Photo: Unsplash / Blake Wheeler
There have been calls for a radical overhaul of what is being described as an unfair law governing retirement villages.
But the group representing operators, the Retirement Villages Association, strongly disputes these "inaccurate and misleading" claims and says the vast majority of residents are happy with retirement village living.
"Unite for Seniors" is a new nationwide campaign, backed by the Retirement Village Residents Members Association, which believes the law favours village operators.
It says that residents who do not own their units and only have rights to reside must cover maintenance costs, and lose out when licences to occupy are resold when they leave.
For example, Bonny, whose parents have to shift out of their retirement unit as they need a higher level of care, says it is costing them.
"Mum and dad have been in their retirement village for 10 years. During those 10 years, they got no capital gain and as we all know, the housing market has increased so much over that time, no capital gain. Mum and Dad bought their villa for just over $600,000," she said.
Calls for overhaul of unfair law governing retirement villages
"They were going to be getting it once it was re-licensed, just over $400,000 back, yet the retirement village is selling that villa for $1.2 million. That situation needs to change."
Di Sinclair, who looks after complaints for the Retirement Village Residents Members Association, told Checkpoint the problem was just as bad as Bonny described, and sometimes even worse.
"It's one of the inequities of the system. I mean, where else in the world would you be able to get your hands on a nine-month, $600,000 interest-free loan with no mandatory payback period? It's as simple as that," she said.
"You can't get your money back until they re-license your unit, and that may take up to two years."
Sinclair said people who were unable to pay for their next place, such as a centre with a higher level of care, could not afford it, or had to take out loans, because they were still waiting for their money to be returned.
"We have someone at present whose daughter has had to take out a $450,000 loan to get her mother into village B from village A, as she was very unhappy," she said.
"Thirteen months later, the daughter still paying interest on that money because they haven't relicensed her unit."
There was no legal requirement under the existing legislation for village operators to pay residents within a certain timeframe, she said.
"They will say, 'nobody's waited longer than six months' or whatever and that's quite true in some cases, but in a lot of other cases, that there's no requirement at all, they don't have to pay out until they re-licence it, that's their right," she said.
"But just because it's legal, it doesn't make it right. It doesn't make it fair, does it? It's wrong from so many different angles."
Depending on the village operator, some residents were are in units did not own them - they had licences to occupy them, she said.
"Some cover all maintenance and repairs of their chattels, which is perfect, but a lot of them do not. They refuse to pay for the maintenance and repairs of their own chattels, and they put that onto the resident."
Many residents had to pay to get things fixed, she said.
"You can just imagine the landlord saying to a residential tenant, 'Sorry, the washing machine's broken down and your unit is broken down. But you'll have to pay to get it fixed and fix it yourself.'"
Sinclair said the Commerce Commission had brought up the issue recently.
"They say it is totally inappropriate and it is not right for operators to charge residents for the repairs and maintenance of things they do not own."
Pre-election, Christopher Luxon supported a review of the legislation. Sinclair said the government had agreed to carry on with the review through the Ministry of Housing and Urban Development.
"They're going through the 11,500 submissions that the resident's association members sent in, and we are hoping that by the end of August or early September, there will be a report to ministers with advice on how to do these things and how many changes we can make and for the legislation to go through."
However, Sinclair said she was worried about tinkering.
"The Retirement Village Association, that's the association of the operators. They want to just tinker around the edges of what we call the code of practice, which is also a legally binding document that goes along with the with the Act," she said.
The Retirement Villages Association disagrees. Chief executive John Collyns said he was disappointed that the Unite for Seniors campaign featured “inaccurate and misleading claims”.
“Independent research shows the vast majority of residents are happy with retirement village living,” Collyns said.
“Village residents tell us they value the companionship, social connections, safety, and security. The criticism from the United for Seniors spokespeople does not reflect the positive experiences of village residents we hear every day.”
Nonetheless, the association acknowledged that, like in any sector, there were some wrinkles to iron out and New Zealand's retirement villages were proactively rolling out “the most significant reforms to the industry in a generation”, Collyns said.
“This has included a commitment to ensuring operators re-license vacant units as quickly as possible and addressing any 'unfair' clauses in occupation right agreements.”
The association supported some regulatory changes.
“This includes providing greater clarity [and] disclosure around moving into care, stopping weekly fees once the unit is vacated, paying interest on outstanding capital sums after nine months, and more clearly defining chattels, repairs and maintenance responsibilities,” Collyns said.
“We also support exploring insurance cover and stopping capital loss clauses when there's no corresponding sharing of capital gain.
Sinclair said she currently dealt with 10 to 20 complaints per week, from residents who were unhappy with their village.
“It's just there's so many and we have to look into these ones. Some of them can't be solved at this stage. The complaint system is unfit for purpose, and we need a new complaint system. At present, the complaints are taking up to three years to be solved.”
She said an Ombudsman-type person for retirement villages would improve the complaints system.
“A sort of a commissioner-type Ombudsman person who would hear the story from both sides and make a binding decision in three weeks, that would be perfect.”
Collyns said one of the great benefits of the current legislation is that it enabled flexibility and competition between operators, so they could develop business models that meet current and future residents' needs.
“Residents tell us they want to continue to have choices. It's essential that flexibility to evolve new models for a new generation is maintained,” he said.
“Consequently, interventions such as a standard ORA [occupational right agreement], limiting the deferred management fee or retrospective changes such as stopping weekly fees on vacation are not viable.”
Collyns said that mandatory buy-backs would have negative unintended consequences, stifle innovation and reduce choices available to residents.
“Requiring operators to hold cash or a line of credit to be able to pay residents out within any specific time frame would lead to significant additional costs and possible business failure, particularly for smaller regional village operators. Instead, the RVA supports an option for operators to pay interest on the outstanding amount after nine months.
"New Zealand's retirement villages are subject to a world-leading regulatory framework with considerable oversight, safeguards, transparency and consumer protection for residents.
“The current complaints and disputes process works well, however the industry is open to looking at alternatives if there is sufficient evidence they work.”