I feel the recent Choice report on retirement villages was unfair as it seemed to imply that all providers are tarred with the shonky brush and did not give recognition to the good providers in the industry.
My wife and I moved into a retirement village on Sydney’s northern beaches one year ago and have zero regrets about our move. We were fully informed about all financial matters before we signed the contract and, given that a considerable amount of our money was involved, sought independent legal and financial advice. The bottom line for us was that the entry cost, exit fees and recurrent fees were a reasonable price to pay for the home and services provided.
It seems to me that many of the complaints being aired about retirement villages are the result of a lack of due diligence by people before committing to a major life expense. As well, it must be recognised that most retirement villages are businesses whose owners are entitled to a return on their investment. There are not-for-profit villages but, not only are they insufficient in numbers to meet demand, many of them are as expensive or more expensive than private operators in terms of entry and exit costs and fees.
This is not to say that there are no shonky operators and I believe there should be appropriate registration and enforcement by Government to prevent unfair practices. I can only hope that the Choice report, while not entirely fair to the industry, will encourage Governments to have a close look at setting up and properly managing policy and procedures to ensure that retirement villages do not operate unfairly.
CHOICE have used many sources for their article, if discussing the newest one. Research and legislative changes have backed up the CHOICE claims. Your research and due diligence for your circumstances has provided you with a different perspective, it appears yours is not the norm for many.
I am happy you have found a good outcome for you, that is importantly an individual or joint experience for you and your partner. It seems from the article you may be in a minority when it comes to happy exit outcomes. Further, as pointed out by @syncretic, you have not yet exited and this may end up a different experience at that point.
I will only be paying exit fees specified in the contract. I’m assuming providers are not so stupid as to take monies beyond what is in the contract. I won’t be complaining about financial arrangements to which I agreed when taking up residence in the village.
I doubt that Choice found any who paid more than the fees specified in their contract, it is unlikely outright fraud was observed and not reported.
I very much hope that if you leave you have no reason to complain.
At signing time nobody thinks they will be complaining later or they wouldn’t sign. The question we are considering is why do so many sign but end up complaining anyway.
“He and his wife will also have to come up with the money to return the villa to its original condition, “throwing out window shutters, ceiling fans, even lifting floor tiles and restoring carpeted floors,” Frank says.
If this was somewhere in his contract, Frank must have missed it.”
Perhaps a missed item, a not well understood item, or just an imposed requirement not in the contract. I am sure many who sign up for these residences, take their contracts through legal advice before they sign. It is after all quite a large financial investment that requires careful consideration.
Usually, the requirement to restore the property to original condition only applies if the resident shares in the capital gain when the property is sold on rather than paying a deferred or exit fee. Otherwise , the exit fee covers refurbishment costs. I can see a problem if the resident did not obtain approval for improvements they made to the property or if the capital gain was insufficient to cover refurbishment costs.
I think one of the issues here is that some residents don’t understand or choose not to understand the difference between owning a property and the arrangements applying to retirement villages. I guess I was lucky in that all the issues were clearly and comprehensively explained to me by the village management and I also sought professional legal and financial advice before signing the contract.
Unfortunately, shonky operators will always be with us and, as I mentioned in an earlier post, there is a need for governments to take action to protect residents. This does seem to be happening, if somewhat slowly in some jurisdictions.
I still believe that the majority of retirement village operators are doing the right thing and would have liked to see Choice recognise this in the October 24 article.
After 13 years living in a retirement village, I feel that we have been conned. In SA, the Residents Committees were meant to look out for the interests of residents. This has not eventuated. Many committee members act as if they are employees of the operator.
Choice is not isolated in their position. If you look at the ABC you will find more than a dozen recent articles on retirement villages - none of them complementary, some scathing. Other media have run similar stories, search whichever you subscribe to and see for yourself.
You have told us all is well in your case. That view relies in part on your assessment that you understand the contract fully and will have no problems should you want to leave. I cannot say anything about your ability as I don’t know you but I observe many others have not been so fortunate.
Other than your own experience, what information do you have that the majority of operators are doing the right thing?
The business model of retirement villages relies in part on the occupant unlocking and sharing the value of the family home to buy in. Over time the operator in addition to the fees and charges for delivering various agreed services and benefits intends to also recover a portion of the original capital investment for the whole of the retirement facility (village). This investment includes all the services, roads, buildings, fencing, landscaping etc. One proposition is the first owners combined buy in repays all capital in full including financing costs. How many developments might pass that assessment? It’s unlikely any buying in could afford the full cost. Also to consider the prospect would an investor risk up front the tens of millions to make a small percentage return on the annual fees?
The most common business model also requires those coming to a village to agree to share at resale the capital gains of a portion of the investment attributed to their occupancy and use. But only after all contractually agreed deductions. There is often debate on the need or true cost of some. The return as a percentage of the original outlay is set by the Village Owner/Operator in the contract. It may not be self evident - some can walk away with less than the initial buy in price and others less than if they were still an owner occupier of a freehold titled property. The challenge for those seeking to move to another village is the buy in price for another/new village. The cost of buying in is always greater as it which will follow the market - property price escalation. The discounting of the selling price and refurbishment costs imposed by the village one is seeking to leave can only leave one behind rather than up with the latest market movements.
To compare the cost of owning freehold in a location with convenience of access to community facilities. Retirement villages are often located to appeal to lifestyle choices - rather than convenience to shopping, medical and community facilities. They are typically self contained ecosystems - one reliant on remaining a motorist or falling back to shared transport. To choose carefully if it matters. Prime locations may be too expensive for many.
Our challenge is the suggestion of living in a community of similar aged adults does not necessarily equate to shared values or interests. One can only repeatedly share ones complaints about the same things in life before it becomes rather uninteresting. Evident over recent years by example of those in the extended family so committed to village life.
That is only one type of payment model used. There are a range of different payment models as recognised by the ACCC:
Victoria Consumer Affairs also touches on different models as well:
I agree with @Bigwave that it is likely the majority of retirement village operators are possibly doing the right thing. There are many retirement village residents who are happy with the arrangements they have and the payment model used for their own villages. It could be that they were fully informed when the decision was made to move to a retirement village and accept what was offered.
Retirement village payment models can be complex and very different to other forms of residential dwellings, such as owning a home on land one owns. The ACCC provides some advice to those who are considering making the move to a retirement village. As retirement village payment models can be different to those one may be otherwise familiar with, obtaining independent advice is important to fully understand the retirement village contract, its payment model, fees, charges and restrictions.
According to the PwC Property Council Retirement Census 2023, the Nett Promoter Score (NPS) was 44 which is considered a high score and indicates that residents are generally happy.
My understanding is that there are more than 2,000 retirement villages in Australia with around 200,000 residents. The critical articles to which you refer probably only cited less than 5% of villages (100) and a tiny fraction of 1% of residents (substantially less than 2000). Any level of wrongdoing is definitely not acceptable but these figures indicate that only a minority of providers are doing the wrong thing and, therefore, that the majority are doing the right thing.
Yes, there is more than one option, noting the Vic CA advises.
The most common types of contracts for retirement villages are long-term lease or licence and strata title.
The first of these is what we have knowledge off through the extended family. To suggest it is the most common form. The second a lease/licence has similar financial commitments (varying according to individual contract).
Long-term lease or licence You pay an ingoing contribution and in return, receive a lease or license to live in a particular retirement village unit for a period ranging from 49 to 199 years. You will also have to pay a recurrent maintenance charge, usually on a monthly or quarterly basis. In some retirement villages, this charge is a fixed percentage of the age pension. Depending on the terms of your contract, you may also have to pay the operator:
a share of any capital gains
departure or exit fees
other charges deducted from your exit entitlement.
There are multiple facets of satisfaction. One being that the operator has put everything in writing and been up front about the line item costs and adheres to it. Another is that those line items have an aura of fairness in interpretation if not explicitly laid out.
From news articles over the years one of the repeated issues is that ‘remediation’ on exit is usually part of the agreement. Many go in eyes open but in reality closed expecting a deep clean, a coat of paint, and similar will be required. On exiting the operator demands the resident make it equal to a new never occupied just built standard to make it easier to attract the next resident. The reality hits they face a new A/C and appliances, paint, upgraded or replaced counter tops, new floor coverings, new door knobs, curtains or blinds, and struggling gardens cared for. All deducted from the proceeds at exit time.
Does this or has this happened regularly? A dated topic has some links to contemporary issues of those times not that long ago.
The information is supplied by the owners not the residents.
It is organised by the industry group, they further the aims of the industry not the residents.
It is not a full census, if there are 2000 villages only ~40% replied. Being voluntary also allows it to be a biased sample.
If those vested interests produced a report that was critical of village governance it would be extraordinary, if such a report was ever published it would be a miracle.
At present I cannot find a comprehensive and unbiased survey of retirement village governance. If anyone knows of such a thing please speak up. All we have are anecdotes. So the issue is to some degree an open question. But without any indication at all that there may be problems nobody will ever commit the resources to doing a proper study.
It is reports by organisations like Choice and the ABC that alert us to the possibility of consumer problems and lead to further investigation.
