Retirement villages are becoming places of protest and agitation as residents object to confusing contracts, high management fees and exit costs, reports Geoff Strong.
Retirement villages are becoming places of protest and agitation as residents object to confusing contracts, high management fees and exit costs, reports Geoff Strong. RARELY does a contract explicitly point out that the fine print could trap the unwary. But many of the contracts signed by thousands of elderly residents living in some of Australia's private retirement villages do exactly that.Such contracts contain a clause in legal language stating that any promises made by sales staff or even company brochures to convince someone to buy into a village are worthless unless the promises are specifically set out in the signed contract.Within documents comprising up to 200 pages of dense legalese, is buried the following clause: "This deed constitutes the entire agreement of the parties about the subject matter of this deed and any previous agreements, understandings and negotiations on that subject matter cease to have any effect on the execution of this deed."Howard Campey, 74, who has such a clause in the contract for his unit, believes it is a legal escape clause so operators can deceive potential residents.Says Campey: "The clause might be worded slightly differently by different operators, but basically it says 'please excuse us if we misrepresent this village to trap you by anything our sales and marketing staff said to you, but by signing this none of their promises are binding'. It is an admission that some operators don't really care that they hoodwink gullible elderly people."Campey lives at Burnside Village in Melbourne's west. The village was originally developed by a company called Australian Retirement Communities, which prepared the contract.ARC has since been taken over by Stockland, one of the country's biggest operators of retirement villages. Brett Zarb, a spokesman for Stockland, says the company is encouraging residents who had signed up with previous owners to re-sign with Stockland contracts. Zarb says while Stockland contracts don't include clauses with this wording, they do include clauses that mean the same thing."They are fairly standard in the industry. We call them boiler-plate clauses. We advise all of our purchasers to seek independent legal advice and have their lease contract thoroughly looked over," says Zarb.For decades retirement villages have been a good investment for developers. Elderly residents with a lifetime's assets were a fairly placid audience paying a handsome percentage of their retirement property's value when they died or moved. Some paid up to 40 per cent of the resale price in what are called deferred management fees.But some residents, sensing injustice, have begun fighting back, campaigning against what they see as excessive charges. Residents of one retirement village in New South Wales facing an expensive legal battle took their case to the media, including Facebook and Twitter, to force village management to cave in.Despite the country's ageing population, sales are stagnating: there are 8500 villages in Australia with 160,000 residents, a figure that has been static for about five years.Realising it is not just retirees, but also their extended families, that are being dragged into these disputes, the state government when it was in opposition declared it would review contract information and disclosure for retirement villages.Last October, the Ministry of Consumer Affairs called for submissions and, on February 22, it held its first meeting with "stakeholders".It received 64 submissions from industry and residents' groups, of which 40 came from one retirement village Applewood in Doncaster. It is one of Australia's most expensive with unit leases costing up to $900,000.Although the Consumer Affairs Department told the Applewood complainants that they were stakeholders, none were invited to or informed about the meeting. They learnt of it after it had taken place.Applewood residents' spokesman John Plunkett says no explanation was given by the department. A former manager for a national chemical company and former chairman of a federal government board, Plunkett, 78, says the residents of Applewood feel trapped because of the high costs they face if they want to move out or if they must enter a nursing home.He says residents are particularly unhappy about what they feel are high costs, especially for unit refurbishment, which they are advised to do upon selling their lease. He says one resident paid a refurbishment bill of $63,000, which was never recouped by a higher selling price."They can take up to six months to do this refurbishing and it is in their interest to take that long, because they want to sell their new units, not the refurbished ones. There is a saying that this industry is based on the business model of, 'milk 'em dry before they die'," says Plunkett.The village is owned by wealthy former medical doctor David Thurin, who is related by marriage to the Gandel family, which owns Chadstone Shopping Centre. While he was not available for comment, in a prepared statement his company dismissed residents' claims, saying that deferred fees allowed residents access to facilities without having to pay for them up front.The company also says all residents agree to costs explained in their leases and that service fees are capped at the consumer price index. It also denies residents are forced to pay for refurbishments, and that refurbishments are done as quickly as possible to speed the sale of a unit.Applewood residents' complaints have been raised in State Parliament. On February 28, shadow consumer affairs minister Lily D'Ambrosio claimed Consumer Affairs Minister Michael O'Brien had failed to fully investigate complaints about Applewood.In response, O'Brien said the government was serious about improving the law to ensure people understood what they were getting into. "There is no point giving people a Yellow Pages worth of legal contracts and asking them to sign." He said one of the best ways for the government to help people entering retirement villages was to ensure they understood the contracts they were signing and that was the purpose of the Consumer Affairs review.The Age has repeatedly sought an interview with O'Brien on retirement home complaints, but has been refused.D'Ambrosio says that unless residents' concerns were addressed, confidence in the retirement village industry would be undermined.But Campey believes this has already happened. The former president of the pressure group Residents of Retirement Villages Victoria says the industry has only itself to blame for the comparatively low number of Australian retirees choosing to live in such villages just 5 per cent of the target age group compared with 15 per cent in the US.Applewood residents are not alone in feeling trapped by the cost of leaving a village. Most villages are set up to sell their units under what is known as a loan licence.This allows developers to charge occupants for virtually all the maintenance and management costs, but still to claim the right to direct work on communal property while usually imposing the costs on the residents.If residents signed a contract before the previous government changed the law in 2006, many developers had a clause that allowed them to withhold the money from any sale for up to eight years, including the interest earned from it over that period.The practice was banned, but the changes were not retrospective. Thousands of Victorians remain bound by these contracts and if they want the proceeds when their unit is sold the estimated interest will be deducted in advance.INTERSTATE, residents have had a couple of significant wins, most notably on the mid north coast of New South Wales. Residents there took on Stockland, which had acquired the company that developed their village.The residents had already accused the previous owner, Aevum, of double dipping by including costs associated with running the company's head office into the ongoing fees to run their village, Queen's Lake at Laurieton. When Stockland took over Aevum in November 2010, they inherited angry residents who were preparing an action in the NSW equivalent of VCAT.The residents had rejected the budget presented to them in 2010 by Aevum, which had included insurance costs for the head office. One of the protest leaders, John Cooper, a 74-year-old retired small business manager, says when they queried the costs, they were told it was none of their business.He says they subsequently discovered the insurance included coverage for loss of profits and the head office artworks collection. They took Aevum to the Consumer Trader and Tenancy Tribunal and won. Cooper says after Stockland's takeover, he believed the former Aevum management encouraged them to take the case to the District Court."Stockland told us they were going to pursue us for costs including for the tribunal, so we launched a media campaign highlighting what the company was doing to us in newspapers, Facebook and Twitter."They got such a bad reaction from the public they then offered to pay our legal fees up to $50,000. In the end we didn't need it because the judge also ruled in our favour. It was a classic David and Goliath battle and it sets a legal precedent."Stockland's Zarb says the company had, "put the matter behind it and now has good relations with residents of the village".Eric Ash, who lived for 4? years in Peregian Springs Country Club village south of Noosa in Queensland, had a similar fight with the developer Aveo. The 77-year-old former quantity surveyor wanted to know what mechanism the company used to distribute off-site and administration costs to its retirement villages."When I started raising these issues village management warned the other residents not to complain because any adverse publicity harmed the industry and therefore hurt them because it damaged the value of their investment," Ash says.Campey says these cases demonstrate that elderly people are no longer prepared to roll over when they feel they are being treated unfairly. "This is despite retirement being a time when they should expect to put their feet up," he says."If the industry thinks it is being hard done by, just wait until the baby boomers start arriving in these places. They are a generation used to getting their own way and they know how to protest."