News National Retirement village regulation lacking, leaving residents open to exploitation

Retirement village regulation lacking, leaving residents open to exploitation

unhappy retirement
A Four Corners-Fairfax investigation has found retirement home residents are being left vulnerable to exploitation. Photo: Getty
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Residents in the nation’s retirement villages are being left vulnerable to exploitation by a hotchpotch of legislation and underfunded consumer affairs bodies.

A joint investigation by the ABC’s Four Corners and Fairfax Media into retirement village company Aveo has found that residents are slipping through the regulatory cracks.

They are not in any federal minister’s portfolio and a series of recommendations and reforms that came out of an inquiry into the sector a decade ago were never implemented.

Tim Allerton, a hard-nosed crisis management professional and PR expert, believes his aunt was taken for a ride by Aveo after she was forced to move out of a unit in Aveo’s Lindfield Gardens village in Sydney after she got sick.

Mr Allerton’s aunt Joan Buswell bought the property in 2008 for $250,000.

It was only when she died that Mr Allerton realised the contract she had signed and how difficult it would be to sell the property.

“The original lease contract was 172 pages, and it contained very dense definitions, charges and so forth, and perhaps at our fault, we didn’t investigate it as heavily as we should have,” Mr Allerton said.

“But we were looking for accommodation for her at the time, and that was our main priority.”

The joint ABC investigation spoke to numerous current and former residents, their children, lawyers, former Aveo staff and lobby groups, and found some questionable business practices.

The bodies that are supposed to protect the residents, NSW Fair Trading and Consumer Affairs Victoria, do not have enough powers.

Mr Allerton said he put the unit on the market after his aunt became sick, appointing Aveo as the real estate agent.

Then after his aunt died in early 2013 it became more urgent to sell the unit and wrap up the estate, particularly given the family were being charged monthly maintenance fees.

“The maintenance fees, despite the fact she’d passed away at that time, were around $10,000 to $13,000 for each year, so it was just eating a hole in our pockets,” Mr Allerton said.

“And we were concerned there was a really strong prospect that we would end up with nothing if the apartment remained on the market for too long.”

‘They weren’t even showing the apartment’

Finally, the family dropped the sale price from $270,000 to $199,000, but still it did not sell.

So the family decided to investigate.

“What we did discover in a range of visits that we undertook was that the agents weren’t even showing people the apartment,” he said.

“There was dust on the floor and on the fixtures and fittings, as well as a very musty smell in the apartment.”

The unit finally sold two-and-a-half years after being put on the market at a 20 per cent discount to the purchase price of $250,000.

After exit fees and other fees, including agency fees, Aveo cut a cheque for $94,000.

Property research house CoreLogic estimates that over the period between the purchase price and sale of the unit, similar apartments in Lindfield rose 38 per cent.

Complex picture of ‘pretty simple exercise’

Mr Allerton’s theory on why it took so long to sell the unit was that it was not being shopped around by Aveo, which was acting as the real estate agent.

“I think just the smell of the apartment, the fact that it had been dormant for so many months, tended to make us a little bit jaded in our thoughts about their activity,” he said.

“My theory was that they’d built a whole range of apartments on site, and clearly the priority was to sell those first, and certainly when my family members went to do a mystery shopping exercise at the village, they were shown those first, and not shown my aunty’s at all.”

Current and former residents describe Aveo’s business model as “financial abuse of the elderly”. Photo: ABC

But he thought one of the most appalling aspects was that his aunt had passed away yet the fees kept coming.

“The monthly bills kept coming in and at the same time, the price was diminishing, to the point where we were actually thinking that we’d have to pay them money to escape,” he said.

All up, he and his family had to surrender more than $150,000 in exit fees, capital losses and other fees.

Mr Allerton said the whole experience left a lot to be desired.

“The whole thing from go to whoa, was opaque in terms of the charges, the contracts, the complexity of the arrangements, the fees, the ongoing fees after my aunt Joan passed away,” he said.

“It created a very complex picture on what should have been a pretty simple exercise.”

Aveo declined to be interviewed for the story.

In answers to a series of questions, Aveo said it was standardising contracts through the “Aveo Way” to make contracts simpler and give certainty to residents.

The new contracts include a guaranteed buyback promise for units that remain unsold for six months in NSW and Tasmania and 12 months elsewhere that Aveo will buy back the unit for the entry price.

The exit fee Aveo charges on the new contracts is 35 per cent of the purchase price if the resident leaves after three years.

Australian real estate ‘going ballistic’

Therese Toohey’s father Rod Bourke also had trouble trying to sell his unit at the Aveo Mountain View retirement village. He died trying.

Ms Toohey said she sent email after email to Aveo, saying: “Could you please explain to me how a unit that was worth $165,000 is now worth $119,000? How can something fall back in price so much?

“The real estate around Australia at the moment, most cities, is going ballistic, it’s going berserk”.

After exit fees and other fees, she would get back $81,000. She refuses to sell.

“It’s a great game they play. When we get older, we get vulnerable, our voice becomes weaker and people just don’t listen and don’t pay attention, then the children are busy and just want their parents to be happy,” she said.

In a statement, it says if a unit is not sold for six years it suggests the resident is unwilling to meet the market.

Some residents feel powerless.

‘No resources, will to tackle industry’

A report titled Older People and the Law was released after a federal parliamentary inquiry into the sector back in 2007, which listed a series of recommendations that were never implemented.

They included that the Australian Competition and Consumer Commission (ACCC) look at exit fees to see if they should be abolished.

“The committee believes that the ACCC, in consultation with its state and territory fair trading colleagues, should be playing a stronger role in monitoring consumer protection for retirement village residents,” the report said.

“While the matter should continue to be managed at the state level for the time being, should there be insufficient improvement in the level of protection for consumers, the Australian government should consider regulating this industry using its powers under corporation legislation.”

Gerard Brody
Gerard Brody says regulators and legislators keep passing the buck.

It supported the concept of a statutory supervisor, such as the creation of an ombudsman, and found that contracts were too complex and some of the advertising was misleading.

In 2011, the Productivity Commission reviewed the sector and again recommended further regulation.

And more recently in 2016, the Victorian government held a parliamentary inquiry that received nearly 800 submissions, the vast majority from elderly residents aggrieved by the financial rip-offs in the sector.

In March this year, the inquiry recommended training lawyers to understand retirement contracts, improving dispute resolution mechanisms for retirees, including possibly introducing a new ombudsman for the sector.

The Consumer Action Law Centre’s Gerard Brody said regulators and legislators kept passing the buck.

“At the federal level, they say it’s the responsibility of state governments and state regulators, at the state level there’s often not the resources or will to really tackle the industry, which has become a huge profitable industry,” he said.


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