australia, including changes to how operators provide information to consumers about their products.
South Australia has legislation amendments before parliament which will allow minister intervention powers and a cap on weekly maintenance fee increases.
It will also reduce exit payment time frames form 18 months to 12 months.
Tasmania amended its legislation last year, requiring increases in recurrent fees to be explained to residents and capping them at CPI.
In September last year, the ACT government rejected a resolution to establish a retirement village ombudsman.
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