On Wednesday, 2 August, the Ministry of Housing and Urban Development released its anticipated discussion paper, The Retirement Villages Act 2003: Options for change. This is the latest step in the regulatory review which was announced in December 2022.
The Discussion Paper outlines proposals to change the Retirement Villages Act 2003 (and associated regulations and codes) and seeks feedback on the same. The Discussion Paper, summary and cost benefit analysis are available here. We are reviewing with interest and note some of our initial thoughts below.
The proposals in the Discussion Paper include changes to disclosure statements and occupation right agreements, both of which will be significant:
- We agree with the overall goal of making disclosure statements shorter and less complex. The proposals also look to increase the ability to hold operators to account for statements made in their disclosure statements (and made verbally). Operators will need to continue to take care in all representations made, including those made by sales staff, and to ensure they are reviewing and updating their disclosure statements regularly.
- Proposals to standardise occupation right agreements are more complex and require careful consideration to ensure the benefits of standardisation are achieved without succumbing to the pitfalls. Standardisation of ORAs was considered in depth in the Te Ara Ahunga Ora Retirement Commission Investigative Report 2021-22 available here.
Proposals front-footed by RVA / industry
A number of the proposals made in the Discussion Paper have been front footed by the Retirement Villages Association, including through the remits recently passed at its July Annual General Meeting. These include making it the operator’s responsibility to maintain and replace operator owned chattels, requiring better disclosure of information around transfer to care, and meeting healthy homes standards.
On fees, the proposals include requirements (i) to stop charging outgoings and accruing fixed deductions either immediately or soon after an ORA has been terminated and vacated, and (ii) for operators to pay interest on capital sums if the unit remains vacant after a period of time. These are matters which have already been adopted and endorsed by a large number of operators in the industry (particularly ceasing to charge / accrue fees on termination). The proposals also include a potential requirement to repay a resident’s capital sum within a fixed period after termination of an ORA (eg 6 or 12 months). Concerns by operators regarding the impact of guaranteed buybacks have been well canvassed in submissions on the previous White Paper, and we expect will be noted again in this consultation process.
Some sensible ideas
The proposal that operators no longer be required to hold full replacement cover and should be allowed to obtain sum-insured and collective policies is positive and reflects the reality of the current insurance environment. Legislating the requirement for statutory supervisors to hold security reflects industry practice and the role of the statutory supervisor and is appropriate.
Some for further consideration
Some of the proposals we are keen to consider further include the replacement of the existing complaints and disputes scheme with an independent dispute resolution scheme, the appropriate roles and powers of government agencies in the retirement villages system, and fiduciary duties to residents in the sale and transfer of retirement villages.
The release of the Discussion Paper on Wednesday began a period of public consultation on the proposals, which closes on Monday, 20 November 2023. The Discussion Paper and consultation will most likely result in a draft bill to amend the Retirement Villages Act being introduced to Parliament. If the bill passes and changes are adopted, there will be a transition period between when the legislation is passed and when the changes take effect, to allow the sector time to adjust.
If you would like to discuss the implications of any of the proposals in the Discussion Paper, please get in touch with our team.
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