The Kaspanz editor lives in a Retirement Village.

Until recently Retirement Village Operators (Industry voice)  have had a easy ride,. With the range of Village developments increasing, and Resident numbers growing,  scrutiny emerges. The emergence of the New Zealand Village Residents Association has also contributed, the residents voice coming into media and political policy decisions.

Voluntary reforms or compulsion. What is the correct mix?

Mike O’Donnell05:00, Sep 10 2022

Mike “MOD” O’Donnell is a professional director, writer and strategy adviser.

OPINION: Back in February my mum died. She’d lived the last few years living in a retirement village studio and the crew there did a great job of looking after her.

After she passed, I was surprised to discover that the village continued to charge me a service charge for her empty unit. I was also surprised that it took four months for the village to pay mum’s estate back the funds she had paid to occupy the unit. Particularly when someone moved in just weeks after she died.

Regular readers may recall I wrote a column at the time. Since then, I’ve heard stories from a bunch of people who are in the same situation. Stories of families and estates having to continue to pay fees and charges for up to six months after a person has died.

one is six foot under, the unit is empty and no-one is consuming utilities, needing insurance or benefiting from maintenance (typically how the operator justifies the ongoing charge).

I’ve also heard stories of it taking up to a year for units to be resold or occupied. A long time for an estate to receive its funds and family be able to pay for funeral and healthcare costs, not to mention pass on any inheritance. The profits being made by retirement village operators are not trivial, says Mike O’Donnell.

These sorts of stories were presented to Parliament’s Social Services select committee a few weeks ago, as the Government undertakes an investigation into whether resident protections from 20 years ago still cut the mustard. As part of their submission the Retirement Village Residents Association had committee MPs play a game of “villageopoly”, to simulate the economic reality of village life.

MPs learnt first hand what It’s like to be tied into an Occupation Rights Agreement (ORA) when you get faced with life incidents like running out of money to pay weekly service charges, having to move facilities and estates facing post-death charging.

Residents’ representatives made a case for people to have their capital paid back just 28 days after they leave a village, the banning of weekly fees after a person has died, and preventing villages from charging deferred management fees for empty units.

I imagine hearing this a few weeks ago put the fear of God into the big corporate operators, many of whom are effectively property development companies dependent on throughput of oldies. Companies not so keen on having government pop the bonnet on their business models and what happens after their clients shuffle off this mortal coil and can’t participate in customer satisfaction surveys.

So now the retirement sector is fighting back, effectively trying to regulate themselves rather than wait to be regulated by Government. A technique that can be effective so long as you deliver sausage rather than sizzle.

In this case the Retirement Village Association has put together a package of proposed voluntary reforms. These include the review of unfair contract clauses, taking reasonable steps to assist departing residents who needed their capital and to pay interest on capital after nine months if a resident has not been paid out for their unit.

They are socialising these voluntary proposals with their members, and will then vote on them later on next year.It’s timely as New Zealanders have started retiring in record numbers. The proportion of the population over 65 is growing exponentially as the baby boom of the 1950s and 1960s turns into the retirement boom of the 2020s and 2030s.

Right now about 16% of the population is 65 or over. By 2030 its predicted that about 21%, increasing to 25% by 2048. So directionally retirement villages have got a tsunami of clients heading their way and a very healthy revenue line.

The question is whether the industry is making super profits from unfair commercial arrangements as this tsunami hits. The profits are not trivial. The largest player in the market is Ryman Healthcare. Earlier this year they reported a net profit of $692 million, up 63% year-on-year.

Arvida Group reported after tax profit of almost $200m, up 51% on the previous year. Meanwhile, Summerset eclipsed them both reporting 135% increase in annual profit to $543m.So clearly there’s big money in farming old people. The question for the Government is whether it’s fair revenue or if operators are just taking the mickey?

Meanwhile, I reckon applying the sizzle versus the sausage test to the Retirement Village Association’s voluntary reforms comes down firmly on the mickey sizzle side.

There’s nothing in their voluntary reforms about a retirement village ombudsman or complaint process with teeth, nothing about a defined period to return the capital from an empty unit and no enforcement. It will be a voluntary code which can be noted and ignored.

So good on the Retirement Village Association for having a go, but somehow, I doubt their sizzle will cut the mustard.