The retirement village fiasco that blew up last June has been addressed by two of the three major operators, with the introduction of greater contractual flexibility.
In July, Australian Competition and Consumer Commission (ACCC) chairman Rod Sims said he believed there were grounds to investigate contracts issued by Aveo in a regime it calls the ‘Aveo Way’, to see if they were ‘unfair’.
During last year’s joint Fairfax/Four Corners reporting of alleged unconscionable conduct by Aveo, revelations surfaced about residents who said they had been ‘gouged’ by exit fees – otherwise known as deferred management fees – when they left the villages.
Those exit fees can be up to 35 per cent of the value of an Aveo property when it sells.
In response to the fallout, Stockland and Lendlease, which between them own 136 retirement villages, have introduced a variety of new contracts, some of them without exit fees.
However, Aveo, which is the only operator the ACCC has named as being under investigation, continues to use contracts with exit fees under a regime it has labelled as ‘The Aveo Way’. The contracts offer leaseholds rather than freeholds, which means the residents are tenants rather than owners of the units they occupy.
The only way to avoid paying the fee if you live in an Aveo village is to leave within six months of signing on. This cooling-off period is also offered by Stockland.
At the time of writing, Lendlease had not responded to questions about the nature of its retirement village contracts.
When Aveo was asked if it intended offering exit-fee free contracts like its competitors, a spokesman told YourLifeChoices: “Aveo continues to refine its Aveo Way contract regime in consultation with its residents and welcomes the introduction of new retirement funding models by others in the market to ensure Australians can enjoy the retirements they want to live.”
Aveo Chief Executive Geoff Grady told YourLifeChoices that his company had refined its contract since the spotlight was shone on some of its villages.
“We have reduced the number of pages from a previous 50 or 55 pages to 29,” Mr Grady said.
He explained that Aveo village residents had been surveyed about what they would like to see in a new contract.
“Our new contracts reflect what consumers wanted … what residents had told us they wanted to see in the document,” Mr Grady said.
Asked if residents had pointed out that they would like adjustments made to exit fees, he said the survey had asked people to nominate what should be included rather than excluded from contracts.
In an earlier statement to YourLifeChoices, Aveo said it was “progressively introducing its market-leading contract regime, the Aveo Way, that provides financial certainty and clarity to its residents and their families”.
However, when compared to the new contracts being rolled out by Aveo’s competitors, it appears that the latter are the ones leading the market.
According to a report in The Sydney Morning Herald, Lendlease has introduced “four financial models at 15 of its 71 retirement villages, with plans to extend them across the board after market feedback. Lendlease would still offer its existing contract, whereby a person buys a unit then pays a deferred management fee at the end. The three new options include a pre-paid plan, a refundable contribution and a pay-as-you-go model”.
Stockland Chief Executive of Retirement Living Stephen Bull told YourLifeChoices in a statement: “One of the key differentiators of our retirement living business is that we make it affordable to move in, and affordable to live in a Stockland retirement village. We also offer a wide range of home types to suit all residents with the sale price of our units, villas, townhouses and homes typically below the comparable median unit or house price in the surrounding suburb or region.”
The company has three types of contracts:
- the Peace of Mind contract has a deferred management fee that maxes out at five years or 25 per cent of the initial price paid from the home. In addition, Stockland covers all renovation costs and residents will be repaid after a maximum of six months from departure even if their home hasn’t yet been sold.
- the Capital Share contract offers the resident the opportunity to share in 50 per cent of the capital gain of the property. In this contract, the residents deferred management fee reaches its maximum at seven years or 35 per cent in total.
- the Aspire product, which will be offered at two villages currently under construction – one at Elara, in Marsden Park, Sydney and the other one is in our Calleya Community near Perth in WA. It has a higher entry fee, but no exit fees.
A two-bedroom home at Stockland’s Aspire at Elara starts from $655,000, levies about $260 per month for services and there is no deferred management fee. A similar home at its Willowdale Retirement Village starts from $560,000, levies are $364 per month and the deferred management fee depends on which of the two above contracts is selected.
Do you live in a retirement village? Are you satisfied with the contract you signed? Would you consider moving to a village where the apartments are more expensive, but where there are no exit fees?