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State and national ministers meet to stamp out poor behaviour of retirement village operators

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Joan Green bought a retirement village apartment for $384,000, but exit fees left her with just $81,000 when she sold it. (ABC News)

Federal Financial Services Minister Stephen Jones said state consumer affairs ministers would meet this week to discuss how to stamp out bad behaviour among retirement village operators.

“There clearly needs to be a real improvement in the behaviour of retirement village operators,” he told the ABC.

“This issue will be on the agenda of the forthcoming consumer ministers’ meeting and I have made it clear to state and territory ministers that bad behaviour must be stamped out.”

In September, an ABC investigation into the multi-billion dollar retirement village industry revealed “corporate abuse of elders” including excessive fees, oppressive contracts and misleading marketing promises.

Retirement actuary, academic and retirement village expert Tim Kyng, who has assessed hundreds of retirement village contracts, described them as “elaborate scams”.

The knock-on effect of high exit fees is that a large number of older Australians are unable to afford aged care and are forced onto taxpayer-subsidized aged care waiting lists.

For example, Joan Green, 89, bought a home in a retirement village 11 years ago for $384,000, but after paying a 60 per cent exit fee and other charges, she was left with $81,000 – not enough to pay for an aged care facility.

States starting to act

Jones will meet with all state and territory consumer affairs ministers this week but said he was “encouraged” by recent steps some states had taken to strengthen protections.

Last month, Victoria, South Australia and Western Australia stepped up protections, with Victoria becoming the first state to require retirement village operators to sign a mandatory code of conduct and requiring standardisation and transparency in retirement village contracts.

While it’s a good start, there’s still a long way to go to fix an industry that’s home to an estimated 250,000 older Australians.

Retirement villages gouging Australians

The photo shows a man and a woman standing side by side, smiling.

State and national ministers meet to stamp out bad behaviour from retirement village operators

Dog bans, mandatory medical checks and incomprehensible financial consequences. Welcome to some of Australia’s retirement village living.

Last year, crossbench MP Rebekha Sharkie introduced a motion in federal parliament urging the government to classify retirement villages as complex financial products similar to timeshare investments, a move that would bring them under the supervision of the federal and corporate regulator, the Australian Securities and Investments Commission (ASIC.

In the 1980s, retirement village arrangements were excluded from the definition of financial products and defined as “excluded securities” because they were considered real estate rather than investments.

In a series of letters dated Dec. 4 to Jones and relevant state secretaries, Sharkey asked them to present a way to “improve national consistency and protections” at a December meeting and work toward a more transparent and consistent industry.

In her letter to state and federal ministers, she said: “Since I raised my concerns about retirement village regulation, retirement village residents and their families across Australia have contacted me to report power and information imbalances in complex contract negotiations; excessive exit fees and payment delays of up to 18 months; lack of controls, gold-plating and unjustified escalations in renovation costs; unilateral rule changes and bullying behaviour by some operators.

In her letter, she said consumer protections for retirement villages appeared to be inadequate compared with complex financial investments such as timeshare investments.

Hundreds trapped financially

The ABC has received hundreds of emails and messages from retirement village residents and their families.

Many of them described being left financially destitute by huge exit fees, renovation costs and restrictive contracts including mandatory health checks.

Sharkey said her office has been flooded with emails since she made her remarks.

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Among the residents is a woman who says she moved into the retirement village in 2021 and has suffered health problems due to bullying and intimidation from the village manager and staff. 

She said: “We had issues with the condition of our villas, maintenance, inappropriate and bullying comments from our manager and intimidating behaviour from maintenance staff.

One family, who is sorting out their late mother’s estate, said the operator had deceived them: “I can’t believe the government allowed this to happen and it’s legal.”

Among the hundreds of emails were several from satisfied residents who wanted to make it clear they stood by their decision and understood the contract.

One resident said: “We moved into the village earlier this year and despite the planned 40 per cent exit fee we are delighted.

Another said: “There will always be people who claim they didn’t know about the exit fee. There will always be people who complain about the living conditions in rural communities. There will always be people who complain about the restrictions on living in rural communities.”

State and national ministers meet to stamp out bad behaviour from retirement village operators

Example of a complex exit fee formula. (Provided)

However, some of the contracts seen by ABC were long, complex and contained algebraic formulas.

“Around page two or three of the contract, there was an algebraic formula .. which meant she would lose 35 per cent of her exit fee,” school teacher Michael Macnamara told the ABC in 2020 when he discovered a contract signed by his late sister. At the time, she was suffering from cognitive decline, according to her doctor.

“My first reaction was, how can a man in his 70s understand this?”

Exit fees a ‘flawed’ model

Fiona York from the Seniors Housing Action Group told the ABC a meeting of state and federal ministers needed to go beyond recent changes made by some states.

She said while recent reforms introduced in Victoria, including a mandatory code of conduct, should be adopted nationwide, residents needed to be protected from the financial exploitation that was endemic in the industry.

The retirement village industry adopted a voluntary code of conduct in 2020, but it has been underwhelming due to its lack of enforcement and enforcement. Less than half of the industry has signed up to the code, and despite questionable conduct by some members, no operator has ever breached it.

“Exit fees are a flawed model that traps residents who want to leave and incentivizes businesses to push residents out rather than respecting their right to age in place,” York said.

“The response to recent 7.30 reporting revealing how these villages prey on the elderly has been overwhelming. There has been huge public support to stamp out these unfair practices. People are angry that vulnerable elderly people are being harassed or even evicted to increase profits for businesses.”

When Maurine Moore left the retirement village this year, she received $343,000 after various expenses including exit fees. The 90-year-old bought the house nearly 15 years ago for $490,000. House prices in the suburb have risen by more than 150 per cent over the same period, according to CoreLogic data. The operator listed her house for sale for $1.1 million.

“I would be happy just to get back the money I actually paid, but they haven’t even paid that,” she told the ABC.

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What the states say

In a statement, Retirement Living Council (RLC) executive director Daniel Gannon said the peak body for retirement villages was “years ahead of others in developing a code of conduct for the industry.”

“We are very proud that the Victorian Government has endorsed the RLC’s code of conduct and we are announcing that the new framework will build on our existing guidelines and principles, and we hope to see it rolled out across the state,” he said.

State consumer affairs ministers received a barrage of questions about this week’s meeting and their stance on retirement villages and safeguards, including whether an ombudsman was on the agenda, and reclassifying retirement villages as complex financial products so ASIC could regulate them. Most were vague on the issue.

Tasmanian Consumer Affairs Minister Felix Ellis told the ABC the government supported discussions on retirement village regulation at a national level.

“We have been working closely with the retirement village sector, including communities across Tasmania, to develop targeted improvements to Tasmania’s Retirement Villages Act. These improvements provide residents with additional protection from unreasonable recurring charges and levies,” he said.

Victorian Consumer Affairs Minister Gabrielle Williams said the new protections introduced last month were the biggest overhaul of the Retirement Villages Act since its introduction. But she did not respond to questions about support for the ombudsman or her position on reclassifying them as financial products to come under the Australian Securities and Investments Commission (ASIC.

Like Victoria, Western Australian Minister Sue Ellery said changes to retirement village resident protections in Western Australia “will safeguard retirees’ rights throughout their retirement life, from finding the right village and living there until they eventually leave.”

NSW Minister Anoulack Chanthivong issued a statement saying the NSW government is currently reviewing regulations for retirement villages. “Draft regulations will be released for public consultation in the coming months,” he said.

South Australian Minister Andrea Michaels said last month the reforms would “provide greater protections for residents, require greater transparency in contracts, strengthen the role of the regulator and improve industry standards.” But there was no response when asked about the ombudsman.

Queensland Attorney-General Deb Frecklington said strengthening protection for Queensland consumers was an important aspect of her new role as Attorney-General and Attorney-General.

She said: “While I don’t want to pre-empt this, I am committed to ensuring we take the best possible approach through appropriate regulation to provide housing security for retirement village residents.

A series of federal and state parliamentary inquiries and investigations into retirement villages since 2007 have revealed questionable practices and called for change.

Aside from some minor fixes, not much has changed. Residents, experts and Sharkie are hoping for a meaningful nationwide overhaul this time around.

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