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Retirement Village deferred management fees

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ghotib

ghotib

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Judging by the nursing home thread, quite a number of people here have elderly parents.

Does anyone have a good understanding of how deferred management fees work and what legislation governs them? My questions are a bit technical and specific to on situation, but the gist is that we - my siblings and I - think our 80-something year old Mum has been dudded, and we're not sure how or who by. We'll be seeking legal advice if she'll let us, but we want as much information as we can find first.

I'd appreciate hearing from anyone who's dealt with management fees in a professional or personal capacity.

Thanks,

Ghoti
 
Ghoti, there are many different financial structures that can apply to retirement villages. Originally they all seemed to have these deferred fees, but I've noticed recently there are more and more who are offering "100% of the capital gain and no deferred fees".
Now if that's the case, you'd have to ask how the retirement village is making its money. Perhaps they have very high weekly fees. It's a claim I'd be suspicious of and would definitely be getting a legal opinion before signing to enter.

My only personal experience is of the village my mother lived in (in NZ) for a couple of years before she died. I think most of them involve a "Right to Occupy" type of lease. Never heard of one where you actually own the land.
She paid $x on entry, and her estate received just two thirds of this amount back after she died. i.e. the village owners claimed all of the capital gain (and it was significant) plus a third of her original purchase price.

So it's a shocking deal financially, but the upside is that she loved it there, and was really well looked after.

There are also the villages that have the little freestanding houses similar to those you see in caravan parks and holiday villages. I gather the purchaser in these retains the right to sell themselves, retaining any capital gain.
For some obscure reason people living in these places can claim rent allowance from Centrelink if they are on a pension.

So as far as I know, many opportunities to be horribly ripped off, and I'd be seeking a legal opinion if there's anything at all questionable.

Sorry, don't know anything about any central body that oversees the industry.
 
There is the 'Retirement Vilage Association (RVA) Limited and Minter Ellison's Australian and New Zealand Village Legislation Compendium.
 
Thanks for that noirua. Julia, this is a deal where the village takes part of the capital gain. We all knew that when she moved in; the complication now is that there's been another sale and purchase which has affected the timing of things. That doesn't make much sense I know, but I don't want to go into any more detail.

We're just collecting information at this point. Anyone else know anything else?

Thanks again

Ghoti
 
Deferred management Fees. Another great business opportunity made by and for Macquarie Bank and a host of other financial leeches.

The short story Ghoti is that the BIG, BIG bickies made by owners of retirement villages is the deferred management fee taken on the sale of the property. If they have been really effective in their fine print they will also charge for refurbishment to bring it back to original condition and control who it gets sold to and at what cost.

In legal circles it could be called unconscionable behavior but to the general public it's just another dirty scam.

Alternatives? I've seen a couple that are interesting. As mentioned the relocatable home villages idea is taking off. In effect you are simply renting a site to place your relocatable home. These can be quite excellent places depending on the developer. If placed cheek by jowl in a scungy area not so good. I did see a nice development in Nagambie called Kelvingrove Relocatable Home Village. Address is 127 High st Nagambie. Phone 57 942 681

Also I did actually find one retirement village that did not have an exit fee. In fact their literature made a point of highlighting how greedy these fees were. It was called Jefferson Place in Garfield just past Pakenham in Victoria. Don't know what has happened to it but contact details on teh brochure were 1300 765 788.

Best of luck with challenging the exit fees...:banghead:
 
Thanks again. After a couple of days to calm down and do a bit of online research I've come to the conclusion that things could be enormously worse. Mum owned her cottage by strata title and had full control over the sale. Apparently there are some agreements where the village, not the "owner", sets the sale price. If she'd been in one of those she'd still own an empty cottage and be responsible for monthly levies on both the cottage and her new apartment. The deferred fee is a percentage of the sale price, and the percentage could have been a lot higher than it is too.

In fact, I now think it's most likely that the village management have been caught out by head office, who don't see the residents every day but do see the corporate financials. My mum lived in her cottage for 15 years through several changes in the structure and ownership of the village, multiple changes in legislation, and a dramatic growth in the supply of similar villages in the area. We've stayed in loose touch with the state of the market and we all checked over the various notices about the other things to see if there would be any immediate effects. We knew there would be a deferred fee to be paid one day, but we didn't foresee these exact circumstances. Staff on the ground told us one thing about what would happen and head office did something else.

Over all we're lucky. The family still think Mum has been dudded and we'll still try and get at least some of the money back for her to use herself. But even if we don't succeed she has enough for what she wants, she's happy and in control of her day-to-day life, and the village itself is terrific.

One general comment: the controlling entity is a mutual, not a company. If I reach extreme old age, I surely do not want my well-being to be a cost centre to a for-profit company, and particularly not a public one.

Ghoti
 
ghotib said:
Judging by the nursing home thread, quite a number of people here have elderly parents.

Does anyone have a good understanding of how deferred management fees work and what legislation governs them? My questions are a bit technical and specific to on situation, but the gist is that we - my siblings and I - think our 80-something year old Mum has been dudded, and we're not sure how or who by. We'll be seeking legal advice if she'll let us, but we want as much information as we can find first.

I'd appreciate hearing from anyone who's dealt with management fees in a professional or personal capacity.

Thanks,

Ghoti
Click to expand...

This may be helpful - retirement village costs!
 
The issue of Retirement Village fees has been brought back to focus by a series of articles in the Fairfax Press over the weekend.
Short story is that Aveo has taken the bit between it's teeth to maximise the commercial returns from it's Retirement villages. The biggest profits come from turning over residents and ensuring a financially healthy exit fee. A key focus of the recent articles was the case of a guy whose partner died and was then told he had to leave the village because he had no right to stay. This story apparently has been played out in many different forms.

4 Corners will run the story tonight. Has anyone else had experience with these situations? Is this going to pose a commercial risk to Aveo and it's plans to substantially improve the profit from it's Retirement Village portfolio?

https://www.aveo.com.au/wp-content/...15-AOG-HY17-Financial-Results-Presenation.pdf
http://www.abc.net.au/news/2017-06-24/elderly-exploited-in-aveo-retirement-villages/8645876
 
I was reading about it on the weekend, if it's factual, there should be a Government investigation.IMO
 
No surprises on the Stock market. Aveo has dropped 8% under heavy selling. They have released a statement that attempts to answer the questions posed by Fairfax/4 Corners.

This story didn't just happen in the last few months. Adele Ferguson wrote about Geoff Richards who was churned out of his retirement home after the death of his partner in 2016. This guy was a CPA with his wits still on show. Didn't matter.

http://www.abc.net.au/news/2017-06-26/regulators-gone-missing-in-retirement-village-industry/8647990

I was more interested in the financial report they released earlier this year that outlined how much of a profit increase they expected as they rolled out their new contracts.

https://wcsecure.weblink.com.au/pdf/AOG/01868327.pdf
 
Tripled in price in the last few years but stalled since late last year.

A few sellers in the queue this morning !

Weekly chart (click to expand)

AOG W 230617.jpg
 
This may be a little overblown by Auntie.... or it might succinctly describe AOG business model.

Watch 'Bleeding Them Dry Until They Die' on Four Corners at 8:30pm on ABC TV on Monday night.
 
Beggers the question of why the Govt is having to intervene on activities that their legislation should have already kept pace of. The ABC seems to be the policeman these days and parliament a reactionary force.
 
Jenna Price has nailed the issue quite well.

Federal government must step in to protect against predatory retirement villages
.......
He's (Yates) dealt with many people who've had advice from lawyers and financial planners. But "90 per cent of those lawyers and financial planners don't understand retirement village contracts", he says.

Too many people start too late. They leave it to the last minute.

That means people end up paying sign-on fees, maintenance fees and what can be called deferred-maintenance fees, more usually called exit fees. And there's plenty of trouble there. For some strange reason, buying into a retirement village isn't like buying any other kind of real estate. You are likely to be charged a lot when you buy – but not get anything like that amount when you sell. With Australia's resilient property market, that kind of real estate deal seems too weird for words. It should work this way: you buy, the unit increases in value, and you get some of that benefit. Instead, if you leave or die, you may end up paying for the privilege.

Yates says too many retirees who bought into villages think they bought real estate. Instead, it's just a licence to occupy and the responsibility to keep up with all the fees, all the time. If a resident of a retirement village dies, it can take time to settle all the fees. He recommends buying in an area of high demand – but that demand can change, too. Some us move into these villages at 60 (most enter in the mid-70s) and can expect to live another 20 or 30 years.
http://www.canberratimes.com.au/com...tory-retirement-villages-20170625-gwycv0.html
 
It will be really interesting to see how Aveo attempts to justify it's practices as this story unfolds. My guess is that scores of other disgruntled clients will be contacting Fairfax/ABC when they see these stories and give their own experience.

Given that they are aiming for a churn of 1000-1200 clients per year and that they have been particularly aggressive in their offers in the past 1-2 years there should be many other stories.

The “get poor quick” scheme

Despite a groundswell of complaints, problems in retirement villages remain rife – particularly at Aveo, where even the savviest customers can end up defeated. So who’s in charge of the sector and how accountable are they?

Adele Ferguson
Sarah Danckert

Tim Allerton is no pushover. From his office on Kent Street in Sydney’s CBD, the experienced public relations professional is often called in when companies and big names are in crisis, including Seven West Media during its public relations disaster with former staffer Amber Harrison.

But he came up for an unwinnable battle when sorting out the sale of his aunt Joan’s retirement village unit.

He was pitted against retirement village giant Aveo – and in the end, he and his family had to surrender more than $150,000 in exit fees, capital losses and other fees.

http://www.canberratimes.com.au/interactive/2017/retirement-racket/the-get-poor-quick-scheme/
 
The issue of "Getting Poor Quickly" via Retirment Villages has been around for a loooonnnng time.
Came across this article which just echoes the current issues. Check out when it was written.

Caught in the web of retirement villages
Retirement villages - beware of the traps and rip-offs
Articles » Scams & Scoundrels » Caught in the web of retirement villages
Ben Hills
His voice is not much more than a hoarse whisper, thanks to the ravages of emphysema. He walks with gingerly stiffness, impeded by an iron brace on one leg. He cocks his head, straining to pick up conversations with the hearing aid implanted in one ear.

At the age of 89 the flesh grows weak, but there’s nothing wrong with the spirit of Fred Myers, retired these many years from his job as a Supreme Court judge and now leading a campaign for justice for his fellow residents at the Fernbank retirement village at St Ives on Sydney’s North Shore.

“If I was trying a case based on this contract,” he says, brandishing a thick bundle of legal documents, “I would set it aside as unconscionable. Unconscionable.” He rolls the word around on his palate, as if savouring the memory of judgments past.

http://benhills.com/articles/scams-scoundrels/caught-in-the-web-of-retirement-villages/
 
4 Corners ran "Bleed 'em dry till they die" last night on the Aveo retirement homes issue.

It did reiterate and expand on a number of the cases already discussed but it also introduced fresh material.
The most disturbing, in my eyes, was the treatment of resident Gwyneth Jones.
Short story is that Gweyneth is most definitely bright, energetic, no body's fool and fiesty. In essence the absolutely last person an organisation like Aveo would like to have in one of their centres.
So Gweyneth started to get ansty about the myriad ways Aveo drip feed off their residents. Apparently every single interaction asked by a resident incurs a fee.
$5 to put on a band aid. $5 to pick up a broken cup (because she couldn't get down) ad infinitum
The situation deteriorated to the point where Aveo decided that Gweyneth would be better off out of the place.

So how did they propose to achieve that ? Simple. Trash her with revolting allegations, get her committed to a psych ward, and then try to get a guardian to take over her affairs and move her out..

All these failed because it turns out she most definitely has her marbles in place.
Enough. Check out the story on line. See the 4 Corners program. Consider writing to Aveo and expressing your concern/disgust/apprehension at what you have seen.

PS. The title for the 4 Corners program came from Gwenyth Jones
http://www.canberratimes.com.au/interactive/2017/retirement-racket/bleed-them-dry/
http://iview.abc.net.au/
 
I don't think writing to Aveo would be any help.

People who do this sort of thing should be de-registered from operation in this country, their property confiscated and turned over to administrators who will do the job properly.
 

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