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Thursday, 18 September 2003
Page: 20546

Mr GRIFFIN (9:46 AM) —I would like to bring the attention of the Committee to a recent article in Choice magazine regarding concerns about retirement villages. The article, which is in the most recent issue of Choice, highlights a range of concerns. As members are aware, we are heading into a time when there will be a larger ageing population. The fact is that retirement villages are becoming a major choice for elderly citizens who are considering how they will spend a significant part of their lives post-retirement, and that leads to the issue of needing more detailed levels of care. The article shows that there are a number of issues which need to be looked at to ensure that people make the right decision in choosing a retirement village and that, if they do not, it can come at a significant cost to them.

Of course, many operators in this area are doing the right thing. There is no argument about that. But there are significant examples of, and real concerns about, what can happen to elderly and frail residents in certain circumstances. Some of the issues that were highlighted point to the need to be really clear about what you are getting when you go into a situation like this. One issue that was raised in particular was that of departure fees. These are essentially fees that you may incur if you leave earlier than you would normally expect. I will read from the article a particular example which I think highlights this problem in some detail. It states:

The Retirement Village Residents Association of NSW provided this example to illustrate the impact of ongoing fees and departure fees.

A person moved into a village in November 1999, occupying a leased, two-bedroom, den, two-bathroom unit. His entry cost was $350,000. Monthly fees paid for village administration and maintenance were $400 (or $4800 per year).

Unfortunately he had to move out of the village and sell his lease after almost three years. Departure fee calculations were made on the basis of three full years as a resident.

He sold at $435,000, and his contract stated that he would be charged a deferred management fee and 50% of any capital gain.

The deferred management fee amounted to $26,250 (2.5% of $350,000 for three years). The capital gain cost was a further $42,500 ($435,000 less $350,000 = $85,000; 50% of $85,000 = $42,500). He was also charged $13,050 as an agent's fee, plus there were legal costs and the cost of replacing carpet and other items.

The resident ended up with $347,700—just less than the original entry price, but three years later. In other words, when considering ongoing fees and departure costs, he paid out a total of $101,700 or $33,900 per year to live in the village.

This was a self-care situation. The cost would be much higher if living in an assisted-care unit with food and cleaning provided.

This highlights some of the concerns here. I have raised the issue with Graeme Samuel at the ACCC. I believe it is something that they should be looking at, because it is an issue which is of concern to many residents throughout this country and will continue to be in the future. (Time expired)