Twelve retirement homes put on notice for care claims, contract terms

The Commerce Commission has put 12 retirement village operators on notice because their conduct risks breach the Fair Trading Act.

After complaints from Consumer NZ and the Retirement Village Residents Association of New Zealand (RVResidents), retirement village operators have come under fire from the Commission for their care claims and contract terms.

Consumer chief executive Jon Duffy said: "This is significant and speaks to the fact that our retirement village sector is in urgent need of fixing.

“Many New Zealanders who should be enjoying their golden years find themselves at the mercy of village operators wielding unfair contract terms and making promises about providing higher levels of care in their advertising, which is at odds with the small print in their terms and conditions."

Duffy said Consumer lodged a complaint with the Commission in 2021, pointing out some villages were misleading people with "continuum of care" claims.

Villages offering a continuum of care allowed residents to transition from independent living to hospital care, or anything in between.

While many village websites made bold claims about the continuum of care, many villages’ terms limited a resident’s rights and access to these additional services, Duffy explained.

“We are concerned the advertising used to promote many retirement villages has led people to believe they are assured of additional or hospital level care at their facility, when in reality, that care is not guaranteed."

He said continuum of care was usually only available at a village’s discretion and it could depend on availability of facilities, the village’s agreement, or a needs assessment that said an increased level of care was required.

“We have heard of people having to find somewhere else to live because the care promised in advertising was not available to them when they needed it.”

He said Consumer's complaint cited one operator, whose website stated, “take a weight off your mind knowing that if your needs change we have comprehensive care options that can be dialled up when needed.”

“In our view, creating the impression a service is a sure thing, when in fact it’s not, is misleading and is likely to breach the Fair Trading Act.

“Our own research shows that continuum of care really matters when people are weighing up which village is the right one for them.

“Given the significant investment individuals make when entering a retirement village, we think it’s outrageous how widespread the practice of misleading residents has become in the sector, as evidenced by the Commission’s review.”

The Commission has now written to 12 village operators to explain their obligations under the FTA and to help them to comply with those obligations.

"The Commission’s approach here puts the entire sector on notice and sends a strong signal that it must do better,” said Duffy.

The Ministry of Housing and Urban Development (MHUD) was currently reviewing the Retirement Villages Act.

Some of the key financial terms which RVResidents brought to the attention of the Commission would be looked at as part of MHUD’s review.

The Retirement Villages Association (RVA) said it is "pleased" the Commerce Commission won't be taking further action against any of the named operators.

"Every resident is required to obtain legal advice before they can sign any agreement, and the solicitor must certify they have explained the terms and the resident understands them. Monitoring by the Retirement Commission has found that the legal advice is generally good," executive director John Collyns said.

He said "historic clauses" were found by the commission and "are not used by the majority of retirement villages".

"No operator can ever give a guarantee of a bed, but in practical terms there is very rarely an issue, which is typically addressed promptly. The move to care obviously depends on a bed being available when required.

"Residents almost always get priority for beds in their own village, and of course in most instances the need for a care bed is something that becomes obvious over time. For most residents, the transition to care is straightforward and planned."

He said the RVA is exploring the idea of seeking a declaratory judgement from the High Court in order to provide retirement village operators with clarity and assurance.

"We are ready to engage with the commission on some of its other comments, such as changes to the weekly fees. Our view is the commission's position does not fully reflect the reality of the retirement villages sector model. The level of the weekly fee either reflects the actual cost of operating a village or in most cases is set at a subsidised level for residents.

"The claims we sometimes hear from some critics about a power imbalance between village operators and residents are at complete odds with what we hear from our residents every day."

Collyns said the sector has developed "best practice standards" around disclosing information around residents' transfer to care.

"We have made it clear we would like to see these incorporated into the Retirement Village's Code of Practice."