VICTORIAN STATE GOVERNMENT REVIEW
OF THE LEGISLATION RELATED TO RETIREMENT VILLAGES.
SUBMISSION PREPARED BY BRUCE L. WILKINSON AND KATHLEEN M. WILKINSON,
39/5 GRAND BOULEVARD, DONCASTER, 3108.
A. INTRODUCTION.
1. For the past five years we have been joint life-time lessees of an apartment in a large “lifestyle” Retirement Village in Doncaster, declared by the proprietors in their disclosure documents as a “high quality residential development with a range of property and health related services available for the use of the Residents”.
2. Still incomplete, the Village consists of 11 stages of Villas and Apartments to house approximately 500 Residents (minimum age 55 years) for “Independent living”.
3. The conditions of occupancy by all Residents are controlled by the terms of their leases with the Owner (a Private Company under the control of one active individual and member/s of his family). The Village is operated as a “for profit” commercial enterprise, and we are all non-owner Residents in terms of the Retirement Villages Act 1986 (RVA).
4. Our expectations of life in the Retirement Village included:
· Security and concern for the well-being of all residents.
· Satisfying life-style within a co-operative and non-confrontational environment.
· Full, understandable and transparent disclosure of conditions, expectations and mutual obligations prior to entry and throughout residency.
· The Owner able to make a fair profit whilst catering for the “Independent Living” of the Residents at affordable entry prices, ongoing operational costs and fair exit costs.
· Consultation with Management on costs of entry, exit and operational costs to avoid unplanned financial hardships for Residents and/or their families.
· All decisions made within the Village that affect the life-style and financial position of Residents would be subject to consultative decision making processes that use the opinions, qualifications, experiences and expectations of Residents to the maximum.
Our solicitor warned us that if we took off “the rose coloured glasses” through which we viewed our move into the Retirement Village, we would become highly concerned by the great advantages bestowed on the Owner at our cost.
Unfortunately, through our own experiences, and our discussions with fellow Residents, we now realise that this cautionary advice was justifiedfor which , as there are many terms in the leases giving the Owner sole or absolute discretion in decision making on ALL fundamental issues in the Village.
B. MAJOR CONCERNS AND ISSUES ASSOCIATED WITH THE LEASEHOLDS IN THIS PARTICULAR VILLAGE.
These points should be considered in any reviews of the Retirement Villages Legislation.
1. The large number of lease contracts that exist in this village (there are approximately 36 forms of lease and their variants) caused by the changes made by the Owner as new Sections of the Village are developed, and refurbished properties become available when Residents move on. Each new form of lease appears to insert more onerous terms, definitions and obligations on the new Lessee to the absolute benefit of the Owner.
2. Definitions of terms in the leases such as “cost” and “charge” cause concern as the Owner’s interpretation and understanding is at variance with formal definition, common usage and the Residents’ interpretations of these terms.
3. The information (or lack of information) in the Disclosure Documents relating to substantial common assets (eg: defective swimming pool, bowling green and hot water service) is a problem.
4. Capital Replacement Fund (CRF) contributions are entirely at the discretion of the Owner after discussion with the Residents’ Committee. (This year the contribution was increased by 40% and will increase by 140% in the next four years, by annual increments. This is well in excess of the Statutory CPI adjustments made to the Maintenance Service Fee.)
5. The operation of the CRF versus the Operations/Maintenance Budget and the resultant allocation of EXPENDITURE between the Operations Maintenance Budget and the CRF has long been controversial.
6. Leases are on a “take it or leave it” basis with no opportunity to amend any of their terms or clauses.
7. Customer Service versus “Independent Living”. Unfortunately, the term “Independent Living” has come to mean that “everything is at the Resident’s expense”. There appears to be an administrative fee for every request for which an ageing group of retirees needs assistance. (For example: charges to change a light globe, or to undertake any property repairs to defects undetected on Settlement Day.)
8. Deferred Management Fees (DMF) . Where is the fairness in this charge?
9. Final Fee on leaving property. Why? Especially as the exiting Resident still has to pay the next six months of Service Fees.
10. Refurbishment Costs. Refurbishment goes well beyond “repairs” and becomes “renewal” at a much higher quality than the original to the entire cost of the exiting Resident. Yet the Owner charges a 10% fee, in addition to the Refurbishment costs and takes 3% or 5% (depending on the terms of the lease) as a DMF per annum (for 5 to 10 years, depending on the terms of the lease) on the new purchase price without making any financial contribution, plus a 3% (or 5%) Final Fee. This lacks fairness.
11. Selling costs of our leases. The Owner takes 3.5% (plus GST) of the new price for selling Resident leases, which is in excess of current Real Estate Agency Commission. If the Resident arranges the sale, he pays his own agent, and then a further 1.75% to the Owner for providing documents and liaising with the incoming Resident.
12. Disclosure in the Annual Financial Statements remains an extremely contentious issue with some Residents.
13. Recoupment of shortfall of maintenance fees compared to the expenditure charges against that income source is also contentious.
14. Head Office Fees have grown threefold in the last four years, yet there is no real detail as to what these covered, except to say that they have been audited, and certified by the auditor, but Residents’ enquiries leave them no better informed as to the detail of this large budget item.
C. RECOMMENDATIONS TO THE REVIEW OF THE RETIREMENT VILLAGES LEGISLATION.
- Require all Village owners and Operators to be licensed and their staff to be appropriately trained.
- Appoint a Retirement Village Regulator, (Commissioner or Ombudsman) to supervise all aspects of the legislation and its regulations.
- Introduce standard forms of contracts for each class of Retirement Village in simple language. Such contracts should include a document similar to a Section 32 as related to the current contracts of sale of houses, etc. in Victoria.
- Empower the Regulator (Commissioner or Ombudsman) to examine leases or other contracts related to Retirement Villages and rescind the onerous terms in the leases or contracts which favour the Owner to the exclusion of any consideration moving towards the prospective Resident.
- Delete from leases and contracts any term which gives the Owner the right to exercise SOLE DISCRETION however expressed in the lease or contract.
- Require a fully detailed disclosure of all COSTS, CHARGES AND REVENUE to which the Residents’ funds are applied.
- Impose realistic penalties to deter Owners knowingly providing false and misleading information (Errors of Omission of required information should also be penalised).
8. Embody the best aspects of the Retirement Village Legislation from other Australian States, with the eventual aim of having nation-wide consistency.
SIGNED:
Bruce L. Wilkinson
Kathleen M. Wilkinson
18th December, 2011.