This year some state governments have legislated to force retirement village operators to simplify the complex contracts they have traditionally expected prospective residents to sign.
The hue and cry raised by a joint Fairfax and Four Corners team investigation this year into the impenetrable documents revealed that most pensioners were unaware of what they were signing up for.
Referring in particular to one giant operator, Fairfax journalist Adele Ferguson wrote at the time: “Its slick marketing promises a safe and sound place to live, yet retirement village operator Aveo is making a fortune by ripping off Australians through complex contracts and eye-watering exit fees.”
Many elderly residents found that when the time came to leave the villages, unexpected exit costs ate away at their initial investment. This often left them with insufficient spare change to fund a place at an aged care facility of their choice.
It is no surprise that pensioners are stumped by complicated legal documents meant to maximise village operators’ financial grip on transactions.
But when an applied finance expert at Macquarie University could not make head nor tail of the same contracts, it was obvious to him that a tool was needed to help prospective villagers.
Mathematician Dr Tim Kyng’s mother wanted to move into a village and he was helping her with the comparisons between a few of them.
“As an expert in complex financial products, I didn’t expect to struggle to analyse retirement village contracts. I found great variation in the entry fees, ongoing fees and particularly the “deferred management fees” or exit fees across the retirement village industry,” Dr Kyng said.
So the academic developed a free calculator that simplifies the complex fee structures of different villages and converts them into a monthly ‘rental’ amount for easy cost comparison.
It takes less than five minutes to complete the village cost estimator survey once you have gathered up all the disclosure documents containing the summary of fees and costs for the retirement village. You will need to know the different villages’ entry, ongoing and exit fees, as well as what share of the capital gain you can keep once you sell out of the leasehold.
The free tool is available here.
“It is important that consumers are able to compare the cost of retirement housing, as well as the facilities and the social environment,” Dr Kyng said.
“To help comparison shopping, consumers should be able to get key cost information in clear language, when they are first looking around. Some retirement villages are withholding key cost information or only giving it in complex documents.”
However, new legislation introduced this year in some states require that operators be more transparent about fees and if they are not, they can be reported to your government’s consumer affairs division.
What can you do if you need help?
The following organisations provide consumer advice on retirement village matters in your state or territory:
Vic Consumer Association of Victoria
NSW Office of Fair Trading
Qld Office of Fair Trading
SA Consumer and Business Services
WA Department of Commerce
Tas Consumer Affairs and Fair Trading
NT NT Consumer Affairs
ACT Access Canberra
The following organisations provide free legal advice in your state or territory:
Consumer Action Law Centre, Victoria
Legal Aid, Queensland
Legal Aid, New South Wales
Legal Aid Western Australia
Legal Aid Commission of Tasmania
Legal Services Commission of South Australia
Legal Aid, Northern Territory
Legal Aid ACT
Have you ever been bamboozled by the contract terms of a retirement village but signed on anyway? Who helped you to understand your contract? Would you ever consider buying a leasehold in a retirement village?
Related articles:
Residents consider class action
Villagers slam operator
Centrelink assesses village deposits
