Retirement village legislation is at risk of becoming outdated and unfit for purpose, requiring urgent review to eliminate unfair terms in contracts and better protect the rights of consumers.
The CFFC has released a report and recommendations following public consultation on a discussion paper studying the effects of the complex legal framework governing the retirement village sector.
We received nearly 3300 submissions. While most were from individuals and the Retirement Village Residents’ Association, others came from operators and other stakeholders including lawyers, supervisors, and consumer advocates.
“Retirement villages provide an attractive option for some older New Zealanders and they are well-marketed. However, in the 20 years since the legislative framework was established there has been no review to assess whether the balance of power between operator and consumer is appropriate,” said Wrightson. “We found competing tensions that are unresolved, and recommend a full review of the framework be carried out as a matter of urgency.”
Submissions backed up concerns expressed in the CFFC’s paper regarding the resale process, weekly fees charged after a resident vacates a unit, flaws in an overly complicated complaints system, confusing documentation, and the tricky interface between village and care facilities.
“These issues are important because it is difficult to leave a village once contracts are signed. Residents are neither owners nor tenants and their consumer protections are limited,” said Wrightson. “It is therefore important that fit-for-purpose legislative protections are in place.”
Almost all individual submitters, the residents’ association and a large majority of other stakeholders, including the New Zealand Law Society, supported a full review of the regulatory framework.
Operators and the Retirement Villages Association (RVA) did not support a regulatory review but agreed some areas may need improvement. These related to improving disclosure for entering a village, and for transferring to care. There was general agreement that the resale process should be reviewed to ensure better disclosure, but no consensus on legislating specific changes. Some operators agreed that the ongoing payment of weekly fees after a resident exits a village needed to be looked at, with a view to setting limits. There was also consensus that more needed to be done to clarify responsibility for repairs and maintenance of chattels in individual village units.
“However, the wide-ranging concerns expressed in the individual submissions, and those of other stakeholders, suggest that focussing only on these limited areas is not sufficient to ensure a fair and balanced regulatory environment,” said Wrightson.
The RVA recently offered to look at improvements in a few areas in a “blueprint” created in response to the CFFC review. Although the CFFC welcomed and encouraged the best practice approaches suggested in the blueprint, these measures should be considered an interim step.
“We do not believe they are sufficient in scope or impact to circumvent the need for a full review. The retirement village sector is growing and if the Government does not review the regulatory framework now, New Zealand runs the risk of ending up with a weak framework that does not properly protect older consumers and their families.”
The CFFC has offered to assist in drawing up the Terms of Reference for the review, and support the Ministry of Housing and Urban Development in undertaking it.
In the meantime, Wrightson said there were some areas where work could be carried out by the CFFC and the retirement village sector to ensure better outcomes in the short-term while a review took place. These “interim recommendations” included a review of contracts to identify and remove unfair terms, the appointment of an RVA Disciplinary Authority to deal with serious complaints about operator behaviour, and the supply of data to the CFFC regarding resale times and the processes villages follow in terminating financial charges after exit. This would provide insights into which operators were following best practice, and where there were issues that may require further investigation.
“Through its monitoring and oversight function, the CFFC has raised many of the issues covered in the discussion paper in previous years. Change has been slow and the submissions we received confirmation that many important issues remain unresolved and problematic,” said Wrightson.
“A piecemeal approach to change is insufficient. The industry has grown in scope and complexity since the framework was drawn up, yet is still a young industry. In the interests of both consumers and operators, it’s time the balance was reset.”