SA retirement villages accused of ‘unconscionable’ fee gouging

Residents of SA retirement villages are pleading with state and federal governments to crackdown on greedy operators.

President of the South Australian Retirement Village Residents Association Roger Adamson. Picture: Brenton Edwards

Residents of South Australian retirement villages have urged state and federal governments to crack down on operators’ “unconscionable” price gouging they say is costing families hundreds of thousands of dollars.

SA Retirement Village Residents Association president Roger Adamson said SA’s 26,000 retirement village residents were frustrated by a lack of action in cracking down on practices they described as rorts.

Mr Adamson, a retirement village resident for the past 15 years, urged state and federal governments to stand up to operators’ double dipping.

“We understand they (village operators) are there to make a profit,” Mr Adamson said. “They’re a business and every business needs to make a profit. But there’s also greed – and that’s not on.

Golden Grove Lifestyle Village residents Jim and Gill O'Neill. Picture: Brenton Edwards

“We are accepting normal business things, but it’s the gouging, the absolute gouging that they do in the double dipping with their fees and contracts.

“And I can’t see a government, any government, prepared to stand up and stop that.”

Mr Adamson said residents’ main concerns centred around exit fees they have described as exorbitant, costing them hundreds of thousands of dollars. Three aspects in particular concern Mr Adamson:

UNCAPPED capital contribution funds: Outgoing residents are charged a capital fund contribution on exit at 1 or 1.5 per cent of market value of the home per year of occupation. This money is ostensibly used to upgrade the homes. But, they are also charged refurbishment costs for individual items the provider deems need replacing.

ADVERTISING and marketing fees on exit: Outgoing residents are asked to pay tens of thousands of dollars to cover the advertising costs to resell the home. But most providers have a long waiting list for people to join, so there is no need to advertise.

UNCLEAR definition of refurbishment costs: As well as paying a capital contribution fund, residents are also charged thousands of dollars on exit to refurbish their apartments. This can include replacing items such as benchtops, new carpets and tiles – work that residents say should be paid for out of the capital fund.

Mr Adamson said updated legislation currently working its way through state parliament corrected some of these issues for future residents, but offered little relief for current residents.

“The state government has missed an opportunity here to correct an imbalance of rights between retirement village operators and retirees living in their villages,” he said.

“The changes provide future residents with more clarity and transparency of rules and fees that will be charged against their future exit entitlement … but they have not been prepared to protect the current residents in the same manner.”

Mr Adamson called on the federal government to redefine retirement village contracts as a financial, rather than real estate, transaction, meaning they would be legislated by the Australian Securities and Investments Commission.

A state government spokesperson said feedback received during public consultation on the Retirement Village (Misc) Amendment Bill 2024 identified that a retrospective cap on capital fund contributions had the potential to adversely impact some villages.

The bill also contains provisions around an operator charging reasonable costs when it comes to re-marketing the residence, along with strengthening the requirement to make clear on what the resident is responsible for in regard to refurbishment costs.

“Residents may apply to the SA Civil and Administrative Tribunal (SACAT) if they believe they are being charged fees that are inconsistent with what they agreed to in their residence contract,” the spokesperson said.

Daniel Gannon, executive director, Retirement Living and Property Council of Australia said given the significant challenges governments are facing with ambulance ramping and hospital bed capacity, the industry was proud to provide privately funded accommodation and care that has been shown to reduce visits to GPs and hospitals, improve the health and wellbeing of residents and delay entry into taxpayer funded aged care.

“For operators of retirement communities, significant financial decisions have been made based on the existing financial models which are underpinned by the commercial terms of residence contracts,” Mr Gannon said.

“Changing commercial terms through retrospective amendments to legislation would lead to significant financial and valuation problems for homes in these communities.

“We understand that stronger consumer confidence leads to stronger investor confidence, which is why industry has been working with government on sensible prospective consumer focused reforms.”