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Greater security for retirement village residents

27 September 2006

Greater security for retirement village residents

Retirement village residents will enjoy greater financial and lifestyle security with the approval of regulations that bring the Retirement Villages Act 2003 fully into force, says the Building Issues Minister Clayton Cosgrove.

These measures include the introduction of a formal disputes resolution process, greater disclosure of information by operators and statutory supervisors to provide a watchdog role over villages. A Code of Practice has also been approved.

In announcing the new measures at the Ngaio Marsh Retirement Village in Christchurch today, Mr Cosgrove said the provisions were strongly focused on consumer protection for residents, at a time in life when security is a priority.

"For the first time, all residents will have a mechanism for resolving their disputes with village owners and managers, and a clear voice," he said. "Often residents' only option has been court action, which can be out of reach for those on fixed incomes."

The dispute resolution provisions come into force on 1 October 2006. From that date, every retirement village must have a way of dealing with complaints. Disputes that cannot be resolved internally will have access to a new independent Disputes Panel.

"This will ensure accessible and fair hearings in a sector where disputes tend to involve substantial issues, both in property and emotional terms," Mr Cosgrove said.
"Former residents, or their representatives, will also be able to use the process, and so will operators."

From 1 May 2007, potential residents of retirement villages must receive full disclosure of information from operators, as specified in the regulations. Other new features include a cooling-off period of 15 working days during which an intending resident can withdraw from an occupation right agreement. A lawyer will need to certify that the details and implications of the occupation right agreement contract have been clearly explained to the intending resident.

“This is about informed consent and protecting the best interests of older New Zealanders entering complex contractual arrangements,” Mr Cosgrove said.

New villages will need to be registered with the Registrar of Retirement Villages from 1 May 2007, and existing villages by 1 November 2007, including those currently governed by the Securities Act.

Mr Cosgrove said as the sector has been largely unregulated to date, there are no concrete figures on how many villages exist, with best estimates at around 400.

“This is too important a sector to run on an ad hoc basis. These changes were borne of real concern at practices in some parts of the sector,” Mr Cosgrove said. "However I am pleased to say that good operators are already meeting many of these standards."

The enhancements are being funded by villages' registration fees. The initial registration fee has been set at $540 for up to 34 units, $1700 for 35 to 84 units and $4410 for 85 units and above. Annual fees will be $450 for up to 34 units, $1510 for 35 to 84 units and $3850 for 85 units and above. The fees include GST.

“The fees have been kept as low as possible, and are necessary if we are to protect the interests and the often substantial financial investment residents make in these villages," Mr Cosgrove said.

The Retirement Villages announcement follows recent decisions by the Government to improve tenancy law and service provision for landlords and tenants, and the review of the Unit Titles Act.

Other reforms by Mr Cosgrove to improve standards and services across the building and housing sector include; the review of the Building Code, the licensing of building practitioners while protecting the Do-It-Yourself (DIY) tradition, auditing and accrediting Building Consent Authorities, a major shake up of the Weathertight Homes Resolution Service, the introduction of a financial assistance pilot for the worst affected owners of leaky homes, product certification and investigation of a home warranty insurance scheme.

Note to editors: This Act does not cover rest homes, which are regulated under separate legislation by the Ministry of Health.

Background Information:

What is the Retirement Villages Act 2003?

The Retirement Villages Act protects the rights of residents and sets out a legal framework for operators to run villages. It places new responsibilities on all retirement village operators for disclosure of information to residents and intending residents, and makes provision for a disputes resolution process. It also introduces independent oversight of villages through statutory supervisors.
Note: This Act does not cover rest homes, which are regulated under separate legislation by the Ministry of Health.

What is happening?

The new provisions being announced today will enable the complete implementation of all sections of the Act over the next 12 months. These provisions include General, Fees, and Dispute regulations, and the approval of a Code of Practice.

Why did the Government pass law governing retirement villages?

There are an estimated 400 retirement villages operating in New Zealand, and while the majority are responsible operators, the Government was not prepared to let the safety and security of residents rely on goodwill. There have been instances where residents' rights have been breached. Operators also benefit from the introduction of a more uniform set of procedures, and, in the case of those villages which have been covered by the Securities Act 1978, ceasing to be under a legislative regime which is not really designed to cover the sector.
The Act will, for the first time, require all villages to be registered and to meet required standards. It also provides mechanisms for dealing with disputes that arise.

What do these changes involve?

The disputes resolution provisions come into force from 1 October 2006. The rest of the Act and regulations dealing with the registration of villages, fees, and occupation right agreement between residents and operators come into force in May 2007. An occupation right agreement is a document that specifies the terms and conditions to occupy a unit in a retirement village.

Why are the new Disputes Regulations needed?

To date there has been no consistent process for resolving disputes in retirement villages. Examples of disputes include disagreements over costs and charges levelled on residents, changes to terms of the contract that the operator and resident have signed, or services which are promised but not provided. For many residents and operators the only option was through the courts, therefore some would choose to leave the dispute unresolved. The new process is intended to be less expensive and less formal than a District Court or High Court hearing, while providing binding decisions and orders.

How will the process work?

All villages will have to establish a complaints process and make sure that all residents are aware of it. If a complaint cannot be resolved through the internal process, the complainant can ask for the dispute to be resolved by a Disputes Panel. This panel will be drawn from a list of people approved by the Retirement Commissioner. The panel's powers include being able to change an occupation right agreement, order any party to comply with such an agreement or to pay or refund money.

Most disputes can be heard by one panel member but for matters regarding the sale of residential units, there will be a minimum of three on the panel, which must be chaired by a retired judge or experienced barrister or solicitor. Decisions of a panel will be binding, but can be appealed to the District Court or the High Court.

Who can use the dispute resolution process?

Complaints may be made by residents, former residents (from February 2004 onwards) or a representative acting on their behalf (such as a lawyer or a family member).

How much will the disputes process cost residents?

There are no costs for a resident to lodge a complaint or take a dispute to a panel. Operators will be responsible for the panel members’ costs. However, a Disputes Panel can award costs against a resident if, for example, the complaint is considered frivolous.

Explain the General Regulations, Fees Regulations and Code of Practice.
The General Regulations deal with the documents necessary to register a village and for a person to agree to become a resident. The Fees Regulations will relate to operators registering villages and filing annual renewal of registration. The Code of Practice will list minimum standards for day-to-day operation of villages.

What are the ownership arrangements in retirement villages?
The arrangements by which residents hold an interest in retirement villages vary. Many residents have a licence to occupy, which is granted by an occupation agreement and grants the resident the right to live in the unit and sell the occupancy rights if they so wish. Other forms of ownership include unit title, freehold or leasehold. In general, residents pay a significant lump sum for the right to live in the unit and hold an equity interest. The Act applies regardless of ownership structure.

What are the new requirements on retirement village operators?
All retirement villages will need to register with the Registrar of Retirement Villages, located in the Companies Office, within the Ministry of Economic Development. A requirement of registration is that the operator must provide a disclosure statement.

What is a disclosure statement?
A disclosure statement sets out details on the ownership structure and management of the retirement village, its services and facilities, and how charges and accounts are calculated. The disclosure statement will specify details about entering into occupation right agreements, terminations, and deductions. An important part of the disclosure statement is the estimated financial return a resident can expect on the disposal of their unit. The disclosure statement will specify the person acting as the statutory supervisor for the village.

What is a statutory supervisor?
A statutory supervisor is appointed by the operator and looks after the collective interests of residents. All villages are required to have a statutory supervisor unless they are exempted by the Registrar of Retirement Villages. The Registrar provides the list of approved supervisors that operators choose from.

What is the Code of Practice?

The Code specifies details that must be included in any occupation right agreement, including clauses on requirements around safety and personal security of residents, transfer of residents within retirement villages, and complaints facilities.

The Code comes into force on 25 September 2007.

Where can I get a copy of the Code of Practice?
The Act requires retirement village operators to provide residents a copy of the Code of Practice. Copies can also be downloaded from the Department of Building and Housing’s website: www.dbh.govt.nz

What about the Fees Regulations; how much will it cost to register a retirement village?
For small villages of less than 34 units, the initial registration fee will be $540. For villages with 35 to 84 units, it will be $1700 and large villages of over 85 units will have to pay $4410. The registration fees will pay for the administration costs involved in registering villages, educating and providing information to residents and prospective residents, as well as monitoring the effects of the Act and providing advice to Ministers.

Does a village only need to register once?

No. Retirement villages will have to pay an annual fee to stay registered. The continued registration fee is set at $450, $1510, and $3850 for the three sizes of village respectively.

The Fees recover the cost of registration and reviewing all retirement village documentation, as well as the costs of the Retirement Commissioner in monitoring the Act, and maintaining a list of disputes panel members. As these are all new processes the fees will be reviewed in two years time to ensure that they are set at an appropriate level.

Where do I find more information?
For information on the Act visit www.dbh.govt.nz or ring 0800 836 262. For details about registration requirements visit www.companies.govt.nz and for further information on operators' obligations to residents and potential residents visit www.retirement.org.nz

ENDS

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