Lianne Dalziel: Address to the Retirement Villages Association
Good afternoon and thank you for inviting me again to speak to you.
This is the third year in a row that I have addressed your annual conference, but the first time as the Associate
Minister of Justice, with responsibility for the Retirement Villages Bill.
When I addressed last year's Conference, the Justice and Electoral Select Committee had just commenced hearing
submissions on the Retirement Villages Bill. As some of you will be aware, the Select Committee has completed its report
on the Bill and submitted it to the House of Representatives.
The Select Committee has done an excellent job of hearing submissions on the Bill and has taken care to ensure it
· addresses essential protections for residents of retirement villages,
· while balancing the interests of residents and what is a diverse industry.
The last time I spoke to you, I outlined the areas I believed would need to be dealt with in the Bill:
· Disclosure of information relevant to occupancy
· harsh and unconscionable provisions
· dispute resolution
· exit payments, and
· ongoing liability for service charges when a resident vacates a village.
The reported back version of the Bill, although fundamentally the same as introduced, deals directly or indirectly with
all of these provisions.
Disclosure
The Bill is designed to ensure that all the critical pieces of information that a prudent person requires to make a
sound decision on whether or not to enter a village, or make a choice between villages, are available in a consistent
and accessible format. It had been the intention to fully provide for the 'disclosure statement' in regulations.
However, it is clear from some of the submissions made to the Select Committee that the emphasis on disclosure was lost
because of the limited reference to the disclosure statement in the Bill itself.
The Select Committee's recommendation that the minimum matters to be included in a disclosure statement will be outlined
as a schedule in the Bill itself, is welcomed.
The areas on which disclosure will be required are: · ownership structure · management structure · legal entity ·
statutory supervision · type of development, services and facilities · entry costs · service charges ·
termination rights, and · exit charges
The Schedule requires that information on each of these matters must be set out comprehensively.
For example, under service charges, villages will have to show: · the level of the service charges, their
frequency, and what service and facility costs they cover · policies applied in adjusting charges and ·
provision for maintenance and repairs
Regulations will still be required to provide a template for the disclosure statement to ensure uniformity and to
minimise jargon and legalese.
Harsh and Unconscionable Terms It is in the nature of the retirement village industry that its ongoing success, and its
continued acceptability to older people as an appealing retirement option, is very dependent on its public image. Bad
publicity affects the industry indiscriminately.
The Law Commission, in the draft Bill attached to their report and in their submission, favoured the inclusion of a
specific provision giving the High Court power to strike down harsh and unconscionable terms in occupation right
agreements. The Bill as introduced did not contain a "harsh and unconscionable" provision, which meant that few
submissions made on the Bill included comment on that particular matter. Both the original and the reported back
versions of the Bill do however contain provisions that should have the effect of eliminating terms of existing
occupation right agreements that are harsh and unconscionable, and preventing new agreements from containing such
provisions.
Dispute Resolution Fair and just complaints and dispute resolution processes are key planks of the Bill. While the two
are linked they are quite distinct processes. An effective complaints process makes a positive contribution to life in
the village and provides an opportunity for dialogue between residents and village managers on matters that need to be
addressed or are not mutually understood.
Where matters cannot be resolved at this level, a dispute resolution process allows matters to be resolved in a
formalised way.
In its report, the Select Committee recommends several changes that are significant. It correctly deals with complaints
as just that - matters to be resolved between a resident or residents and the village management. It is only where
complaints cannot be resolved to the satisfaction of the parties that the matter proceeds to a disputes hearing.
The disputes process itself is more carefully prescribed by the Select Committee in that: · low level concerns are
dealt with at the appropriate level · dispute resolution can be initiated by both residents and operators · the
Retirement Commissioner will establish and maintain a list of approved persons from whom disputes panels can be drawn
instead of the operator approving their suitability · the responsibility for appointing the disputes panel from the
approved list will rest with the operator · the process to be followed in the conduct of the dispute hearing, the
powers of panels and the enforcement of decisions are carefully prescribed, and · a right of appeal to the District or
High Court against a decision of a disputes panel is inserted.
Exit Payments Concerns about the time taken to on-sell units and continuing charges on vacant units were a major
consideration in initiating the Bill.
A survey of a sample of the correspondence received by my office in 2001 on retirement villages showed that 49% had
concerns at the time taken to sell vacant units and continuation of fees following people vacating their units. Some 34%
were concerned at the level of exit charges. Those same concerns again came through the many consumer-oriented
submissions to the Select Committee. I shared these concerns that the Bill did not go far enough to address these
aspects and raised the matter with officials and with the chairperson of the Select Committee.
As a result the matter was opened up for further consultation with the Retirement Village Association and some of the
main interested parties, on the basis of the following proposal: · Units vacant for three months or more would be
subject to monthly advice to the former resident or their family on the steps taken to market the unit and the progress
made · After 6 months the former resident would be able to request the operator to obtain an independent valuation of
the unit to establish the appropriate price at which the unit should be marketed. · If still unsold after 9 months,
the former resident would have the right to have the matter referred to a specially constituted disputes panel chaired
by a retired judge or experienced lawyer. This special panel will be able to determine whether there has been any
failure to meet obligations relating to the sale and have a range of powers including, in extreme cases, a payment to
the former resident of an amount equivalent to a sale.
Provisions giving effect to the first two steps are not in the Bill, however it is my intention that these will be
included in the Code of Practice, which will have legal force under the legislation. Access to the specially constituted
disputes panel will be provided for in the Bill itself. The point to be made is that the process outlined should lead to
the establishment of good practices in the management of exits while at the same time allowing flexibility. Once people
understand from the outset that they are not buying an apartment or a unit they can sell, then I suspect that the
concerns that have been expressed in the past will dissipate.
Service Charges following Exits Liability for service charges following exits is also another problem area where both
the industry and residents would benefit from greater uniformity in practices. It is an issue, which causes considerable
concern to families in particular. It is recognised that charges on vacant units are a matter of being fair both to the
departing resident and to other residents who would otherwise have to carry the costs.
The Schedule outlining the matters to be included in the Industry Code of Practice includes 'requirements relating to
payments due when an occupation right agreement is terminated and the manner in which those amounts are calculated'.
Code of Residents' Rights It is acknowledged that life in a village is as much about relationships as it is about bricks
and mortar, services and facilities. The Code of Residents' Rights has been designed to provide the basis for a positive
relationship between residents and village management and owners. The Select Committee has sought to change the status
of, and simplify the Code and align it more closely to the provisions of the Bill as they apply to occupation right
agreements. It has also extended it to recognise the reciprocal rights and obligations of operators and their staff.
Statutory Supervisors The quid pro quo for the plain language disclosure of the details people need to know before
buying into a village is relief from having to prepare a prospectus. This does not relieve intending residents of the
need to apply diligence in ensuring that their selection of a village provides investment security. Within the Bill the
role of statutory supervisors has been retained but will be more focused on the financial viability and management of
villages. With the complaints and dispute resolution process villages will have introduced to conform to the Bill, their
involvement in disputes should be minimised. There has been concern expressed that the Bill is silent on notification to
the statutory supervisor of disputes that could in fact have an impact on the financial operation of the village, and I
have undertaken to look at that.
Following submissions from a number of villages, many of them small not-for-profit organisations, the Select Committee
accepted that some villages have little need for the protections that a statutory supervisor has to offer and to require
them to appoint such a position would involve their residents in considerable expense. As a consequence, it recommended
that in very carefully defined circumstances villages may be exempted from the need to have a statutory supervisor.
Approvals of statutory supervisors will transfer from the Securities Commission to the Companies Office. However
Statutory Supervisors approved under the Securities Act will be able to be appointed as statutory supervisors of
retirement villages under the Bill.
Code of Practice Once the Bill is passed, and it has a Category 2 Status 'Must be passed in 2003', our next area of work
is the Code of Practice. As many of those with interests in these matters have said:- the devil is in the detail. And
look forward to either watching with interest those developments, or being directly involved as the case may be.
I am confident however that with the goodwill that I have seen displayed on both sides of the issues as well as all the
work the RVA has done leading up to this that we will see the Code developed in a timely and satisfactory manner.
Conclusion In conclusion, my attendance at the Retirement Villages Association Annual Conference presents an opportunity
to thank the Association for the positive way you have responded to the preparation of the Retirement Villages Bill and
its progress through the Select Committee process.
Special thanks are due to the President, Helen Melrose, and Past President, Cliff Cook, who have made themselves
available, often at short notice, for advice and consultation.
When I first came to see you, I said that this would always be about balancing the sometimes, but not always, competing
interests of the residents and the retirement villages. I think that balance is now pretty right, and I look forward to
answering any questions you may have.