06 December 01

Media and Interest Groups Briefing

The development and proposed introduction of a Retirement Villages Bill has been long awaited by many people associated with retirement villages, either as residents or their advocates, e.g. Grey Power/Age Concern, or owners, lawyers, developers or financiers who each have an interest in this important sector.

It is with pleasure therefore that I welcome you here this afternoon to brief you on the government's decisions on the proposed legislation.

I am not in a position to give you a copy of the proposed Bill, as it won't be tabled in the House for another couple of weeks. However, the policy decisions have been made, and with Christmas coming I felt it was important to undertake this briefing now rather than wait until the Bill was tabled.

Setting the scene
With 300 villages and 20,000 residents already, coupled with a predicted growth rate of 6% a year, retirement villages have, over the last 10 years, emerged as one of the most significant new developments in the residential arrangements of older New Zealanders. It is an extremely varied industry that has sought to respond to the equally varied needs of older people who in their retirement, are looking for housing options that can accommodate their desire for security and independence, lifestyle choices and service provision. Villages vary in size, in the range of services and facilities offered, in price and investment arrangements. This has posed a major challenge for the drafting of legislation. The legislation that I will be introducing, while primarily focused on consumer protection, manages to strike a balance between the interests of the owner or operator of a village and the interests of the residents. This is an approach that will result in reduced compliance costs for those in the industry, and, at the same time, offer greater protection for residents.

The vast majority of residents of retirement villages who have written to me, or have spoken to me, have said how much they enjoy the lifestyle that goes with living in a retirement village. Then come the 'buts'.

It needs to be said that the numbers of villages where there are significant problems, are few. However, where they occur, the impact on residents is substantial. The frustration is that a best practice approach could address these problems. Unfortunately, it has become clear that the sector as a whole will not undertake this responsibility without the imperative that legislation can provide. This Bill is very much about roping in the 'cowboys'.

At this point I would like to acknowledge the Securities Commission, which has offered protection to residents up until now. The Commission has provided an important framework to address financial concerns, and the fact that NZ has not experienced some of the appalling examples of financial ruin in the development stage, stands testament to their influence. It would be fair to say, though, that many of the concerns that have been raised by residents do not sit comfortably within a regime established to deal with financial securities. It is for this reason that I rejected the Law Commission's proposed Bill, which in my view did not go far enough beyond the financial issues associated with retirement village living. That being said I do acknowledge their work as their report to the previous government in 1999 gave impetus to today's announcements.

I would also like to recognise the Retirement Villages' Association in its efforts to promote quality standards within the sector. Its energy and dedication on behalf of all villages, in an environment where membership is entirely voluntary, has been commendable.

So what am I seeking to address in the legislation?

The main measures in the legislation will be:

All villages covered - The legislation will cover all villages and an inclusive definition will be applied. This recognises that risks and problems for residents, and consequently the need for protection, are the same for small and large villages. Existing villages will be given 12 months to comply with the legislation.

A comprehensive Disclosure Statement - The Bill will fully and carefully prescribe the information that villages have to provide to intending residents. The Disclosure Statement itself will be legislated for through regulation (to make it easier to change and keep current) and will:

• Be very specific on the range and type of information and require it in a single document within a standard format;
• Require it to be presented in easily read language;
• Include warnings to prospective residents to take legal or financial advice;
• Be capable of amendment through regulation.

The Disclosure Statement will be the key document, working on the premise that a sound understanding of terms and conditions and their implications will prevent problems later. I intend to work with organisations such as Age Concern, Grey Power, CAB, and the Law Society, to ensure that people are aware of the implications of the information set out in the Disclosure Statement. Intending residents need to be able to identify what is important for them in choosing a village and make their choice accordingly.

Cooling-off period - There will be a cooling-off period of at least 10 working days during which residents can rescind their decision to buy into a village. Villages will be able to offer a longer cooling-off period if they wish.

Code of Residents' Rights - Every village will be required to have a Code of Residents' Rights that, as a minimum will establish residents' rights as to a range of matters, including rights to:

• Information that affects their residency such as changes in charges or in future developments, etc
• Make complaints and have them heard.

Individual villages will be able to add value through additional rights.

Standards for contractual documents-The legislation will provide that contractual documents relating to occupancy in the village and access to services and facilities must be consistent with the Code of Rights and Code of Practice, and contain certain provisions and information.

Statutory Supervisors - Every village will be required to have a statutory supervisor to represent the collective interests of residents, especially in such matters as negotiations with owners on the fulfilment of village developments.

Disputes Resolution Process - Every village will be required to have a robust disputes resolution process. Residents should have an opportunity to have disputes heard and resolved fairly. The legislation will formularise the process to achieve this.

Registration Process - All villages will be required to be registered as such with the Companies office. Registration will be effected when all the key documentation associated with the village and the offers it makes to intending residents, such as the Disclosure Statement, is lodged with the Companies Office, in the style and format that is set out in the legislation. The Companies Office will be able to refuse registration to villages that do not comply and impose penalties if appropriate.

Monitoring of Legislation - The Retirement Commissioner will have a role in monitoring the effectiveness of the legislation, information collection and public education.

Industry Code of Practice - The proposed legislation will require the development of an Industry Code of Practice to be developed by the industry and, once approved by the Minister responsible for the legislation, will be binding on villages. The legislation will not be prescriptive as to the detail but will provide that the Code addresses aspects such as staffing, safety, fire protection, security, and terminations. These are all matters that are the responsibility of village management and for which the industry needs to be involved in establishing quality standards and practices. In default of the industry developing an acceptable Code, the responsible Minister has power to establish a Code binding on all retirement villages. Provision will be made for the Code to be amended or replaced from time to time.

Sanctions and Penalties - Breaches of the legislation will incur an appropriate range of sanctions and penalties aligned with the Fair Trading Act.

Example of complexity
One specific issue that I would like to address that I know has been of concern to some residents and their families, is the difficulty they have experienced when they leave a village. It is an aspect that exemplifies the difficulties of legislating for such a wide and diverse industry. When a person dies or leaves a village they often have to pay for some of the ongoing service charges, such as those that cover rates and insurance, until the unit is sold, when they get their refund.

The issue is who covers the cost - the person exiting the village, the owners of the Village or the remaining village residents? The legislation will not answer that question, but I expect the Industry Code of Practice to address it. The bottom line is that to be too specific or detailed in the legislation could disadvantage some residents or types of villages.

Nevertheless it is an area where I believe the industry can establish best practice to assist former residents and their families in that situation. Consequently it is an aspect that the legislation will signal to the industry for consideration in respect of the industry code of practice.

Conclusion
The Retirement Villages Bill will address the needs of retirement village residents in a comprehensive way ensuring appropriate disclosure of all information necessary for intending residents to make sound decisions about buying into a village. It will also ensure their rights are respected while they live there and that fair and sound practices are followed in the management of villages.

I will be working with the many groups representing the interests of older people and with information agencies and professional bodies, to ensure that the measures that will be in the Bill become well known and that prospective and present residents will be able to take advantage of them.

The next step will be for the Bill to be introduced into the House. It will then be referred to a Select Committee, which will call for submissions. This means that the government gets the benefit of a wide range of views, and will strengthen the resulting legislation.

I would like to thank my officials in the Senior Citizens Unit, who are not usually directly involved in legislation, the Ministry of Social Development, which has provided real assistance, John Greenwood, the lawyer who has worked closely with officials, the reference group which has been made up of individuals from Grey Power, Age Concern and the industry. And I finally want to make special mention of Cliff Cook from the Retirement Villages' Association, and Christchurch lawyer, Leo Steele, who spent valuable time updating my knowledge of one of the most complex aspects of land law.

I look forward to progressing this matter, and I am happy to take any questions.