Retirement Villages legislation – a government viewSenior Citizens
Good afternoon, and thank you for the opportunity to once again address your national conference.
In preparation for today’s address I went back over the address I gave last year. I informed you that I had been given the task of developing and introducing stand-alone retirement villages’ legislation. That Bill was introduced just before Christmas, but had to await a first reading in the New Year, before it could be referred to the Justice & Electoral Select Committee.
I did attempt to gain the agreement of the Parties to refer it directly to the Select Committee before Christmas so the Committee could have more time for the submissions, consideration and deliberation. Unfortunately, Retirement Village residents don’t have quite the same public profile as ‘boy racers’, and the National Party whip indicated on behalf of his caucus that leave would be denied.
However, despite this avoidable delay, I am pleased that the Bill is progressing well, and I understand that your Association’s submission is being heard tomorrow (Wednesday, 22 May).
I wish to make the same point to your Association that I have made to Grey Power, and that is that the select committee process is a meaningful one.
I have made it clear to the Select Committee chair, Tim Barnett, that the government is interested in a comprehensive report-back, which identifies all the key concerns raised by submitters, so that we can consider whether changes are necessary.
Although my role is somewhat removed from the process at this stage, many individuals and groups have written to me with concerns about the Bill. And I am also aware of the submissions that have been heard already, including the detailed submission of the Law Commission, which after-all provided the impetus for stand-alone legislation.
This suggests to me that we may have to deal more effectively in the Bill with:
·harsh and unconscionable provisions
·exit payments and
·ongoing liability for service charges
It is important to return to the purpose of the legislation, and to ask whether that purpose has been achieved. The overarching purpose is to protect the interests of residents and intending residents of retirement villages, as well as allow the continued development of further villages within a readily understandable legal framework for residents and developers alike. I have always preferred to see this Bill as one of seeking balance between competing but not necessarily opposing interests.
To achieve this overarching purpose, the Bill has been designed to:
·Promote understanding of the financial and occupancy interests of retirement village residents;
·Provide an industry focused regulatory and monitoring regime in which compliance costs are minimised;
·Provide a degree of external oversight on conditions of entry and ongoing operations;
·Introduce a range of requirements and procedures necessary to give effect to the regulatory and monitoring regime;
·Encourage an environment of security and rights protection for retirement village residents; and
·Include within the Retirement Commissioner’s role and functions, monitoring and reporting to the responsible Minister on the effects of the retirement village’s legislation.
In addition to these technical points, there were a number of principles that we took to the drafting process:
·the focus is on consumer protection;
·however, within that focus is the flexibility that allows the present range and variety of villages to flourish;
·risks do not diminish with village size and all village residents need legislative protection regardless of size or legal status of their village;
·primacy of contract should be balanced and supported through adequate disclosure of all terms and conditions;
·resident participation in decision-making, coupled with quality management practices within villages, enhance village life and add value to the village through goodwill.
I was pleased in the consultation process that we appeared to have relative consensus between the RVA and the consumer groups, and I do want to acknowledge the Association for your contribution to this process.
However, the balance appears to have shifted, which I guess is not surprising when people have the opportunity to study an actual Bill in detail. It is clearly the opinion of some submitters, and that includes the Law Commission itself, that the balance is weighted towards industry.
Naturally I cannot predict what changes will be proposed, but I thought it would be worthwhile to traverse the key issues that have been raised so far, and also those issues that have been raised with me.
I am disappointed to report that the rate of correspondence has not reduced in the wake of the legislation, and more disappointed to learn of the fear that some residents still experience that they will be ‘turfed out’ if they are seen to ‘rock the boat’. Retirement Village operators who treat their residents in such a manner ought to be ashamed, but the fact that some do, provides a salutary reminder of why we need comprehensive legislation.
Disclosure is designed to ensure that people know exactly what they are letting themselves in for, both in terms of their financial investment and living in the village. Although the Bill allows for the disclosure statement to be provided by regulation, there has been almost universal opposition to this approach. There has been a call for an explicit framework for the disclosure statement, if not the disclosure statement itself, to be included in the Act. I believe there would be an advantage in this approach. Detail could still be left to regulation, which would make ongoing review and amendment a much simpler process than amending the Act, however, there would be a degree of comfort to those who don’t feel able to sign up to something they cannot see.
We have already made it clear that we anticipate the Disclosure Statement to include:
·The ownership and management structure of the village and the ownership structure of the units within the village.
·The village development, numbers of units, services currently provided and to be provided and other developments that would impact on residents’ use and enjoyment of their unit and the village facilities.
·Full information on entry costs, periodic charges and fees, what they represent, and on what basis they might be adjusted.
·Availability to residents of information, including relevant financial information, and how this is to be provided.
·Details of what happens on departure and sale of a unit.
·The rights of owner and resident in respect of any changes to the terms and conditions of occupancy.
It may be preferable to have these spelt out in the legislation, so that there is clarity about the content of the Disclosure Statement in advance of its development, which would enable the detail to be measured against specified criteria.
Harsh and Unconscionable Provisions
The Law Commission Report recommended the inclusion of a High Court power to strike down ‘harsh and unconscionable provisions’. In their submission to the Select Committee, they have recommended that this be included in this Bill.
I referred to this in my address last year, when I spoke of the principle of sanctity of contract when there was no level playing field. I stated that I did not believe that the playing field is levelled by the mere act of disclosure.
I had felt that the Disclosure Statement coupled with the ‘cooling off’ period would suffice, however, perhaps it should still be open for the court to intervene to prevent harsh and unconscionable provisions or actions to prevail.
Good disputes resolution is not simply about having a process; it is about:
·access to a fair and just hearing;
·which is clear and unquestionable in its resolution;
·is capable of dealing appropriately with both small and large issues; and
·encourages complaints and disputes to be addressed as quickly and as simply as possible.
This is one aspect of the Bill that I believe called for some detail and prescription. The benchmark we have used is the Residential Tenancies Act. However, there are those who feel it is too prescriptive, others feel that there is too much industry control over the appointments.
As an observation, based on the extensive correspondence to my office, I believe that a good complaints process linked to a sound disputes resolution process is absolutely critical to the success of the legislation.
Exit payments and ongoing liability for service charges
Although the issue of exit payments and ongoing liability for service charges is intended to be dealt with in the Industry Code of Practice, you do need to know that these issues present as complaints to my office more than all other issues combined.
I gave serious consideration to imposing statutory boundaries around these charges, however I was not persuaded that it would meet the balance test that I have tried to apply throughout. Now I am not so sure.
I believe we need to do some further thinking around this.
In saying that I acknowledge that a significant number of retirement village residents choose this option, because it enables them to maximise their resources during their lifetime, leaving a significant part of the costs to be borne by their estate. I also know that limiting service charges after leaving the village, could lead to a transfer of costs to remaining village residents, which could disadvantage, in particular, people living in small villages.
It could also pose problems between existing residents and those entering into new occupational agreements.
However, I am also mindful of the fact that given the fact that retirement village residents have not actually bought property, which they themselves can sell, then it may be that they require more protection than the Code may give. Again, I am sensing a reluctance to sign up to provisions that are not yet written.
Ongoing service charges are also an issue. Given that depreciation is deducted for deferred service charges, then perhaps the ongoing service charges should be limited to a proportion of those paid during occupancy, and be time limited.
What people are writing to me about all the time is what possible chance do they have in seeing their unit re-occupied, when there are brand new units to be occupied first. They complain there is simply no incentive to sell when they or their estate continues to pay.
As I said, my intention in raising these issues with you is to highlight what appear to be the key concerns. It may not be exhaustive, as all the submissions have not yet been heard. I wish to reassure you that no decisions have been made to change the content of the Bill as introduced, and any significant changes will have to go back through Cabinet.
However, I thought it would be worthwhile to signal to you those areas where my correspondence and the submissions have raised concerns thus far. I have also asked the chair of the Select Committee to consider bringing back the key representatives of industry and residents before reporting the Bill back, to ensure that the widest possible input is achieved.
Code of Practice
Finally, the Bill itself once enacted is not the end of the process. I guess it would best be described as a milestone event. Beyond the Bill, I will be relying on the Association to play an active role in establishing the Industry Code of Practice.
The Bill identifies Staffing, Safety and Personal Security, Fire Protection and Emergency Management, Transfers of Residents, Meetings of Residents, Financial Reporting to Residents, Maintenance, Termination of Occupational Rights and Communication with People for whom English is a Second Language, as issues to be addressed in the Code.
I know you recognise the value and importance of your industry taking ownership of this process in developing the Code. My challenge to you is to commit to the standards of excellence that already exist across many villages.
I am sure you will recall my comments last year about the “cowboy operators” who I believe have been the cause of many complaints to my office, and who continue to undermine the good standard set by most Association members. The Code will enable us to ‘rope-in the cowboys’, which will be as good for your reputation as an industry, as it will be for the residents.
I am confident that your Association will consider these matters carefully, and identify fair and workable solutions. I am certain that is what the responsible Minister will be looking for when the Industry Code of Practice is referred for ratification.
In conclusion, I would like to thank the Association again for its cooperation, especially during the consultation phase of preparing the Retirement Villages Bill, and for your willingness to have positive input. I look forward to engaging with you further as we move this legislation forward. Thank you for inviting me to address you, and I would be happy to respond to any questions.