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Legislative Council - Fifty-Third Parliament, Second Session (53-2)
2016-06-21 Daily Xml
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Retirement Villages Bill

Second Reading

Adjourned debate on second reading.

(Continued from 26 May 2016.)

The Hon. R.L. BROKENSHIRE (16:29): I rise to speak to this bill. I find it interesting that the government seems to wallow around when it comes to orders at times and it becomes very confusing. Anyway, we are here to talk about an important bill and to actually advise the chamber that we will be supporting the government on this piece of legislation. I hope that the Leader of Government Business has heard what I have had to say and that he does not whinge and whine on the odd occasion when we cannot support him.

Nevertheless, this bill is long overdue. In fact, people have been contacting Family First for quite a period of time, asking firstly for a review of the bill, and secondly, an outcome from that review which would see improvements in the legislation regarding retirement villages. The bill is a result of the findings of the Select Committee on the Review of the Retirement Villages Act which occurred back in 2013. We have moved at a snail's pace. The government has not brought a mass of legislation before the houses in any case, but it has still taken three years from the time a select committee put its findings to the parliament for the government to come to this point.

In May 2014, the government did recommend the majority of the committee's recommendations be adopted. Then, of course, the Office for the Ageing undertook public consultation and that subsequently meant releasing the bill for public scrutiny in January 2015. So here we are in June 2016, some 18 months after the Office for the Ageing—a government department—released the bill for public scrutiny.

The objects of the bill are to clarify the rights and obligations of residents and operators. It imposes disclosure obligations on operators so that prospective retirement village residents are more informed before they enter into a contract. The bill regulates all residency contracts, including contractual terms relating to termination, with the goal of improving clarity and transparency. There are also provisions contained in the bill which increase financial and operational transparency in both documentation and operator practices.

Before I go to the other points that this bill addresses, I am pleased to see that whilst it has taken too long, the government has come up with a bill which, for most intents and purposes, Family First believes is a reasonable outcome for both those people who buy the licences (the licensees) and the organisations which provide the licences (the licensors) to retirement villages. In my experience as a member of parliament, working with constituents in retirement villages and retirement village developers for over 21 years, it is fair to say that you do have to consider both.

As an ageing population, there is growth in the demand for retirement villages. We have to be careful that we do not end up with a situation where we become so bureaucratic in the way retirement villages are managed that those people building them simply say that it is too difficult and that there is not enough margin in it for them, and they pull out. That would be a shame because there are a lot of good things that occur when people move into retirement villages.

For the most part, major developers such as Lifestyle SA, which is a section of the Fairmont Group, do a really good job with their retirement villages, as do some not-for-profit organisations. Some of the church groups which I have worked with also do a good job. Then you find others, often single developers, that have a dream to develop a retirement village. I am sure they have the right intentions, but they also intend to make a profit on the retirement village industry, and sometimes promise more than they deliver.

Sometimes, they are not as transparent in the way they go about their general meetings or in showing the books to residents when it comes to the input costs (or what is often referred to as the outgoings) of that retirement village. We know that every resident and owner of a retirement village must contribute to the outgoings of that retirement village. There have always been debates about the amount of profit that a retirement village should make when it comes to the disbursement of the sale proceeds of a retirement village home when those residents decide to leave. There have been some really bad cases. There is one that I dealt with in the southern suburbs for many years.

I can remember having a meeting with the then attorney-general and minister for consumer and business affairs, the Hon. Rob Lawson, taking him down there to actually meet with the residents. That was probably the worst example of a poorly run retirement village that I have seen. When an operator can put advertisements in the paper and have displays that show they are going to have swimming pools, magnificent and grandiose meeting rooms and libraries, and the list goes on, and years and years later nothing has happened to actually meet their side of the bargain, when it comes to what I would call misrepresentation when they actually advertised and signed contracts, some things had to be tightened up. I do believe that the government has tried to do this.

Importantly, the bill includes a dispute resolution process to deal with grievances. I trust that these amendments will actually have teeth and will ensure that there is better dispute resolution than there is at the moment. The legislation seeks to strengthen the confidence of residents in the operation of retirement villages through better disclosure of key information and clarification of rights and responsibilities which will allow residents to make informed decisions. This is very important to Family First because that is where I have highlighted one of the weaknesses with some, albeit a minority, of the developers of these villages. One of my siblings has just recently retired into one of the Lifestyle retirement villages and has never been happier.

The Hon. D.W. Ridgway interjecting:

The Hon. R.L. BROKENSHIRE: She is somewhat older than me, yes. She deserves a long and enjoyable retirement. She has never been happier since she went into the Lifestyle SA retirement village and indeed the other residents who I have met there are also very happy. That is because when they go in there the contract and the advertising commitments are met, it is fully completed, and all they have to do is move their furniture in there, set up their residents' committee and start to enjoy a great social life as part of their retirement in that village and not have to worry about security, mowing lawns, planting gardens or any maintenance. They can go away for months if they want to and come back and know that it is all cared for.

Having said that, there are some who do not comply with that standard. The responsible agency, or the regulator, will have an increased capacity to monitor compliance with the legislation. I place this on the record so that, when the regulator does go back to have a look at the debate in the parliament and the intent of the bill, there will be no doubt that what certainly Family First as one party in the Legislative Council—and I am sure my colleagues would agree with this—wants to see is that regulator actually looking at their responsibilities with their capacity to monitor compliance with what is the intent of the parliament. That is, to actually exercise the strengths that they will have with these amendments to this bill and take that very seriously and solve problems, mediate through problems, and get results.

We have been advised in briefings that this bill is part of a trio of government reforms aimed to improve the retirement village sector. The other two measures were, firstly, the release of the better practice guidelines developed in consultation with stakeholders and industry and residents of retirement villages, and, secondly, the establishment of the retirement villages advocacy service which will provide support and representation to residents when dealing with operators or attending the tribunal.

The key justification behind the government's push for these reforms is that the current act is nearly 30 years old, hence reform is needed to address changes in the industry and increase protection for consumers. If memory serves me correctly, we have dealt with this act before and it needs to be reviewed on a regular basis to keep pace with the ever-changing landscape of retirement villages and the opportunities that they offer South Australian retirees.

The major amendments are key definitions are clarified; contracts must include disclosure statements, and this is a measure that seeks to ensure potential residents better understand their contracts. This also seeks to improve transparency of all fees and charges up front. I believe when you talk about this we also should have the regulator having a look at evidence when complaints come forward from the committees of retirement villages about what I can only describe as inappropriate use of the funds at times.

I do not believe that funds that are for outgoings, maintenance and running costs of the village should be used as a bank for any developer to be able to do further capital investments. That should be totally separate; it should be absolutely kosher. I know at times there has been evidence put to me that, once the investment fund for the outgoings and the general running costs accumulates, it is being used as a form of bank by the proprietor. I do not believe that has ever been the intent of the legislation.

The particulars of the disclosure statement will be prescribed by regulations. I say to those licensees on the committees: if they have problems when they see those regulations, Family First would be keen to hear from the committees, and we would be prepared to look at whatever needs to be done to ensure that those regulations regarding disclosure statements are within the intent of the debate with the legislation and the parliament.

The disclosure statement must be provided to a prospective resident at least 10 business days prior to the signing of the contract, and the residents will then have a 10 business day cooling-off period. There are quite a lot of other requirements within the disclosure statement with which we sit comfortably, and importantly it does outline the circumstances in which residents must pay what is deemed to be a special levy. It must disclose interests an operator may have in services provided in the village so that there is full transparency, disclosure of any financial contractual relationship between an operator's villages and disclosure of the option for early repayment of an exit entitlement when entering aged care.

The third key component is that, regarding aged-care repayments (and this is a big one), residents can apply for the village operator to cover daily payments for an aged-care facility until the village unit is relicensed. These aged-care repayments would then be deducted from the final exit entitlement, and it provides more flexibility for residents to transition into aged care. This is an important aspect of the bill, because the intent and desire of people, when they move into a retirement village, is that that is where they will stay, but sadly the reality is that for some they do have to move on to aged care, and that becomes a very difficult financial burden for them. This will be an improvement for the benefit of those residents needing an aged-care home.

The fourth point is changes to premises conditions reporting, that is, that a new premises condition form must be completed within 10 business days of a resident being entitled to occupation of a residence, must be signed by both parties and the new report aims to accurately reflect the 'as is' condition of the residence when a resident takes up occupation. Really that is no different from what should happen when a tenant moves into a home to rent.

There are other amendments; new provisions that allow for a person to avoid giving information if the information will incriminate the person of an offence under the act. The costs of independent valuations are to be split evenly between parties, and adoption of surplus or deficit policies should be adopted by special resolution of the residents.

I now come to what I think is the absolute key point in this legislation, and that is what is known as the mandatory repayment of exit entitlement. Originally under the draft bill the exit entitlement was paid by an operator to the outgoing resident after 12 months of the resident choosing to leave the retirement village. That has been increased to 18 months, based on feedback given to the government. Apparently, I am advised, it was also a compromise with the Property Council, which actually wanted to abolish mandatory repayments of exit entitlements altogether.

The 12-month repayment would potentially have caused poorer capital gains returns for outgoing residents, as operators are under pressure to sell the unit before the 12 months, and hence perhaps would be more likely to take a lower offer. There is a counterargument to that, because the way profit share, as I understand it, occurs with a retirement village, there is a definite incentive for the owner of the village to try to maximise the return on the sale of that property for the benefit of both the licensee and of course the owner of the property.

An exit entitlement is generally a sum of money that is paid to an outgoing resident, minus any fees and costs imposed by the operator. Exit entitlements vary according to the contract between the operator and the residents. Operators, however, are not able to contract out of mandatory repayment of exit entitlements, so effectively after 18 months if the unit is not sold the operator must buy it back from the resident in the form of an exit entitlement.

As a party we agonised over this and there is still an argument that the 12 months would have been more beneficial to the licensee, but as I said earlier in my second reading speech, it has to be a two-way street. We have to get people investing in these retirement villages as well as looking after the residents and, all things being equal, it appears that the acceptable compromise is 18 months. I add that if the retirement village is up to the standard that it should be then one would have thought that most times you would end up selling that property well within 12 months in any case. That has been a big issue for some time and I hope that this will be a better outcome for all those involved.

I note that the Property Council had concerns about the bill preventing any leasing of units that have not been sold. Some residents prefer leasing arrangements as they are able to move into a village at their own pace especially because of the significant lifestyle change. The Property Council went on with quite a lot of reasons why it was lobbying for more flexibility, I guess, in summary for the developers.

On the other hand, the South Australian Retirement Villages Residents Association (SARVRA) which I have worked with for a very long time and which has had great chairpersons, are very important in lobbying and supporting the residents of those villages. I understand they were not supportive of the government increasing the statutory payment of exit entitlements to 18 months and, as I have already said, I can understand why they were not. I think 12 months would have been a better period of time but this is a compromise between both sides and I think the government has tried to find a middle ground, if I can put it that way.

I understand that SARVRA understands that this is a compromise between the government and the Property Council and that it is supportive of the ability for residents to be able to remain in their village units during the relicensing period. SARVRA believes this will prevent hardship for those who wish to leave but would have to rent another residence for an indefinite period whilst waiting for their exit entitlement.

SARVRA did raise concerns about clause 26(7), the 18-month statutory payment deadline if special circumstances exist. They also raised concerns about clause 29(3), the operators must make daily payments to meet the cost of an outgoing resident taking up residence in an aged-care facility—they had strong arguments there—and also with disclosure statement clause 20, SARVRA made representation. In relation to premises condition reports in clause 22, SARVRA wanted premises condition reports to include an approximate period for the replacement of capital items—that is, buildings, equipment, fixtures and fittings and furnishings—to facilitate the pro rata payments by residents for refurbishment costs. To me that is not an unreasonable request.

Finally, I understand at clause 20(14) they recommended that where a resident disagrees with the operator's estimated market value of a unit they should be able to get an independent valuation from a list of recommended valuers provided by the Office for the Ageing. I understand that that will be the case. I am advised that the Liberal opposition in the House of Assembly has supported the bill and it has passed without amendment. It is never going to be perfect for both sides but I think this is a good improvement on the legislation that exists at the moment. I suggest and encourage the government of the day to have a thorough look at where this legislation is up to every five years.

As I said at the beginning, and I finish with, there does have to be a point where we can get people to make enough profit out of these villages to invest in them in the first instance, and we also need to ensure that we have proper protection to allow and facilitate enjoyable affordable living for those who are seeking this style of retirement. I believe at the end of the day, whilst it has taken a long time—as I said, three years, pretty much—the government has achieved a good outcome. With those words, Family First supports the bill.

Debate adjourned on motion of Hon. G.A. Kandelaars.

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