Kia ora tatou
I’m delighted to be able to speak to you here in my hometown. It’s not all doom and gloom here in Welly but there are certainly a number of challenges to navigate
I’ve just had a small break in Brisbane and I can tell you that the noise about road cones and disruption from city development is just as strong.
Over the last few months, wearing a different hat to my Retirement Commissioner one, I’ve separately met a couple of directors of RV companies. Once we introduced ourselves, they’ve said – hello – nice to meet you - sorry, you won’t like this - I’m on the board of xx Village Company Ltd – and I know you don’t like villages.
How interesting I thought.
A – it’s not true.
And B – it’s perhaps reflective of how the conversation has developed and become siloed. Let me tell the story as I see it.
As some of you know I’m now in my second term as Retirement Commissioner. My job, set in legislation, is to take a long-term view of the economic lives of New Zealanders so there’s a better retirement for all.
Early in my first term, to my surprise, I saw a fairly noisy dispute going on between RV residents and RV operators that seemed to have been going on for some years. Both parties talked past each other quite often and often the debates seem to have become personal, sometimes verging on the abusive. Both sides.
The history of solving various problems was fairly erratic and even reviewing the Code of Practice seemed to be difficult. When I looked at the legislation I saw it was very light touch – in itself not a bad thing – but that the processes to consider change and improvement were poorly developed, and overcomplicated by the presence of an Act, regulations, AND a Code which had all become a bit messy with tinkering over the years.
I concluded that a full review of a legislative framework that was over 20 years old did not seem to be to be particularly unreasonable.
And I still believe this. As a newcomer to the sector, I saw intransigence on both sides and often a misunderstanding of each other’s position. I had come from the broadcasting and media sector and I can tell you that heated debates are not unknown in that space either.
But normally there’s a path to resolution and this did not seem to be a viable option in 2020 as both parties had their heels well dug in. Even just a Code review was off the table at that time.
I saw – and see - little trust between the entities involved and considerable frustration, compounded, in my view, by somewhat of an imbalance of power.
In short, there was no incentive to start some real problem solving and the legislative framework didn’t provide an easy process to get the parties to the table.
So that’s the genesis of the white paper we published in 2020 and the response to submissions received in 2021. In my view we needed to address an impasse and to set down the core issues very clearly. To shine a light, in other words.
Next, as you know, the then Associate Minister of Housing and Ministry of Housing and Urban Development accepted my recommendation that a full review was overdue. HUD subsequently issued a very good discussion paper, which received over 11,000 submissions. That’s an astonishing number. People care about this.
Meantime, the RVA coordinated and published its Blueprint which mooted some change and was an excellent start. I know that some operators have also since changed some of their terms and conditions to bring them closer to current best practice consumer protection.
I think now we have to look at where we have general agreement for change - for few are arguing against any change as vociferously as some were back in 2020 – and where the sticking points are.
In short, I am asking you to consider the issues with an open mind.
First, I acknowledge that RVs are not one size fits all. We have always acknowledged this, and good legislation and codification will recognise this.
Second, I also acknowledge that these issues are complex and that the underlying business models are not always as robust as they sometimes seem.
But these are not good arguments for no change. They are arguments for sensible and responsive change. For give and take. For recognising your residents have consumer protections that might override a contractual position if that contract is unfair. For supporting good legal protection for your residents as well as providing for their physical comfort. For providing strong competitive consumer choice. For best practice legislation.
Third, I also acknowledge that village operators generally do an excellent job of looking after their residents – let’s call them customers. But some customers are unhappy, and unhappy customers should concern you.
A comprehensive legislative review is far preferable to code changes alone. There are longstanding issues that need to be resolved with a holistic look at the system. This will make the framework fit for purpose for at least another two decades. This is not something to be afraid of.
Many of the proposals in the review will help village managers. Residents who understand the documentation when they enter the village won’t be complaining at a later date that they didn’t realise there was a second deferred management fee to move into a serviced apartment, or that the on-site rest-home doesn’t provide dementia level care.
An independent complaints scheme will take the onus off village managers from trying to resolve the messier disputes. Yes there are vexatious complainants – there are in any complaints regime – but there are also complaints that deserve an independent hearing. Both types can exist at the same time.
I want to cover four key areas which I really want the legislative review to consider. These are areas that have been subjected to much heated discussion but not much light has emerged.
1. Simplifying documents when you enter a village
It’s widely agreed that the unit purchase documentation is lengthy, confusing and mostly non-negotiable. This contrasts with the highly attractive marketing used to attract your customers. It’s not a stretch to say that some residents and their families may not fully understand what they are signing up for, despite receiving legal advice.
We have heard multiple stories from both lawyers and residents, that many residents only see their RVA Key Terms Summary, Disclosure Statement, and Occupation Right Agreement when they are in the lawyer’s office signing up for the village or shortly before.
Their hearts are already in your village. You’ll likely get the sale. But you can’t then be surprised if trouble brews later.
Prospective residents and their families need to be able to compare disclosure statements and ORAs across villages when they are weighing up the options. Disclosure statements and ORAs need to be simplified and standardised where possible, made available on retirement village websites, and they need to be searchable.
I was interested to see the Commerce Commission’s recommendations for banking the other week include a call to present information on their products in a “readily comparable way” to help consumers properly compare the costs of different offers.
Likewise, I support standardising ORAs as outlined in HUD’s paper - important information and a separate section for bespoke terms at the beginning, and the schedules, lawyer’s certificate and signature section at the end. For RVs the bespoke contractual terms would be financial terms, services, or requirements specific to the resident.
Placing bespoke terms in a separate section is a common contractual process. I’m a bit bemused as to why this seems to be such a problem, and I’m not convinced it actually is.
It’s also not unreasonable to consider standardising some common terms, such as the definition of “license to occupy”, or those which are minimum standards, or mandated by the Act.
Our research also confirms the anecdotal stories that it is difficult to enforce undertakings made in disclosure statements – e.g. building a promised care-home or a recreational facility. While I understand that your business might change, I can’t see how I couldn’t support proposals to make it easier for residents to take action on misleading or false statements, to strengthen the Registrar’s powers to act if a document or ad is misleading, and to require inconsistent ORA and disclosure terms to be interpreted in the resident’s favour. Remedies under the Fair Trading Act are too slow, rely on Commerce Commission action, and a Court declaration that a specific term can’t be enforced or relied upon. So, it’s stacked against the resident and you shouldn’t be happy about this.
The good actors among you, and that’s most of you, must surely want to censure any bad actors: poor commercial behaviour is highly detrimental to the sector’s reputation as you know.
A series of workshops with stakeholders that were hosted by HUD last year worked on simplifying the disclosure statements and ORAs in detail. So, a lot of the work has already been done.
2. Clarifying responsibility for chattels
Who owns what? In terms of chattels and fixtures, transparency is important. A definition of operator owned chattels needs to be included in the Retirement Villages Act, and operators need to list operator owned chattels for intending residents. As you know the Commerce Commission found that some ORA terms relating to chattels are unfair to residents.
Operators also need to pay for the maintenance and repair of chattels that they own that break down, and to replace them when they wear out. This is not unreasonable from any lens and some of you have already moved to clarify this.
3. Improving the complaints scheme
We received numerous submissions to our white paper from residents outlining the difficulties they faced when navigating the complaints scheme. We frequently receive calls and emails from residents who are reluctant to complain about their village management when they must lodge the complaint with the manager.
We know it is never easy to complain about the place where you live. And that some complainants can be taxing. But the current scheme does not align with best practice principles.
Residents need a scheme that is independent, fair and accessible.
Village managers need a scheme that can triage complaints so that minor issues can be dealt with decisively.
Informal issues should always be dealt with at the village level - it’s how to deal with issues that escalate that’s the real problem – either for the resident or the manager.
I do not think the RV complaints scheme with its many and complicated doors is fit for purpose. We see frustration from both operators and residents. So we need to develop a new independent dispute resolution scheme that is aligned with best practice principles to consider formal complaints and disputes.
In developing a new complaints scheme these factors are the most important:
· the type of complaints a complaints body would deal with
· how it would be funded and who would provide it
· how the dispute panel process would work in with such a scheme including, whether the scheme could replace this process altogether
· how an advocacy service for residents would fit with such a scheme
· how the scheme could be structured so that it discourages any frivolous and vexatious complaints
· how the scheme could ensure that statutory supervisors are still across serious issues that arise as disputes.
We’ve already researched different models and this work provides a strong foundation for developing a new scheme to replace the current multiple doors that frustrate both residents and operators.
I can’t see why operators wouldn’t welcome a system designed to take some of the headaches away.
4. Making the exit provisions fairer
I consider the exit provisions are so important that they need to be lifted from the Code of Practice into the Retirement Villages Act.
Providing some form of payment to residents or their families, while waiting for the License to Occupy to sell, whether in the form of interest or the capital sum minus the deferred management fee, may make the lives of village managers easier. Village managers will deal with fewer distressed families who aren’t sure how they can pay for their parent’s rest-home care.
If we can get the exit provisions right this will make a huge difference to the experience of residents and their families. And improve the reputation of RVs themselves.
I am heartened to see there is now a much higher level of agreement that fees stop when the unit is vacated, that fixed deductions stop accruing when a resident vacates a unit, and that residents are only liable for capital losses to the same extent they are entitled to a capital gain. These principles need to be enshrined in legislation.
In terms of repayment of residents’ capital sum, it is unacceptable, even though it is a minority of cases, that some residents are waiting two years or more to have their capital sum returned to them. So a requirement that the resident is paid interest if the unit is not relicensed after a period is also fair and reasonable.
Again – this is only a small number of villages, but the reputation damage to your sector as a whole is severe when these tales emerge.
I also consider that a specified timeframe for repayment of the capital sum - with exemptions - is worthy of further investigation. Issues around cost, impact on smaller retirement villages and not for profit operators, possible trade-offs, and the exemption process itself, will of course need to be thoroughly considered. As I said earlier, we know that one RV size does not fit all and there are genuine issues to be resolved here.
But this does need to be looked at.
Retirement Villages play an important role in the housing landscape. You provide a quality housing option for those who wish to downsize, you are one of the few sectors that continues to build aged residential care facilities, and of course you add to the overall supply of housing in New Zealand. Your business model is clever - and better terms and conditions should help both competition and potential buyer interest.
I want to take the opportunity today to recognise the efforts the RVA has made to improve fairness and transparency in your industry through the development of the Blueprint, and for the changes some of you have already made. The work of Graham Wilkinson, John Collyns and the RVA here has been very helpful and has gone some way to help solve some problems. It’s really important that these changes - and a few more - are enshrined in legislation.
Change does not have to be an antagonistic process. No one wants villages to fail – and no one wants unhappy customers. We can engage constructively about this, agree to disagree on occasion, but nonetheless together develop a better framework that fits the 21st century.
To summarise: Make the documentation simpler. Clarify chattels responsibility. Improve the complaints scheme. Make exit provisions fairer.
Get the legislative framework right and you’re set for a couple more decades. Most of the hard work has been done and I look forward to legislation being introduced into the House which provides a further opportunity for feedback and adaptation.
So, I don’t hate villages at all - in fact I rather like them. Thank you for your time.
No reira tena koutou katoa. Kia pai to ra.