Investing in a retirement village home, to see out our twilight years is one of the biggest financial decisions any of us will make.
But in some cases, the investment becomes a cause of significant financial loss.
Or as Alan Carrington says "the way we see it with our old man, it's a rip off, it's got to be".
Alan’s Dad, James Carrington, was a former soldier and builder. He’d served his country, and then served his wife and five kids by earning a decent living.
In 2006, as old age meant he and his wife Dulcie needed care, he chose to move in to Gracelands Retirement Village in Hastings. He thought he’d done due diligence on his contract, and was happy with the terms.
The deal was that he paid $179,000 for the villa, which would be in an as-new condition.
On leaving, he’d get back his $179,000 plus 50 per cent of any capital gain, minus the costs of refurbishing the villa to bring it back to as-new.
So what did as-new mean on moving in? Well, an old stove (that he had to replace), an old heater (that he replaced with a heat pump), dry cleaned drapes, and professionally cleaned carpets.
The only thing that was actually completely new was a lick of paint. But it was perfectly comfortable, and James and his wife Dulcie were happy.
They lived there for several years, then Dulcie died and James continued to stay there until April of this year, when his health had deteriorated to the point he needed to move into a nursing home.
All this time, he’d paid the usual monthly fees. It was also in the contract that he’d be responsible for exit fees of $45,000.
But he wasn’t prepared for the huge cost of refurbishment to bring the villa back to "as-new". The cost was $90,500.
Last time the refurbishment extended to a new paint job, and professionally cleaned carpets and curtains.
This time, it covered a completely new kitchen, a completely new bathroom, the addition of a new conservatory, brand new curtains and carpets, new light fittings, new plug sockets even.
The villa did sell for a good price, $420,000. That gave a capital gain of $241,000 to be shared, so $120,000 each. Adding the $120,000 to the original price James paid of $179,000 gave him $299,000.
But take away all the fees and the $90,500 refurbishment costs and James was left with just $137,000. That’s much less than he paid twelve years ago.
His family made contact with Gracelands, but didn’t get any satisfactory engagement. They paid a visit to the manager, but were told not to come back and simply to look at the contract. So they approached Fair Go.
We consulted Troy Churton from the Commission for Financial Capability. He is the national advisor on retirement villages. He spoke to a solicitor who confirmed that "as-new" should refer to the time that the occupant moved in, not when they moved out.
He also confirmed that refurbishment shouldn’t extend to brand new kitchens, and bathrooms, but just to the likes of paintwork, carpets and drapes.
Fair Go made contact with Gracelands. This time, the area operations manager Phil Harman took over the case.
I asked him if he thought the situation was fair, he said whether I think it’s fair or not is irrelevant, really it's what was agreed to in the ORA (Occupying Resident’s Agreement). When I questioned whether he’d like it to be fair, he said that yes that was why he was trying to work with the family to resolve it.
Sadly, two weeks’ ago, James Carrington died. The family wanted to continue to fight for his money on his behalf, and agreed to meet with Phil Harman.
They were keen for Fair Go to be at the meeting, but the Gracelands management barred us from attending. Negotiations followed, and finally, Gracelands agreed to pay $22,000 towards the refurbishment. It wasn’t as much as the Carringtons hoped to get, and at $159,000 was still less than they paid twelve years ago, but they were happy that management had admitted the situation wasn’t fair, and grateful for the contribution.
So could this affect you or your parents or grandparents? Well, contracts drawn up after 2006 have to be very precise about costs and fees, thanks to a new code of practice.
But many residents will have had contracts from before 2006. These should be checked, with the help of a lawyer, as it’s possible that changes could be made to bring them more into line with current agreements.
If you’re keen to find out more, take a look at www.cffc.org.nz which gives independent advice on all things relating to retirement villages.