Big retirement village shakeup proposed: lives of 50,000 residents could change

Big changes to the retirement village sector out from ministry today.

Retirement village owners could be forced to repay residents’ money within six to 12 months and be banned from charging weekly fees once people have left their places.

These are proposals for a long-awaited shakeup of the sector from Te Tūāpapa Kura Kāinga Ministry of Housing and Urban Development, which today released a discussion paper on changes.

Around 50,000 people live in retirement villages, owned by some of the largest NZX-listed companies.

Last year, the ministry said it would begin its probe.

Villages can keep charging weekly fees for months after residents die. They are not forced to repay a family estate or beneficiaries the money paid for a unit or bed once their relative has died. Nor are there any specific time constraints on these two aspects, which comes as a shock to some families, grieving after a relative’s death.

Nigel Matthews, chief executive of the Retirement Village Residents Association, today welcomed the ministry’s recommendations.

“We’re very pleased with this as a starting point as well as the tenor of the proposals. This will offer better consumer protection, fairness and consistency within the sector,” he said.

Villages don’t have any set timeframes for repaying people or their estate’s capital sums and can carry on charging weekly fees months after people have left their units.

Matthews has lobbied hard against this, saying it’s wrong.

Woodlands Boutique Retirement Village, Carmichael Rd, Bethlehem, was reported in September last year to be keeping a widow’s $790,000 for 10 months after she had left. It said it had halved her weekly fee and was trying to resell her unit, but house sale contracts had failed meaning it couldn’t repay her, the business said at the time.

In 2021, Consumer NZ year lodged a Commerce Commission complaint about what it said were “misleading” retirement village claims. Chief executive Jon Duffy said a major selling point for many retirement villages was the rest home facilities they provide if a resident can no longer live independently. Advertising and marketing create an impression that care was guaranteed, he said.

Retirement Commissioner Jane Wrightson.

Retirement Commissioner Jane Wrightson said today she wants people to submit their views on the ministry’s changes.

“I am really pleased to see the review progress to this consultation phase. The proposed changes tabled in the discussion document address many of the issues we have raised, along with important others,” she said today.

“The sector provides important and valued housing options for some older New Zealanders and is by no means broken. I acknowledge recent voluntary changes made by the industry itself. But the act has not been reviewed in 20 years: it’s important for residents, their families and operators that sector-wide best practice is clearly set out in legislation. I encourage all interested parties to submit their feedback on the proposals put forward.”

The discussion paper wants feedback on proposals for change to three phases of retirement living: moving in, living in and moving out.

This spans everything from plain language disclosure statements, partially standardised occupation right agreements, replacing the current complaints and disputes scheme, right through to introducing mandatory timeframes for repayment of capital sums after units have been vacated.

Today’s release comes after the commission’s own probe into residents’ experiences in moving out of, or within, a retirement village.

Research found that the experience can be quite varied, with some residents feeling informed and supported, while others feeling rushed and taken advantage of, Wrightson said.

A lack of understanding of how the buying and selling of retirement village accommodation differs from the wider residential real estate market can lead to disappointment and dissatisfaction among residents and whānau.

Many residents and whānau expect a duty of care from a retirement village to be also applied throughout the exit process, and their interpretation and expectation of this duty of care greatly affected their exit experience, Wrightson said.

The commission proposed a review of retirement village legislation in December 2020.

Wrightson said the legislation was at risk of becoming outdated and unfit for purpose. Key concerns were raised about the resale process, weekly fees charged after a resident leaves a unit, flaws in an overly complicated complaints system, confusing documentation and the tricky interface between village and care facilities.

“Retirement villages remain an attractive choice for some older New Zealanders, providing a sense of community and a quality option for those who wish to downsize,” she said.

“This review is an opportunity to assess what updates to the legislation are needed, for both residents and retirement village operators.”

But not everyone wants the law changed.

Graham Wilkinson, president of lobby group the Retirement Villages Association, said the sector has a range of operators, large and small, and with varying models and offerings that provide flexibility and choice for Kiwis.

All villages know that without happy residents, there’s no business, so we work extremely hard to meet our residents’ expectations, he said.

The association remained committed to working with the ministry and the Government to ensure the best outcomes for retirement village residents and operators alike, Wilkinson said.

The vast majority of retirement villages had already implemented substantial changes to the way they operate and other villages were following, he said.

For villages with more than 50 units, more than three quarters charged no weekly fees once a resident vacates a unit, almost two-thirds did not continue to accrue a deferred management fee once the unit was vacated and 90 per cent of villages had removed any capital loss clauses where the resident does not share any capital gain.

“More than 70 per cent of villages also make a compensatory payment when the capital sum remains unpaid for any period,” Wilkinson said.

John Collyns, association executive director, said proposals reflected that entity’s approach, in particular when residents left a village.

This includes village outgoings and fixed deductions to cease being charged either immediately or no later than four weeks following vacation, no right to pass on capital loss unless residents also have the benefit of capital gain and the payment of interest on the capital sum after a six month period and/or a compulsory repayment of the capital sum potentially six or 12 months following vacation with some exceptions, Collyns said.

Anne Gibson has been the Herald’s property editor for 23 years, has won many awards, written books and covered property extensively here and overseas.