Labour MP Ingrid Leary drafts bill on retirement village payouts

Labour MP Ingrid Leary has drafted a bill to force retirement villages to pay capital sums to residents moving to higher care levels or families once a resident dies.

But Retirement Villages Association president Graham Wilkinson says a law change is unnecessary.

Leary, Labour’s spokeswoman for seniors, said the existing law does not specify when capital sums must be repaid and villages can keep the capital without restrictions.

That means 53,000 residents living in villages are potentially disadvantaged.

“This causes them real stress when they exit accommodation to move into a high-level of care, or for their families when they exit the village,” Leary said.

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But Wilkinson said there was a common misconception that operators held large reserves of cash when a resident leaves a unit.

“In reality, the initial incoming payment is typically used to repay a village’s bank debt. On top of that, the cost of providing community facilities and care services often leads to an initial cash loss,” he said.

Labour MP Ingrid Leary.

Retirement villages were capital-intensive, long-term investments, not cash cows, Wilkinson said.

A spokesman for Associate Housing Minister Tama Potaka said the Government did plan retirement law reform, but not how Leary proposed it.

Associate Housing Minister Tama Potaka.

“We are taking a more focused approach to the Retirement Villages Act review, based on progressing changes that are broadly supported by the retirement sector as well as three priority areas that have been raised by residents, including:

• Maintenance and repairs of operator-owned chattels and fixtures;
• Complaints and disputes;
• Options for incentivising or requiring capital repayments when residents move out of a village," Potaka spokesman said.

Law changes would be introduced next year, he said.

Leary said retirement village operators hold all the cards when it came to capital repayments.

“That just isn’t fair.”

She hopes NZ First will support her.

“That has been a party which has traditionally branded itself as a champion for seniors,” she said.

Retirement Villages Association president Graham Wilkinson opposes the bill on capital payouts.

Wilkinson said the average repayment time is around five-and-a-half months.

“That’s a reflection of today’s property market, where prospective residents must first market, sell and settle their own homes before moving in,” he said.

But the association understood that waiting for the return of capital could be stressful, particularly for families facing care decisions or managing estates after a resident passes away.

In 2022, PwC calculated that the annual cost of capital repayment per unit per village could range from $70,000 to $1.5 million, depending on the size of the village and the time for mandatory repayment.

If Leary’s bill proceeded, village fees would rise and smaller charitable or regional villages could be forced to shut, Wilkinson said.

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“That would reduce choice for older New Zealanders, particularly in rural communities, and limit access to aged care.”

Wilkinson is also concerned at the retrospective nature of the proposed bill.

Village operators and residents signed contracts in good faith, he said.

Retrospective change would be poor law-making, setting a dangerous precedent for other law changes in the future, Wilkinson said.

Last week, Leary criticised Seniors Minister Casey Costello for not doing her job but Costello hit back, saying Leary had a “very shallow understanding of the seniors portfolio”.

Costello said older New Zealanders could be assured every commitment made to them in the NZ First-National coalition agreement would be met this during this Government’s term.

Anne Gibson has been the Herald‘s property editor for 25 years, written books and covered property extensively here and overseas.