The Commerce Commission has written to 12 retirement village operators it says may have contravened the Fair Trading Act following a nine-month probe into the sector.
It launched its investigation in May 2023 after a string of complaints from Consumer NZ, the Retirement Commissioner and the Retirement Village Resident Association.
The complaints largely said terms in retirement village occupational right agreements clearly benefited the providers, as well as claiming misleading advertising about the availability of higher care for residents.
The commission’s letters, released under the Official Information Act, were sent between January 17 and January 19 this year to 12 retirement village companies:
• Arvida Group
• Heritage Lifecare Villages
• Tamahere Country Club
• Ultimate Care Group
• Metlifecare
• Ryman Healthcare
• The Vines at Bethlehem
• Althorp Village
• Coastal View
• Oceania Healthcare
• Omokoroa Country Estate
• The Grove Orewa
In some cases the occupation rights agreements (bought by residents to occupy retirement village units) used by village operators were found to have significant imbalances or a likelihood to cause financial detriment.
The village contracts found to have gone against the unfair contract term aspect of the Fair Trading Act were Tamahere Country Club, Metlifecare’s The Avenues, The Vines at Bethlehem, Althorp Village, Omokoroa Country Estate, and The Grove Orewa.
Relevant clauses related to maintenance, wear and tear, the billing of variable weekly fees, authorisation of collection of sensitive information, insurance liability, the discretion to carry out further development as it sees fit, as well as a clause absolving the operator of any pre-contractual representations.
The specifics for each village operator can be found on the commission’s website.
The commission has asked these businesses to respond and explain the interests it is seeking to protect by including the potentially problematic terms in their contracts.
Other villages were pinged for potentially misleading advertising under the Fair Trading Act relating to how the availability of onsite aged care facilities is promoted to potential village residents.
Being able to transition from independent living to a higher level of care is a major selling point for retirement villages, but the commission found the statements some players made could risk misleading the public.
In the case of Arvida, in 2021 its website said “Arvida communities provide a full continuum of care and can support residents who have a multitude of specific personal and health needs. Whatever your care requirements are, you’ll be in good hands.”
The Commerce Commission said this, and other statements on its website, gave the overall impression that further care and support services were available to a resident at their discretion, subject only to priority access.
The statement didn’t allude to contractual aspects, including a the requirement for assessment to determine the type and level of care required and that there were situations when the results of the assessments may require a resident to move out of their village.
The letters were released with a full-page bold disclaimer that they did not represent a formal finding of contravention of the law, which can only be decided by the courts.
It doesn’t intend to investigate the cases any further.
Retirement Village Residents Association chief executive Nigel Matthews said the group was grateful the commission had listened to residents and investigated their concerns over perceived unfair contract terms.
“Hopefully those operators that turned a blind eye will now take immediate action for the thousands of existing and new residents.”
John Collyns, executive director of industry body the Retirement Villages Association, said its members were fully committed to meeting the requirements of the Fair Trading Act, Retirement Villages Act and their code of practice.
He said the commission had identified “historic clauses” in a few operators’ occupation agreements not used by the majority of retirement villages.
He said though there were very rarely an issue arising from access to care beds, the group would also be seeking a declaratory judgment from the high court over the use of the phrase “continuum of care” to provide retirement village operators with clarity and assurance.
One subject it is pushing back on is the charging and calculating of weekly fees.
The Commerce Commission said price certainty was an important factor for consumers and an unilateral right to increase a price could give significant power to the operator unless counterbalances were in place.
Collyns said the association’s view was that the commission’s position did not fully reflect the reality of the retirement villages sector model, adding the level of the weekly fee either reflected the actual cost of operating a village or in most cases was set at a subsidised level for residents.
He said the weekly fee also played into wear and tear/maintenance coverage, with some flexibility for operators to charge higher fees and cover more maintenance themselves or vice versa.
Issues raised in the Commerce Commission’s probe are relevant to the Ministry of Housing and Development’s review of the Retirement Villages Act, the outcome of which is expected to be known later this year.
