Retirement villages legislative framework: Assessment and options for change - SUBMISSIONS SUMMARY AND RECOMMENDATIONS 2021 - Amazon AWS
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Retirement villages legislative framework: Assessment and options for change SUBMISSIONS SUMMARY AND RECOMMENDATIONS 2021
Te Ara Ahunga Ora Retirement Commission will be the new name of the Commission for Financial Capability
from July 1, 2021. Te Ara Ahunga Ora translates to ‘the pathway to developing long-term wellbeing’. It reflects
our purpose to empower the people of Aotearoa on their journeys to a better retirement. Our original English
name of the Retirement Commission encapsulates the breadth and depth of our work in pursuing our mission
and vision - to improve retirement outcomes for all New Zealanders, so that everyone can retire with confidence.
We have retained reference to the CFFC throughout the body of this document as the consultation, analysis
and report writing phase was carried out while we operated under the name of CFFC.
2 Te Ara Ahunga Ora Retirement Commission Retirement villages legislative framework: Assessment and options for change
Contents
Executive Summary 2
1. Background 4
2. Individual submissions 5
General feedback 5
Specific themes 5
3. RVRANZ collated submission 9
General feedback 9
Specific themes 9
4. Operator submissions 11
General feedback 11
Specific themes 12
5. Other stakeholder submissions 13
General feedback 13
Specific themes 13
6. Summary of areas of general agreement between stakeholders 15
7. Discussion 16
8. Cross-government issues 19
Strategic review: Responsibility for oversight of legislative framework 19
Aged care considerations 19
9. Recommendations 20
Appendix 1: Sources of submissions 23
Appendix 2: Summary of Method 24
Appendix 3 White Paper questions and summary of Yes/No answers 25
Appendix 4: Occupation Rights Agreement (ORA) and a Licence to Occupy (LTO) 27
Appendix 5: Summary of Australian legislation 27
1
Executive summary
A CFFC White Paper proposed a policy review of the retirement villages framework, including the
resale and buyback process, weekly fees after vacating a unit, and a Code review. It noted
flaws in the complaints system, confusing documentation, and explored the tricky interface between
village and care facilities. It also noted the changing business and demographic environment.
Feedback was sought1.
The CFFC received over 3,000 responses to the White Paper, ranging from simple answers to the five
questions posed in the paper to extensive written submissions.
Almost all individuals and residents, as well as We have categorised the themes identified
the Retirement Village Residents Association in the submissions into three areas of the
(RVRANZ) and a large majority of other retirement village life cycle: moving in, living in,
stakeholders, including the New Zealand Law moving on.
Society (NZLS), support a full review of
retirement villages framework. In the moving in phase key concerns relate to
disclosures, legal advice, and legal
Operators and the Retirement Villages documentation. There is general agreement
Association (RVA) do not support a full review, that legal documentation needs to be
but they do agree on a few areas for simplified. However, disclosure alone is not
improvement. always sufficient, and regulations should ensure
minimum standards and fair terms. This is
Areas where there is general agreement that a particularly important because Occupation
review is needed relate primarily to improving Rights Agreements (ORA) terms are generally
disclosures for entering a retirement village not negotiable.
(RV) and also for transferring to care. There is
general agreement that the resale and buy-back Those living in a retirement village generally
process should be reviewed to ensure better report high satisfaction levels, and there are low
disclosure, however there is no consensus about levels of formal complaints. However, from the
legislating specific changes. Many agree that submissions we heard that, due to the nature of
the payment of weekly fees after exit needs to the Licence to Occupy (LTO) model, financial
be looked at, with a view to setting limits. There considerations play a role in whether residents
is also consensus that more needs to be done to feel they can raise issues, and they are not easily
clarify responsibility for repairs and maintenance able to exit a village if they are unhappy with
of chattels in individual village units. how complaints are handled/resolved. For this
reason it is extremely important that there is a
However, the wide-ranging concerns expressed robust, trusted and simple complaints process
in the individual submissions, and those of other to ensure that issues that arise are addressed in
stakeholders, suggest that only focussing on an appropriate manner, that takes into account
reviewing these limited areas is not sufficient the financial power imbalance that exists
to ensure a fair and balanced legislative between residents and operators.
environment.
1 Pursuant to the Retirement Commissioner’s obligations under s36 of the Retirement Villages Act 2003 to monitor the effects of the RV legislative framework.
2 Te Ara Ahunga Ora Retirement Commission Retirement villages legislative framework: Assessment and options for change
Most of the concerns raised in the individual Transferring to care is another area where
and resident submissions related to issues that more needs to be done to ensure there is a
are encountered in the moving on stage of the clear understanding of resident rights when
lifecycle. Concerns related to resale and contemplating moving into care within a village,
buyback timeframes, sharing capital gains, and as well as the financial consequences of such a
the continuation of financial charges after exit move; and the implications of moving (or being
were among the most widely discussed issues moved) outside the village to receive higher
in the individual and resident submissions. levels of care.
Many operators highlighted that financial
terms and consequences of resale and buyback A full legislative review has not taken place
process should not be legislated as these are since the legislation was enacted almost
commercial terms that allow operators to two decades ago. The initial intention of the
differentiate their models. However, a distinction legislation was to provide a framework for
needs to be made between dictating commercial retirement living options in a then-nascent
terms and legislation that protects consumer industry. The industry has grown in scope and
rights and eliminates unfair terms. It is the complexity since then and projections are for
moving on stage where residents and their further significant growth. Other than some
families are often at their most vulnerable. revisions to the code, no review has been
Issues relating to resale and buyback timeframes, conducted to assess whether the balance of
sharing capital gains, and financial charges power between operator and consumer is
post-exit, highlight strongly differing views appropriate. We therefore recommend that a
around the minimum rights and responsibilities full review of the legislative framework is carried
of both operators and residents. Once again it out as a matter of urgency.
needs to be highlighted that ORAs are generally
not negotiable.
Based on the issues outlined in the White Paper, the unresolved competing tensions, and the
feedback received from the submissions process, our recommendation is to conduct a policy
framework review.
3
1. Background
The CFFC’s White Paper: Retirement Villages Legislative Framework: assessment and options for
change2 was released for consultation at the beginning of December 2020. The consultation
process was open until 5pm on Friday 26 February 2021. The CFFC received some requests, mainly
from operators, for an extension to this deadline and these were granted on a case-by-case basis,
with a final deadline of 31 March 20213.
Submissions were received from a variety of The total number of submissions was:
stakeholders, and we make use of the following
four categories in this summary report: • Individuals: 1,316 submissions
• RVRANZ: 1 RVRANZ and 1,910 hard copy
• Individual submissions4 (via the online
resident submissions5
submission portal and emails sent directly to
CFFC). These include RV residents, family of • Operators6: 1 RVA and 13 operator
current or past RV residents, and any other submissions
submissions made by an individual in their
• Other stakeholders7: 13 submissions
personal capacity.
TOTAL SUBMISSIONS RECEIVED: 3254
• RVRANZ submission and the collated hard
copy submissions from residents sought We have structured discussion of themes and
by the RVRANZ. These were primarily from issues into the three stages of the retirement
RV residents, however on the form that the village lifecycle:
RVRANZ sent to residents they also
encouraged them to get family to submit, • moving into the village,
either by filling in a hard copy form, or online.
This means that while we can assume that • living in the village, and
the majority collected by RVRANZ were • moving on from the village (this would relate
resident submissions, they may also include to those who move out of the village for any
some submissions from family members of reason, including moving into care (which
RV residents. could be within the same RV) and those who
• Operator submissions: All submissions from pass away).
Retirement Village Operator or Owner The following four sections describe the
companies or individuals. The RVA submission general themes in the four respondent
on behalf of their members was also included categories.
in this group.
Appendix 2 sets out our submission
• Other stakeholder submissions: All methodology, including the steps we took
submissions from other stakeholders to minimise the risk of duplicate submissions.
including from lawyers, trustees, aged care,
and consumer groups. Appendix 3 cites the questions posed in
the White Paper and analyses responses
by category.
2 CFFC-RV-whitepaper-2020-Final.pdf (amazonaws.com)
3 The submission from the Health & Disability Commission was received in April and was included in the review as it had been specifically requested
by the Retirement Commissioner.
4 We do not have a specific number that we can assign to retirement village residents as we did not ask those who submitted to identify whether
they were a resident of an RV.
5 RVRANZ reported 1680 in their submission as at end February, and an additional 230 submissions were received during March, which were included
in the final count.
6 See Appendix 1 for list of specific operators.
7 See Appendix 1 for list of other stakeholders.
4 Te Ara Ahunga Ora Retirement Commission Retirement villages legislative framework: Assessment and options for change
2. Individual submissions
General feedback residents were concerned that changes would
The majority of individuals believed the White come too late for them, and there were
Paper canvassed issued fairly and accurately suggestions that any changes should be
(96%)8. Those who disagreed mainly claimed applied retrospectively to existing residents9.
there was a lack of consultation and canvassing There were also comments that the RV financial
of the views of retirement village residents model and legislative environment favoured the
during preparation of the White Paper. operator, and there were concerns that RV
operators prioritise profit over care.
There were very high levels of support for
conducting a full review of the retirement Specific themes
village framework (99%). Comments Table 1 summarises the key themes that were
specifically related to the review spoke about identified in the submissions. The themes relate
the need for an urgent review, that the review to issues that were mentioned in at least 5%
was overdue, and that they wanted a review of the submissions, therefore issues that were
to take place to ensure that the legislative only highlighted by a few individuals are not
environment was more balanced in terms reflected10.
of resident versus operator rights. Existing
8 Not everyone who made a submission to the White Paper answered the questions, and some only answered a few of the questions. In the
percentages reported we only provide feedback based on those who responded to a particular question (non-responses are excluded)
more detail is provided in Appendix 2 & 3.
9 We note that legislative change is only very rarely applied retrospectively.
10 More detail regarding the analysis process is provided in Appendix 2.
5
Table 1: Summary of themes raised in individual submissions
Moving into village Living in village Moving on from village
Purchase process Responsibility for maintenance Resale and buy-back process
& repair
• Got legal advice but terms of • Support guaranteed timeframe
ORA generally not negotiable, • Concerns related to paying for for buy-backs
and limited choices so forced repairs and maintenance of RV
to accept terms of ORA owned chattels • Concerns related to delays
in the resales process & delays
• Concerns related to knowledge • Refurbishment/ongoing in receiving funds
of lawyers with respect to the maintenance if live in a villa
operation of ORAs, and how the for a long time • Support interest payable once
ORAs and Code are applied in vacant
practice by RV operators
Resident advocacy
• Promises of facilities that don’t (power imbalance)
Financial charges after departure
materialise (disclosure documents • ORA clauses and interpretation
don’t seem to be binding on • Support stopping weekly fees
in favour of operator
operator) after exit
• Voice for residents/resident
• Sales agents are not required • Accrual of DMF should stop
advocacy
to adhere to real estate agent on exit
standards, such as those related
to disclosure/misrepresentation Review of complaints system
• Support review of complaints Capital gains
process • Support sharing capital gains
Legal documentation
• Support RV Commissioner/
• Legal documents and disclosure Ombudsman
documents complicated and Transfers to care
overlap of information • Concerns about financial
• ORAs should be standardised Financial concerns consequences (especially if delays
contracts (similar to residential in resale and buy-back process
• Weekly fees: concerns related to
tenancy or sale & purchase from RV unit)
increases, calls for standardised
agreements) approach • Lack of information related to
these transfers
• Transfers within RV – financial
consequences
ORA exit provisions
Complaints regarding RV facilities
• Exit terms favour the operator
& services
• General complaints related to • Improvements made by residents
RV facilities and services to their villas not taken into
account in calculation of exit
payments
Legislative framework/participants • Unfair exit terms (capital loss
• Too many govt entities involved without gain; 80/20 contracts
– need someone with ultimate with selling fee as % of sales price)
responsibility/power
• Concerns regarding independence
and functions of the statutory
supervisors.
6 Te Ara Ahunga Ora Retirement Commission Retirement villages legislative framework: Assessment and options for change
Moving in to the problem, with RV operators generally
The issues related to entering into a village having the final say regarding who was
focused on the purchase process and the legal responsible for specific costs.
documentation related to entering into an
For those who had lived in a village for a long
Occupation Rights Agreement (ORA) to
time, there were also issues related to obligations
purchase, in most instances, a Licence to
on operators to refurbish villas. Generally full
Occupy (LTO)11.
refurbishments only occur once they exited their
In terms of entering into an ORA, while many villa. Some noted that they could potentially live
noted they received legal advice there was in their villa for 20 to 30 years.
concern that the terms of the ORA were
A number of submissions dealt with the issue
generally not negotiable. The limited choices
of resident advocacy, and the inherent power
of operator financial models, and in certain
imbalance in the resident operator relationship.
regions, limited villages available, meant that
There were concerns that where ORA terms
many felt they had no choice but to accept the
were not necessarily clear, the interpretation
terms if they wanted to move into a retirement
of the clauses was determined by the operator
village (especially if they were no longer able
and therefore generally favoured the operator.
to continue living in their existing homes).
Another clear theme was the need for a voice
There was a feeling that the offers of occupancy
for the residents, and for residents to be
were very much on a “take it or leave it” basis
listened to and respected by operators.
as operators were unwilling to negotiate terms,
and given high demand for retirement villas, Linked to the issues of the power imbalance
many had waiting lists so they could just move and resident advocacy, submissions also
onto the next person on the list. highlighted the need for a review of the
complaints system to make it simpler and
Some highlighted that, due to the specific
fairer to residents. There was support for the
nature of ORAs and how they were interpreted
appointment of an Ombudsman or a dedicated
by the operators in practice, the knowledge
RV Commissioner.
their lawyers had was not necessarily at the
level required to give specific practical advice Individuals also highlighted concerns regarding
regarding how the terms of the ORA would financial issues, with most focussing on weekly
function in practice once they made the move fees, where many were concerned about how
into the RV. fees increased. There were also concerns about
the financial implications of transferring
There were concerns that sales agents were
between units in the RV (moving from larger
not held to the same standards as real estate
to smaller units after a partner passed away
agents, and that the facilities that were
or moved into care; or moving to serviced
promised as part of the sales process did not
units). Some mentioned that this would require
always materialise. It was noted that there was
a new ORA, which was not affordable given the
a need for better regulation of sales agents
escalation in prices since they originally
(in line with the standards required of estate
purchased their initial ORA.
agents) and for the disclosure documents to
be legally binding on the operator. Individual submissions also highlighted
complaints related to the provision of facilities
There were concerns that the legal
and services in the RV, with some noting
documentation was too complicated, and that
concerns about health and safety, construction,
there was too much documentation. There
and general maintenance of facilities.
were a number of comments that ORAs should
be standardised, like residential tenancy Lastly, in terms of the legislative framework,
agreements and sale and purchase agreements, there were calls for a simplified structure with
so that it would be easier to understand and one central authority responsible for RVs,
compare across RVs. rather than the multiple government and
statutory entities currently involved. There was
Living in also concern raised regarding the role of the
The issue mentioned most often relating statutory supervisor, both from the perspective
to living in the village was responsibility for of whether this role was sufficiently independent
maintaining and repairing RV chattels. Many of operators (given that they are paid for, and
felt it was unfair that they should have to pay appointed by operators), and calls for a review
to maintain and repair chattels that they did of the role that statutory supervisors should
not own. A lack of clarity about specific play within the framework.
responsibilities and limited disclosure added
11 Refer to Appendix 4 for explanation of the ORA and LTO.
7Moving on For those who would need to enter into a new
Many of the key concerns that were highlighted ORA to move into care any delays in receiving
by individuals in their submissions related to their capital back from their existing ORA
the third phase, moving on from the village. would create a shortfall of funds, and once
again the issue of increases in prices created
In terms of the resale and buy-back process concern that, without a share of capital gain
there was strong support for a guaranteed from their existing ORA, the new ORA for care
buy-back process. There were concerns would be unaffordable.
expressed about delays in the process and
the lack of control as the process is generally Several submissions observed that the exit
handled by the operator. terms of ORAs favoured operators, and that
ORAs were generally not negotiable.
Many were concerned about financial charges Individuals noted that exit payments generally
continuing after resident departure. There was did not take into account any improvements
strong support for stopping weekly fees after made by the residents to their villas.
exit, and individuals also highlighted that the
accrual of the Deferred Management Fee (DMF) Finally, there were also specific concerns with
should also not continue after the unit was the older versions of ORAs (that were still held
vacated. The continuation of this accrual by some residents) based on the 80/20 model.
meant that the former resident’s capital sum In these cases residents are responsible for the
continued to decrease the longer it took for escalating refurbishment costs paid on exit and
the villa to be reoccupied. must pay a selling fee, a percentage of the sale
price of the new LTO. Given rapidly-rising LTO
The issue of capital gains was also frequently prices this results in a financial deduction that
highlighted in the submissions. In general, there gets larger as prices increase without the
was strong support for reaching some resident participating in any gains from the sale
arrangement to share the capital gain between of the new LTO.
the resident and the operator. While it was
recognised that most agreements did not While it was acknowledged that these types of
provide capital gains, there were still concerns contracts were no longer commonly used, and
that large price increases over time made it some who had previously held these contracts
difficult for existing residents to move to other had been offered new terms, there were still
villages, or into care when an existing ORA some residents who were subject to the terms
capital pay-out would be insufficient to meet of the original 80/20 contracts.
the new higher prices. The financial implications
of transfers to care were highlighted, in particular
concerns that residents would not be able
to pay for care costs if they continued to pay
weekly fees for their previous villa until it
was reoccupied.
8 Te Ara Ahunga Ora Retirement Commission Retirement villages legislative framework: Assessment and options for change3. RVRANZ collated submission
General feedback review within a reasonable time after
In this section we summarise the RVRANZ implementation. This did not take place and
submission, which included the submissions was now long overdue.
from residents sought and collated by the
The RVRANZ expressed the view that a policy
RVRANZ12.
review was about fairness and protection that
There were high levels of agreement that the the current legislation did not afford to older
White Paper fairly and accurately canvassed consumers, and not whether residents were
issues (98% of those who answered this satisfied or happy with village life.
question). Also mirroring the responses in
the individual submissions, 99% of those who Specific themes
responded to Question 3 were supportive of The RVRANZ submission set out its own
a full review of the legislative framework. response and also highlighted the key issues
that were raised by residents in the submissions
One of the most common comments from collected by the RVRANZ.
resident submissions was that it was time
for a change and that a review was needed In the sections that follow we focus on
now to make the Act fair. The RVRANZ also highlighting the themes from the RVRANZ
noted concerns that there was no legislative submission and focus primarily on the top
requirement for periodic reviews of the concerns raised by residents in comments
framework, and that at the time the Act collated by the RVRANZ in Appendix A of
passed into law almost two decades ago, their submission.
the responsible Minister had promised a
12 More detail is provided in Appendix 2.
9Moving in Moving on
The RVRANZ was supportive of a review of The RVRANZ highlighted that urgent attention
disclosure statements with a view to producing needed to be given to the exit provisions in the
simplified and accessible documentation. Their Code. Its view was that weekly fees should be
view was that changes to documents should be reduced to 50% immediately on exit, with a
mandated by legislation. maximum time limit of 3 months. The RVRANZ
supported introducing guaranteed timeframes
Another aspect related to the moving in for buy-backs, and that interest should be
process was the need for recourse available payable during the vacant period. They did not
to residents if facilities and services that were support restricting these changes to larger
included in the disclosure statements or for-profit operators only.
marketing documents did not materialise,
or changes were made to what was promised. It also provided recommendations for how the
This was echoed by residents in their comments resale and buyback process should be amended
that there needed to be a way to ensure to result in a fairer outcome for residents, by
villages followed through on promises made linking buyback timeframes to the percentage
during the sales process. of capital gain allocated. They highlighted that
amendments, in particular buyback times,
Living in should be carried out as a priority, and should
The submission noted the need for a review also bring relief to existing residents (as has
of the complaints function, and the need for been implemented in New South Wales).
an authorised advocate, Commissioner, or Concerns related to exit provisions were also
Ombudsman with the legislated powers to among the most frequently made comments in
enforce decisions. The RVRANZ highlighted resident submissions, specifically:
that the current formal processes were seldom
used by residents who didn’t want to make a • Introduce capital gain sharing for both parties
fuss, or who were concerned they would be
victimised, bullied or not listened to. • Review/shorten time limit to pay back
• Review/stop charging of weekly fee after
The need to support resident welfare and
vacating dwelling
provide a voice for residents was also noted,
and in this respect the work done by the Residents also raised financial concerns
RVRANZ was highlighted. Limited financial regarding transferring into care when there
resources were noted as a constraint. Resident were delays in the resale and buy-back process.
advocacy was raised in comments from The RVRANZ was supportive of a review into
residents who mentioned the need for an how to improve and standardise information
ombudsman and someone available to act as about transferring into higher levels of care.
an advocate. Comments were also made by
residents about the need for regular
communication between operators and
residents, the need for fair representation, and
a fear that elderly people were being exploited.
Finally, residents from a variety of villages
highlighted the need to have greater
clarification regarding who pays for the cost
of repairs and replacement of chattels.
10 Te Ara Ahunga Ora Retirement Commission Retirement villages legislative framework: Assessment and options for change4. Operator submissions
General feedback Operators also felt that the White Paper
Responses from the operators were highly was trying to address too wide a scope in
consistent. The majority (62%) did not believe terms of broader housing questions for older
that the White Paper had canvassed the issues New Zealanders. A number of operators
fairly and accurately, and all operators felt that noted that the provision of social housing
there were important points missing. was the responsibility of government, and not
that of the RV sector, and that this was beyond
A key issue raised by a number of operators the scope of the RV Act. There was a view
was the inclusion of the case studies in the that broader housing issues for older New
Appendix to the White Paper. Many expressed Zealanders required attention as part of the
concern that these case studies were one-sided broader role of the CFFC, but that this should
as no right of reply had been given to the be addressed separately from the review of
operators involved to present their side of the the RV Act. In terms of the broader housing
story. There was also concern that these context, a number of operators did point out
highlighted only negative resident experiences that the RV model frees up housing stock as
and did not cover cases where operators had residents generally sell their homes before
gone to effort and trouble to assist with moving into an RV.
resolving resident complaints. In contrast to
these case studies, many of the operators Almost all the operator submissions (92%)
highlighted the high levels of resident were against a full review of the legislative
satisfaction in general, and in their own villages. framework. However, nearly all those who were
against a full review still felt there were issues
There were concerns that the White Paper that needed attention and these are addressed
adopted a generic one-size-fits-all approach in the specific themes covered in the next
and did not sufficiently differentiate between section. Operators claimed that the current
models where capital gains are already shared, legislative framework, with oversight by
or between the not-for-profit sector versus statutory supervisors, and self-regulation
commercial operators. In addition, a number of by operators, was sufficient. Operators also
operators said that the White Paper failed to highlighted that the New Zealand RV model
take into account a holistic view of the was seen as “world leading”.
retirement village operator financial model,
where issues like guaranteed buy-back time Specific themes
periods, and sharing of capital gains need to be We again consider the issues that were
considered in the context of the overall financial mentioned in the context of the three stages
model and cannot be considered in isolation. of the RV lifecycle.
11Moving in Moving on
Operators were of the view that the current In most instances operators were of the view
legislation, that made provision for getting that many of the issues highlighted in the
legal advice, and the disclosures that were White Paper with reference to the resale and
already in place, ensured that those who buy-back times were commercial terms that
moved into an RV were aware of the the operators used to distinguish themselves
implications. from competitors, and that these should not be
encoded in legislation.
Operators highlighted that people move into
an RV as a lifestyle choice, considering the While there was some agreement that more
many benefits that were provided from living transparency was needed regarding the resale
in a retirement community and specifically the and buy-back process, and therefore a need for
financial certainty provided in terms of costs better explanation and disclosure, operators
(especially with fixed fee models). Operators did not support putting legislation in place to
believe the structure of the financial model enforce mandatory buy-backs, paying interest
provides certainty for residents, and changes on capital once a unit was vacant, or sharing
to the model would lead to greater uncertainty. capital gains.
Specifically, it was noted that upfront costs of
buying into a RV would need to increase to In addition, a number of operators raised the
offset any change to capital gain sharing or the issue that changes to the treatment of these
buy-back process and that this would make would have knock on effects on upfront
RVs less affordable. This would result in many purchase costs, the DMF, as well as weekly fees
new residents retaining a much lower portion charged by the operator. Many highlighted that
of the equity released from the sale of their any legislative changes would have adverse
houses with the higher upfront cost of buying effects on the financial stability of the sector.
into a RV. There were also operators who noted that their
current business models, and the profitability
This equity release was noted by a number of these models, allowed for cross-subsidisation
of operators as a key attraction of the current of rest care facilities that were now becoming
model, as it allowed residents to free up a more common within RVs. There was concern
portion of the capital from their former homes that changes to the business model would have
to fund day to day expenses in retirement. a knock-on effect on their ability to provide
private rest care facilities.
However, there was general agreement that
improvements could be made in terms of Most agreed that weekly fees after exit should
disclosure documents. Reference was made be reviewed with a view to terminating these
to existing initiatives such as the RVA’s “key after a specific timeframe, and many
terms summary” document as a way to highlighted this was something they already
simplify documentation. did. However, there was concern regarding the
impact on small operators and other business
Living in models where the resident, or their estate,
Many operators highlighted high levels of manages the sales process.
resident satisfaction. Several noted that Lastly, in terms of moving into care, there was
residents were not vulnerable. agreement that improvements could be made
Most agreed the complaints system could be in terms of providing information about
reviewed to make it simpler; but there were transferring into care. Reference was made to
concerns regarding the need to balance existing initiatives such as the RVA’s best
operator rights versus resident rights, and practice guide that provided key information
issues raised about frivolous and vexatious about transfers to care.
complaints. There were indications that there
may be support for an Ombudsman, but only
if the industry felt it provided sufficient benefit
to outweigh the costs.
With respect to who should be responsible
for maintenance of RV chattels, there was
agreement there should be better disclosure.
It was highlighted that operators taking
responsibility for repairs and maintenance
could be encouraged as examples of best
practice.
12 Te Ara Ahunga Ora Retirement Commission Retirement villages legislative framework: Assessment and options for change5. Other stakeholder submissions
General feedback often the people engaged in face-to-face
Thirteen submissions were received. The majority discussions with clients regarding ORA terms,
(68%) believed that the White Paper had and this would provide a more cost effective
canvassed the issues fairly and accurately. and efficient process for clients.
In terms of specific inaccuracies in the White The New Zealand Law Society (NZLS)
Paper, the following specific corrections were suggested ways to improve disclosures, such
pointed out in the Trustee Corporations as including a compulsory glossary of terms,
Association of New Zealand (TCA) submission: or a standard form contract, with schedules
for specific details or variations. They also
• On page 32, when discussing the role of the suggested expanded requirements for
statutory supervisor, it is stated that residents disclosure and certification of solicitors
have the power to remove “operators”. This is involved with advising clients on ORAs.
incorrect and should refer to the power to
remove “statutory supervisors”. Eldernet highlighted the role that business
and NGOs could play in the sector in terms of
• On page 34, it is stated that residents must offering unbiased information and education.
receive information about matters listed in
s34(3) of the Act. This is not accurate in that Living in
there is only an obligation to notify residents
Most of these stakeholders supported
of these matters if the village does not have
improving the complaints system. The Health
a statutory supervisor. If the village has a
& Disability Commission and FSCL highlighted
statutory supervisor, the obligation is to
how advocacy and complaints were dealt with
notify the statutory supervisor of these
in different sectors and provided insights into
matters. It is only if the statutory supervisor
how there may be opportunities to incorporate
so directs that each resident and intending
ideas and share resources in the RV sector.
resident must be notified.
There were also concerns raised in some of The NZLS highlighted the need to explore
the submissions that the inclusion of resident whether a dedicated Retirement Commissioner
case-studies only showed one side of the story. or Ombudsman was required for the RV sector.
Most stakeholders (80%) supported a full TCA raised a number of issues related to
review of the legislative framework. Those specific deficiencies in the current code and
stakeholders who did not support a full legislation which could have adverse
review all thought there were still issues consequences for residents. Among these
that needed attention. issues was insurance cover for operators
(considering full cover versus cost of
Specific themes replacement and gap cover insurance), financial
reporting to residents, the duty of the auditor
Two-thirds of other stakeholders felt there were
to report to the statutory supervisor, and fire
important points missing from the White Paper.
and emergency procedures needing to be
These missing issues are discussed in the
reviewed to ensure compliance with the latest
following section.
Fire and Emergency legislation.
Moving in We also heard from statutory supervisors that
There was general agreement from the requirement for the statutory supervisor to
stakeholders that disclosure statements could hold security on behalf of residents, against the
be improved. In addition there were titles to the land and also against the operating
submissions that dealt with specific aspects entity, should be prescribed in the legislation
related to legal advice. Legal Executives New rather than just under the deed of supervision
Zealand suggested that the legislation be as this would ensure better protection of
amended to allow Fellows of the Institute to residents’ interests.
advise on and witness ORAs as these were
13Consumer NZ focussed on issues related to Submissions from Anthony Harper and
the unfair terms in the ORAs, including those Eldernet noted that they did not support
related to maintenance charges, where limiting changes to larger for-profit operators
residents were responsible for maintaining and highlighted the negative impact this might
chattels they did not own. have and unintended consequences that may
arise from such a distinction.
The New Zealand Nurses Organisation
highlighted the need to include issues relating Many raised issues related to transfers to care
to staff employed in RVs and noted that and most supported providing better
healthcare workers in RVs should be paid an information about transfers to care. Eldernet
equitable wage. highlighted the issue of having capital held by
the operator (due to the resale-buyback
Moving on process) when the resident required access to
There were mixed views from these this capital to fund Aged Residential Care. This
stakeholders regarding the resale and buy-back was currently being addressed ad hoc by the
process. While many supported reviewing sector with some providers offering ‘bridging’
current processes to make them more finance. Eldernet suggested that facilities such
equitable to residents, others believed changes as the current Residential Care Loan offered on
should not be legislated. They claimed the freehold properties by the government should
financial consequences of legislating changes be extended to include those in Retirement
would be detrimental to operators, which could Villages.
cause instability in the sector. One other issue, raised in the NZ Aged Care
The issues of sharing capital gains again Association (NZACA) submission, was the use
resulted in mixed views. Consumer NZ raised of ORAs within Aged Care. They noted that the
a number of concerns regarding unfair terms current ORA system was relatively
in ORAs, in particular relating to capital gains. straightforward and they would reject any
However, others were of the view that an system that would make it more complex.
individual RV should determine whether it Specifically, they highlighted the ability to use
shared capital gains as part of its model, as ORAs within Aged Care lifted the quality and
there would be knock-on effects to pricing choice of accommodation offered by some in
and other costs. the sector. In their view, the regime’s flexibility
enabled this, and further regulation would
There was more support for limiting or seriously constrain this choice.
stopping fees once residents had exited
the village, but some did not support this.
14 Te Ara Ahunga Ora Retirement Commission Retirement villages legislative framework: Assessment and options for change6. Summary of areas of general
agreement between stakeholders
Considering these diverse views, there was some general agreement on areas that should be
reviewed, summarised in Table 2. It must be highlighted that there was no agreement on legislating
changes in these areas.
Table 2: Areas of general agreement
Moving into village Living in village Moving on from village
Disclosure documents (and other Complaints process Resale-buy back process
legal agreements) Review and simplify the complaints Review the process (but no general
Documents should be reviewed and process (but needs cost/benefit agreement to mandate buy back
made easier to understand assessment) times etc.)
Maintenance of chattels Weekly fees terminate on exit
Disclosure needs to be improved, Review but reservations about
look at reviewing how this is dealt with applying to all RVs
Transfers to care
Review and provide better
information about transfer to care
157. Discussion
The CFFC White Paper offered four options: approach mostly operates. In addition, there is
limited recourse for residents when promises
1. Maintain the status quo made by sales agents, and intended future
facilities and services mentioned in disclosure
2. Approve a Code variation to add some
statements, do not materialise.
consumer protections
More needs to be done to promote education
3. Conduct a regulatory systems assessment
and awareness of the financial consequences
4. Conduct a policy framework review of a move into an RV. There is a need for a
(the recommended option) stronger focus on education and awareness
of what a move to a RV entails from a financial
Almost all individuals and residents, as well as and legal perspective. This is especially
the RVRANZ and a large majority of other important because in almost all cases this is not
stakeholders, including NZLS, support Option 4 a purchase of real estate. Rather it is a financial
- a full review of retirement villages framework. transaction that requires an upfront capital
While Operators and the RVA do not support a payment to purchase an LTO. When the licence
full review, they do agree that there are some terminates the capital payment is returned
areas for improvement. minus the Deferred Management Fee (usually
around 30% of the original payment). The
As highlighted in Table 2 there are limited areas benefit of the model is that the resident can
of agreement among stakeholders about the usually purchase the LTO at a discount to what
issues that need review, and the extent to a freehold property would cost, they get to use
which changes should be legislated. However, village facilities at a weekly fee (which may be
the wide-ranging concerns expressed in the fixed), and the operator assumes ownership
individual submissions, and those of other risks for the property.
stakeholders, suggest a review that focuses
only on these limited areas would not be This transaction is similar to providing capital
sufficient to ensure a fair and balanced as a loan, with the expectation of the return
legislative environment. of capital at the end of the loan period. The
difference is that not all capital is returned in
Issues related to resident vulnerability exchange for the resident having the benefits
appeared throughout the submissions. There of the LTO over the residency period.
were some submissions that highlighted that
RV residents were not vulnerable, while at the This structure is important to understand as it
same time, other submissions pointed out has specific financial consequences that impact
vulnerabilities particularly related to legal on a variety of outcomes, such as the capital
advice and consumer protection. While we value that will be left to the resident’s estate.
would agree that residents are generally not Importantly, individuals need to be aware of the
vulnerable when they move into the village, adverse financial consequences if they change
vulnerability increases over time, and their mind about living in a village or wish to
consideration needs to be given to the fact move to a different RV, as their capital sum will
that age limits for entering RVs have generally not be repaid in full. In an environment of rising
increased. Many of the issues raised in the house prices, residents will require extra capital
White Paper focus on the final moving-on to purchase a new LTO or to buy back into the
stage, when vulnerability is at its highest, and property market. This causes some residents
the opportunity to complain is limited. It is considerable stress: there is no simple way to
therefore important that fit-for-purpose easily leave an RV if the resident is unhappy
legislative protections are in place. (after the ‘cooling off period’ of 15 working
days has passed). Therefore, some residents
Moving in are financially trapped and their complaints
and general dissatisfaction become stressful
As highlighted by the operators, people move
for both operators and fellow residents.
into an RV as a lifestyle choice, with the
benefits of safety, security, and the financial There is general agreement that legal
certainty provided by the current model. documentation needs to be simplified. In
Operators say residents understand the model addition to using a ‘plain English’ approach,
and get appropriate advice. However, the this should also include reducing the amount
limited ability to negotiate the terms of the of document duplication or overlap. However,
ORA and high levels of demand to move into disclosure alone is not sufficient. The power
RVs suggest that a “take-it-or-leave-it”
16 Te Ara Ahunga Ora Retirement Commission Retirement villages legislative framework: Assessment and options for changeimbalance that can occur (eg, ORA terms investigative function (such as seen in financial
are generally not negotiable, only one suitable dispute resolution schemes). Such a scheme
village in a territory, difficulty in comparing could be funded by operators, but not
offerings between villages) would suggest that appointed by them, and would investigate
minimum fair terms need to be set by legislation. specific issues of substance where the parties
are deadlocked or not reaching agreement.
In addition, we know from financial capability
research that individuals are not always good A further issue that needs attention is
at weighing up short term versus long term understanding the status of RV residents and
benefits and costs. Entering into an ORA is how this relates to their rights and
a case where the immediate benefits may responsibilities. It is very clear from the
outweigh the longer-term financial costs and operator submissions and the RVA that
consequences in the mind of the decision- residents with LTOs are not homeowners and
maker, and this needs to be taken into account do not share in capital gains; however, neither
when reviewing both disclosures and are residents afforded the rights usually
legislation. Caveat emptor can only go so far. available to tenants. Tenants generally have no
obligation to repair and maintain chattels that
Living in are not owned by them, they have the right to
Operators report very high satisfaction levels complain to the tenancy tribunal, their bond is
and low levels of complaints. However, there generally returned within 10 – 15 working days,
were concerns expressed in some of the and they can also expect their landlord to
submissions that complaints are under-reported: adhere to specific legislated standards, eg,
residents might not want to make a fuss or are the Healthy Homes Standard.
concerned they would not be listened to or RV residents with an LTO are neither owners
even bullied. At the same time, operators nor tenants so it is particularly important to
highlight the need for balance between have clarity regarding their rights and
resident and operator rights, particularly in obligations. At present they generally do not
the case of frivolous and vexatious complaints. benefit from the rights of ownership or the
As previously discussed, the financial rights of tenants.
consequences of moving out of a village are Lastly, in terms of the legislative framework,
costly for residents and can result in a feeling there was support from individual submissions
of being trapped in a village. This can also put for a more simplified structure with one central
pressure on operators as residents in this frame authority responsible for RVs, rather than the
of mind may increase their levels of complaint. multiple government entities currently involved.
For this reason, it is extremely important there It should also be noted that the current
is a robust, unbiased, simple complaints legislative environment does not make
process to ensure issues that arise are provision for any government agency to audit
addressed in an appropriate manner, which retirement village compliance with the Code or
takes into account the need for mutual respect, other RV legislation, other than the Registrar’s
the power imbalance that exists between s97 powers to inspect relevant documents.
residents and operators, the stress unreasonable However, the RVA has taken responsibility to
complaints can place on operators, and which conduct audits of Code compliance among its
recognises that residents can’t just move away members every three years.
if they are unhappy with the resolution offered
by the operator.
Moving on
It is relatively common for operators to engage It is at this stage of the process that residents
legal counsel to deal with complaints but this (or their families) are often at their most
route is affordable to fewer residents. There vulnerable and not in a position to complain.
were also concerns expressed in the Concerns related to resale and buy-back
submissions regarding the role of the statutory timeframes, sharing capital gains, and the
supervisor as an independent arbitrator given continuation of financial charges after exit were
they are appointed by and funded by the among the most widely discussed issues in the
operator. There is no resident advocate built individual and resident submissions. Operators
into the complaints process. highlighted that the financial terms and
consequences of resale and buy-back process
Other complaints systems that focus on should not be legislated as these were
consumer complaints where financial and commercial terms that allowed operators to
power imbalances exist (such as finance, differentiate their models.
insurance, and media complaints) may provide
some insights into how best to structure an However, a distinction needs to be made
improved complaints system for RVs. Another between dictating commercial terms, and
missing element is an independent complaints legislation that protects consumer rights
17and eliminates unfair terms. Once again it arrangement, while those with non-registered
needs to be highlighted that the ORA terms interest generally do not share capital gains.
are rarely negotiable. Therefore, the power However, as they are not owners of the unit,
imbalance would suggest that minimum fair their residence rights end when the unit is
terms need to be set. We note that recent and permanently vacated; therefore, timing of exit
proposed changes to RV legislation in a payments is linked to vacating the unit, not the
number of Australian states have focused on resale of the licence to occupy14.
setting minimum standards for exit terms and
payments in legislation13. In New Zealand, an LTO would be an example
of an unregistered interest, whereas a unit title
In the submissions from operators, key would be an example of a registered interest.
concerns related to sharing capital gains and However, in New Zealand RV legislation, there
implementing mandatory buy-backs, which is no clear distinction between rights and
they felt did not take a holistic view of the RV responsibilities linked to different types of
financial model and would lead to uncertainty occupancy rights. This is the case even though
and financial challenges for many operators. the definition of retirement village in the Act
Use of the term ‘capital gain’ was also seen outlines how a resident’s right of occupation
as problematic. Operators noted that an LTO can be provided in many ways, including
provides no ownership right: the capital sum “freehold or leasehold title, crosslease title, unit
received by the operator for relicensing the unit title, lease, licence to occupy, residential
is not relevant to the outgoing resident as they tenancy, or other form of assurance, for life or
do not own the property. any other term”15.
However, from the perspective of exiting Operators highlighted the confusion that
residents (or their estate), in most cases surrounds the nature of the LTO, clarifying in
residents with LTOs must wait for a new their submissions that the rights of someone
resident to purchase an LTO for their villa with an LTO were clearly distinct from those of
before getting paid out. This linking of someone who has ownership of the underlying
transactions may be part of the reason why property. This distinction is important not only
exiting residents might focus on what the new as it applies to explaining why capital gains
licence is being sold for, as it is only when this would not result from an LTO, as highlighted by
sale takes place that they are refunded their the operators, but also in understanding what
initial capital payment minus the DMF. other obligations of ownership should not
apply in the case of an LTO, such as
The issues related to resale and buy-back maintenance costs, and issues around the
timeframes, sharing of capital gains, and timing of exit payments. If these rights and
post-exit financial charges, highlight the need responsibilities were more explicitly stated in
for greater clarity regarding the minimum legislation, this could bring greater clarity to
rights and responsibilities of those with issues such as when capital gains sharing is
different occupation rights. As an example, relevant, who is responsible for maintenance,
in the Australian RV legislation in some states and timeframes around exit payments.
there is a distinction between those with a
registered interest (whose title to the unit Information about transferring to care is
they live in is registered in some way, including another area where more needs to be done.
those who occupy based on long term lease There needs to be a clear understanding of
arrangements) versus those with a non- resident rights if they move into care within a
registered interest (who are living in a unit village, as well as the financial consequences
based on some type of licence to occupy). of such a move, and the issues and obligations
if they need to move outside the village, for
The distinction between the two broad types of example to receive higher levels of care or if
occupancy is important in dictating exit the RV does not have an available care bed.
provisions, such as timeframes for exit
repayments and for cessation of recurring Currently there are misunderstandings about
charges. In addition, these distinctions are different levels of care, the various legislative
important in determining responsibilities for environments, and the use of confusing
maintenance and related charges. Broadly terminology in the sector.
speaking those with registered interest are
more likely to have a capital gain sharing
13 See appendix 5 for further detail
14 See appendix 5 for further detail
15 There are some sections in the Code of Practice that are limited to being applicable only where the operator has the responsibility for the sale of the residential
unit, but there is no general distinction based on the occupancy rights, other than Sections 40 – 45 “Maintenance and upgrading” not being applicable to units
owned by residents (where terms need to be set out in the ORA).
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