Retirement village operators face mandatory code of conduct due to Victorian crackdown

The Victorian government will become the first state to force retirement village operators to comply with a mandatory code of conduct, which also includes greater transparency about how fees are calculated, as part of a crackdown on the industry.

The overhaul follows ABC’s investigation into the industry, which revealed some operators are gouging residents by charging exit fees of up to 60 per cent of the home purchase price, plus renovation costs when the villa is sold.

Some draft penal agreements that include clauses such as mandatory medical exams, a ban on pets without permission, and mandatory renewals when a resident leaves or dies.

There is now a voluntary code of conduct established in 2020 by the powerful Property Council’s Retirement Living Council, but less than half of the multi-billion dollar industry has signed up to it and the ABC’s investigation found it has not been ratified. It has been the sole operator for the four years it has been in effect.

State Consumer Affairs Minister Gabrielle Williams said the package of changes would ensure village residents had “some of the strongest protections in the country”.

Legislation to re-regulate the sector was introduced to parliament on Wednesday, and the government plans to develop the new law separately next year.

Ms. Williams’s bill aims to standardize contracts and provide residents with more information before entering the village, but falls short of capping exit fees, which have resulted in ABC charging village residents hundreds of thousands of dollars in some cases. the sale of their homes when they left the village.

The bill is the result of a parliamentary inquiry held in 2016, followed by a consultation process that lasted several years.

It’s part of a series of bills the Victorian government will bring to parliament this week, the last sitting week of the year.

Ms Williams said this represented the most comprehensive reform of the law governing retirement villages “since it was introduced in the 80s”.

He said the proposed legislation “also goes hand in hand with the new dispute resolution processes that form part of this bill, as part of the codes of practice require retirement village operators to participate in those dispute resolution processes in good faith”.

“We know that this is an industry that is causing some concern for many retirement village residents in our state for a number of different reasons, many of which are addressed in the bill that has just entered parliament.”

Fiona York, chief executive of the Aged People’s Housing Group (HAAG), which helps many pensioners struggling with retirement village operators, welcomed the standardized contracts and said vague and confusing documentation “makes it difficult for people to compare villages or understand their true costs” and said a mandatory code would send a strong message to the industry He said he would send it.

“Due to a lack of adequate consumer protection and regulation, we have seen shocking mistreatment of our customers in retirement villages by unscrupulous operators,” he said.

“Mandatory codes of conduct have the potential to provide stronger consumer protection and a better experience for residents.”

But he said HAAG was concerned the bill would allow some of the worst practices in the industry to continue.

“It doesn’t go far enough in regulating exit fees, which could encourage villages to ‘lose’ or evict residents for more profit, trapping unhappy residents in villages that no longer suit them,” he said.

“The worst operators we have seen use threats of eviction to harass residents in order to manipulate exit payments and make windfall profits.”

Retirement Living Council chief executive Daniel Gannon said the industry had “long called and supported” villages to buy back units within 12 months of residents leaving.

“Many of the changes proposed in Victoria appear logical and reasonable, particularly as they relate to the provision of more information to potential residents and higher standards,” he said.

“This is the same sentiment that has driven recent consumer-led reforms in both WA and SA, while ensuring a sensible balance for operators.

“We have made clear from the beginning that the industry is motivated by the desire to increase consumer and investor confidence, raise industry standards and pursue better regulation.

“When we achieve these goals, the real winners are the residents and potential residents.

“Given historical criticism about the complexity of the contract, we have worked with state governments across the country to bring greater transparency, clarity and certainty to this part of the process, including Victoria.”

The new Victorian bill does not cap exit fees, also known as deferred management fees. ABC’s research found that these fees can be calculated based on complex algebraic formulas that are sometimes confusing and difficult to understand.

“What we have done is to outline the method by which deferred management fees should be calculated,” Ms Williams said.

“Deferred management fees were one of the areas where residents told us they often caught them by surprise as they moved through the various different stages of their time at the retirement village, including exit.

“So this is a very important reform to make sure there is clarity and consistency in how they are calculated.”

The new laws will also force villages to pay former residents any amounts they owe them within a year of leaving the village, which Ms. Williams said would “prevent this kind of protracted, protracted, drawn-out process of residents trying to gain access.” to the funds to which they are entitled”.

State and territory consumer affairs ministers are set to discuss the sector at a meeting next month after Federal Financial Services Minister Stephen Jones confirmed it will be on the agenda.

Ms Williams said the Victorian reform package had “also brought us to a point where we have some of the strongest protections in the country” and she would “demonstrate” these at the meeting.

Asked why the law reform process was taking so long, he said the changes were “too comprehensive”.

“We were very keen to consult on these changes to ensure we struck a balance between delivering positive outcomes for retirement village residents while also looking after the viability of the sector going forward,” he said.

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