Research report
2 February 2021

Retirement village contracts: unfair terms in the fine print

Unfair terms in village contracts are leaving a financial sting.

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Ray M.
12 Jun 2021
It is a choice

As long as the contracts are clear and people get legal advice before signing I see no issue. It is interesting that lots of people talk about setting up with shared capital gains, lower fees etc but nobody is actually putting their money up to do it. Just accept that these places are business run for profit just like every other business. Feel free to set up your own using different terms as that is what our free enterprise, capitalist system does.
Totally agree on removing unfair terms and especially those that are unclear but not sharing capital gain isn't unfair if you know about it and agree to it!

John J.
12 Jun 2021
Another great article

Although the elderly have freedom of choice, really what other choices do they have and at what cost.

Ian R.
23 Feb 2021
Unfair settlement

The village I live in has had a number of owners and is now owned by Arena Living, a subsidiary of the American Blackstone Group. I came into my village on the earlier 80/20 licence to occupy, under which the longer I stay in the village, the less I or my estate get when I leave. Taken to its logical conclusion, if I live long enough and costs and prices continue to escalate like they have been doing, I could get nothing and theoretically would have to pay the owner to leave!
The reselling value of the licence for my villa has been estimated at $960,000, but is more likely to be in excess of one million dollars. When I came into the village 19½ years ago, the licence to occupy cost me $321,000. From that figure, in terms of the licence, when I leave I am liable to have deducted 20% (64,200) plus the cost of refurbishment, estimated at $85,000, plus an “administration fee” of 2% of the resale price (another $19,200) plus Arena’s legal fees for settling with me and also from negotiating with the incoming resident (estimated at $1,500). So if the licence is resold for the conservative figure of $960,000, I could be offered only $151,000. Remember I paid $321,000. Also, I or my estate would not get this amount until the villa has been refurbished and resold
If the licence to occupy is resold for$1,200,000 and the refurbishment cost is $100,000, take from the payment to me of a further $16,200, bringing the figure I would get down to $134,800. As can be seen, as costs and prices increase the payout to me decreases. Definitely no capital gain! Had I come into the village just a few years later I would have been on the current 70/30 contract and the payout to me would be $224,700 fixed no matter what the resale price or cost of refurbishment. Still no capital gain of course.
What is even more galling is the fact that some residents on the 80/20 contract have been offered settlement by Arena living as if they were on the fixed 70/30, so they know exactly what they are getting on exit without further deductions. I suggest the Fair Trading Act should come into play.
The above is my main dispute with Arena, but there is more I am afraid. Others have commented on the estimated cost of refurbishment, which appears to include some costs of upgrading, not provided for in the licence to occupy. There is also the matter of the resident paying for the cost of repairs to the inside of the residence, which is to the ultimate benefit of the owner. Assuming that the resident is liable, there is the question of the costs of these repairs and the ability of the resident being able to nominate the repairer.
There is no doubt that the Retirement Villages Act is badly in need of overhauling. I note that village owners have asked for an extension of time for submissions. I trust this is not a delaying tactic, given that they have already said that the Act is basically OK in its current form.

Simon E.
07 Feb 2021
Excellent Article - Thanks to the Law Foundation

Excellent Article - thanks to the law foundation - and the question of market forces or as Denis says "reality" is rubbish - the entire industry is set up to remove capital from the elderly and the contracts are horribly unfair - why have they not appeared in court yet ? - because as soon as anyone complains the industry pays out - they don't want their utterly unfair contracts exposed let alone subjected to judicial scrutiny.

Simon England, Lawyer, Nelson, Mother in Ilam Rest Home, Christchurch.

Margaret C.
07 Feb 2021

As soon as soon as anyone complains the industry pays out? Not my experience at all.

Denis K.
06 Feb 2021

Most of this analysis strikes as a gripe along the lines of 'You have something, I want some of it'. Consumers (families) have a choice. Don’t move your elderly relative in to a retirement village. Its very simple. Families will have to care for their elderly relative in their own homes. They will not always be able go on holiday when they want as they will have to look after their elderly relative. Make sure they don’t get lonely. Take them out for outings. Take them shopping. Bring in other people to entertain them. In other words spend a lot of their free time with their elderly relative and not always doing what they want to do.

The business model for these villages does not give exceptional returns. There is a lot of competition in what looks like a pretty efficient market to me. The listed names and a host of private operators.

This is a beat up. People want their elderly relative cared for by someone else so they can still have their personal freedom and no responsibility, at the lowest possible cost. That does not work as we see many of the church based not for profits closing. A business has to make a profit to enable it to survive and reinvest for the future and to continue to exist. Will it be back to the rest homes of 1980s with 4 or 6 to a room.

Michele T.
06 Feb 2021
Another view

My parents are currently considering retirement village options. Absolutely their decision, no-one is moving them anywhere. They have their (perfectly understandable) reasons for this move. As their daughter I would absolutely want to know that they were treated fairly in terms of expectations of repairs etc while living there.

Peter S.
06 Feb 2021
Beat up?? rubbish

These modern shylocks running these villages would give scrooge a run for his money - talk about warehousing and asset stripping the elderly. There should be strong regulations, judicial reviews and harsh penalties for these people creating these elderly ghettos that the weak and frail often end up in. Personally I'd like to see the contracts reviewed and if unfair, the village assets seized, their owners deported to some asian hellhole (NZ Citizens or not!) and statutory managers responsible to the licencees put in place. It is currently nothing but rampant extortion of the elderly weak and frail.

Wilma M.
12 Feb 2021

In my experience (limited, I admit) it is the elderly choosing to move into retirement villages and choosing not to live reliant on their children. I certainly would choose independence over reliance.

Ross C.
27 Feb 2021
Reasonable Profits?

My mother is in a Retirement Village in Christchurch. She moved there about 15 years ago because she wanted to maintain her independence but the effort of maintaining her house and garden was getting too much, despite regular help from the family. As others have said, it was entirely her decision and not a case of family not wanting to help care for her - one of us visits at least weekly (usually more often) to help with shopping or anything else that needs doing.

It's not unreasonable that the Villages make a return on their investments and with the growing number of people in retirement the requirement for housing that is suited to the elderly is increasing. And for every resident moving into a village, it is freeing up housing for another family which is important given the current housing shortage. They are a business and in the interest of full disclosure, I have a few shares in several of the companies involved. They charge an ongoing fee to cover operational costs but I doubt there is much, if any, profit in that. It stands to reason that if they were not able to take a profit when the unit is sold then the weekly fees would probably need to be higher. The question that comes to my mind is how much profit on sale is reasonable?

As I said, Mum has been in the village for about 15 years. She is now rising 101, still in her own unit and is very happy she did so with eyes wide open regarding the "deferred management fee". It didn't seem too unreasonable at the time but I do wonder if there should be some limit on what could also be viewed as "windfall profits" during periods of high and rapid capital gain. This is not to say that the village is not entitled to any capital gain, but perhaps some formula whereby it is shared with the resident if it exceeds a certain level

Peter K H.
06 Feb 2021
Extra charges.

Rest and care homes add extra charges for rooms with their own toilet While I can understand that extra frequent cleaning charges may be needed, I think some of these are unreasonably high - I have heard one one which charges over $90.0 each day. Can this level of cost be justified ?

Margaret C.
04 Feb 2021
Transfer costs

The cost of moving from an independent apartment to a serviced one, or into care, is often unclear. This is also the case when circumstances change and a resident needs to move from one independent unit to another, or to another village belonging to the same operator. There may be transfer fees and other charges, and they may be huge. Also check if the village will buy back your current apartment as part of the transfer, or if you will have to pay the whole price of the new apartment upfront and wait for the old one to sell before you get anything back. How is the DMF pro-rated between the two apartments, and when is it charged? Get all this in writing before you sign on the dotted line - do NOT rely on oral assurances. This is from personal and very expensive experience.

Margaret C.
04 Feb 2021
Buying off-plan

As with any new development, not just retirement villages, there can be pitfalls here when the plans change after off-plan sales are under way. A fellow-resident at my village is directly facing the rubbish area, which was not shown on the plans. If it had been, he would have bought an apartment on the other side of his building. Other features which were shown on the plans were built differently than drawn, & for the worse. When he objected, the management agreed that he was right but said it was too late to change the plans.

Elaine S.
02 Feb 2021
A washing line? You must be kidding!

Your checklist includes checking that the washing line is easy to get to. Ha! ha! We don't have a washing line! Independent apartments all have a clothes drier, and we are expected to use that to dry all our washing. Or have a folding rack - inside the apartment. No such thing as drying the sheets & towels in the sun outside, let alone the clothes.

Or somewhere to wash the car & vacuum its insides.

Mike H.
02 Feb 2021
Virtual villages

In order to avoid these unfavorable terms and costs, and if you still operate with some independence, why no consider a member owned cooperative model or even stay in your own home and set up a virtual retirement village community. You can find some examples of successful virtual villages on line (popular in the US), where you pay a subscription to access the collective "village" services that might include transport for medical visits, organised social outings and other social connection, exercise classes, home maintenance, housekeeping and so on.

Rachael D.
02 Feb 2021
No surprises

Another example - and one which has been know about for a long time - of the discrimination practiced against older people (which in many cases starts from well before most would be contemplating a retirement home. Currently have the book Elder Law in NZ (Thomson Reuters) in my reading pile (needs refreshing as is 2014 dated). If Consumer can get some traction on this it would be wonderful.

02 Feb 2021
Unfair Increases in Monthly Fees

When my Mum was alive and living at a Somerset Village, there were a number of meetings held for residents to discuss the good and bad things with the complex. One of the issues that always was brought up by my Mum and fellow residents was the fact that when Retirement Pensions were increased by the Govt, in turn Somerset appeared to increase their regular fees. Why should this be the case? If my wages go up, my bank does not increase my mortgage payments by the percentage of income increase, so why should Somerset appear to be taking advantage of increase of their income streams?

Wolfgang J.
02 Feb 2021
Summerset fees increase !

Tell me... is that increase in percent of what you get... or are “they” taking the “lot” ???

Virginia V W.
02 Feb 2021
Retirement Villages

I have many friends in Retirement villages who are very happy in them. I visit a friend who is in the hospital section and have some dismay at how things pan out there.
1. Most of the things that are not so good are because they are a business and as such need to make a profit for their share holders, so staff are generally at a minimum
2. Residents are not restrained in their chairs as this is now unlawful, however they do have their chairs tilted so far back that they cannot get out of them, no matter how much they struggle. If they had more staff they would be able to monitor unsettled behaviour and modify the situation to the residents advantage. ie needing the toilet, uncomfortable bottom from sitting for long periods, stiff legs etc
3. The residents are put into incontinence pants rather than being taken to the toilet at regular intervals. if a resident says they want to go to the toilet the OT takes them out of the 'occupation circle' and calls a carer to take the resident to the toilet, the carer is in the middle of doing something which she finishes before responding to the residents need. Elderly people often have urgency and it is unfair to ignore this requirement for an urgent visit to the toilet when other tasks take precedence.
4. Residents who do not sleep well are often given more sedation so they are not 'troublesome' during the night, this had flow on effects with drowsiness during the day.
5. Residents walking is restricted for fear of falling, so the resident gradually becomes completely chair bound. Especially if they have had a fall. the need for a "good" record as a company is more highly rated than the importance of exercise for brain and body well being! If there were enough staff they could keep the resident walking for much longer but because they are risk averse the residents lose their abilities very quickly, becoming weak and unable to walk, this hastens the residents demise. Put bluntly this will, of course, increase the company turnover.
6. Atul Gawande author of "Being Mortal: Medicine and What Matters in the End" should be compulsory reading for all who work or manage retirement homes. Quality of life is the desired goal.
7. In fairness to the company the staff are very good to the families when a relative dies, making rooms available for grieving and supplying food and drinks without it being requested.
8. When a resident from another part of the 'village' (townhouse/ apartment) needs hospital care, the staff are very solicitous and caring. It would seem it is easier to be a good carer when the caring required is of short duration.
9. I am 80 and dread the thought of losing my independence, and hope that I can go on taking 'risks' until I die.

Remo Casale
04 Feb 2021
Hospital level care

When my mother was required to leave her rest home, she was put into a hospital (Bupa). Within a couple of days another resident from the same rest home was put into another ward of the same hospital.
Mum was put into a reclining chair and did not have the strength to put it into an upright position in order to leave the room for the toilet. Within three days she had a cough followed by pneumonia. None of the staff spoke kiwi English, and none had been working at that hospital for more than a few weeks.
We encountered the family of the other resident, and he too had been put in a reclining chair and succumbed to pneumonia.
Mum survived her 'care' for less than two weeks. Medication for pain took hours to get to her.

Mary F.
02 Feb 2021
Your Support Us button doesnt work

Wondered how I could support this commendable and long overdue endeavour.
So I click Support Us... And a blank page comes up?
I have considered a retirement village and figured that it would be cheaper to live in a hotel or motel, with a district nurse calling in if necessary. I look forward to hearing more and about which companies offer the best deal. Thanks.

Frank - Consumer staff
03 Feb 2021
Re: Your Support Us button doesn't work

Hi Mary,

Which button are you referring to? Our "Support our mission" widget at the bottom of this page allows you to donate, should you wish to support us. Please let us know if you're still having trouble.

Kind regards,
Frank - Consumer NZ staff

02 Feb 2021
Ex Retirement Village Director

Absolutely agree with everything written in this article. I find the whole industry to be upholders of "Elder Abuse." I tried to create a fair system but the majority of Retirement Village Owners are in it for the almighty dollar. The Government lets them get away with highway robbery. Its time for a major overhaul of the Retirement Industry. The mottos on the pretty brochures hide the abuse.

Wolfgang J.
02 Feb 2021

Thank you for speaking up !

Sylvia J.
02 Feb 2021
Our Family experience with a Bupa Retirement Village in Auckland

Great idea to review. My Mother bought into a Bupa Village and she could either have a no capital gains contract or a capital gains contract for an extra $30,000 which she couldn't afford. When it sold she got 80% of what she paid, back. They then sold it for nearly double what she paid all profit for them. She paid her weekly $120 fee and had to pay all the maintenance costs except for water blasting the outside once a year. She had to buy her own curtains/drapes plus $5,000 for the repainting before she moved in. When she moved out she had to pay $20,00 for refurbishing the unit eg new stove, painting, new carpet etc for the next person. When we questioned it all they got quite cross and asked "Well how else do we make a profit as after all, we are a Business and not in it for love". She could have not moved in but she had just sold her house and needed to be somewhere secure and where help was close by. Because of waiting lists they did sell it within six weeks but of course we still had to pay her weekly fees for that time even though she was not using any services. They guaranteed that if it didn't sell within 6 months the fees would stop at that stage.

Peter M.
02 Feb 2021
Metlife are VERY slow to sell a unit

After my mother had a stroke she needed to move to another facility with hospital level care. Metlife showed no interest in selling her unit as the fees kept on coming while it was not sold. I threatened to list it on TradeMe but they said I was not not permitted to do that as we didn't own the unit just had a licence to occupy. I asked why they didn't list it on TradeMe and they said well we need to assess it first. This is many months after my mother moved out. They make more money by going as slow as possible.

Susan O.
06 Feb 2021
Will never go near MetLife again!

They have been on Fair Go for this disgusting practice which is money in their pockets for no out going costs!
I could write a book on how they ripped off two of my close elderly reletives - down to the ridiculous charge when four of us in attendance were registered nurses and got in our own GP for the person who literally put her head in the door when our father died. Surely she was working anyhow! Why charge for that as well as numerous other things never even delivered I his last week!

Margaret C.
02 Feb 2021

A further point here is that the chattels - carpets, oven etc - may already be several years old when the resident moves in, yet they become responsible for replacing or repairing them when they wear out. This could be after only a few years, and further increases the unfairness.

Jenny W.
02 Feb 2021
Retirement villages

They are not for everyone. A great many people leave it too late until they are very frail & then have to move in, making the move more stressful. Many people mistakenly call them rest homes. Most of my family are overseas, I retired from my job several months after moving in and I have absolutely no regrets. I am in one of the ‘major players’ smaller older villages, it is friendly & homely. The staff are outstanding & when you first move in, management & residents make you very welcome. Like anywhere they are not perfect, they are a business. Staff went out of their way to solve two appliance problems and I was not charged a penny. Also many elderly are talked out of moving to a village as their family do not want “their” inheritance disappearing. I no longer have to worry about noisy inconsiderate neighbours and continuous maintenance. Works for me.