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?
The “get poor quick” scheme
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.
![Tim Allerton. Photo: Janie Barrett
Tim Allerton. Photo: Janie Barrett](/images/transform/v1/crop/frm/GJZ5TVpAk84wrTzsQfLQRB/58c50c42-6549-456d-b284-c0d98dc7c40f.jpg/r0_41_980_592_w1200_h678_fmax.jpg)
Allerton is one of the many Australians who are left to pick up the financial pieces for relatives who have purchased a retirement village unit.
A Fairfax Media-Four Corners investigation has uncovered harrowing stories of financial loss experienced by some of our most vulnerable citizens who have bought into the retirement village sector. And many of these people are residents at villages operated by listed retirement village giant, Aveo.
Allerton’s aunt, Joan Buswell, bought a unit in Aveo’s Lindfield Gardens village in Sydney’s lush upper north shore in 2008 for $250,000. A single woman with a long career as a teacher, she moved into the retirement village after she could no longer look after herself. It was only when she died, at the age of 86, that Allerton learned of the financial mire his aunt had landed herself in.
![Joan Buswell Joan Buswell](/images/transform/v1/crop/frm/GJZ5TVpAk84wrTzsQfLQRB/de386f62-2bcc-4823-9475-77b557a5485e.jpg/r0_0_620_519_w1200_h678_fmax.jpg)
“The original lease contract was 172 pages, and it contained very dense definitions, charges and so forth, and perhaps at our fault, we didn’t investigate it as heavy as we should have, but we were looking for accommodation for her at the time, and that was our main priority,” he says.
Fairfax Media-Four Corners spoke to numerous current and former residents, their children, lawyers, former Aveo staff and lobby groups, and found some questionable business practices including churning, gouging, safety issues and misleading marketing and advertising. It uncovered a legislative framework that leaves the responsibility for regulating the sector to the overworked, underfunded consumer affairs bodies, NSW Fair Trading and Consumer Affairs Victoria, which don’t appear to have enough powers to help the people it is supposed to represent.
The media investigation found that “churn” is a key part of the business model with Aveo targeting and achieving a “turnover” of as much as 12 per cent per year, or 1200 residents.
That tactic is leading to calls by residents and consumer lobby groups for the competition and consumer watchdog, the ACCC, to intervene.
Aveo declined to be interviewed for the story.
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In a statement, the company said it was “committed to enhancing the lives of older Australians by improving living choices”. It said that Aveo rates very highly on resident satisfaction surveys.
In answers to a series of questions, Aveo denied it was more aggressive than other operators, saying its exit terms were more favourable and substantial than those available “from almost any other operator”.
It says it does not generate a profit from ongoing service fees and it does not have a policy to churn residents.
Like resident Geoff Richards, who Fairfax and Four Corners revealed had to leave an Aveo retirement village when his partner Harry Nash died, Allerton says Buswell was “encouraged” to move out and sell her unit when she became ill.
“Let’s put it this way, I got the impression they didn’t encourage her to stay and, effectively, they were quite happy for her to leave,” he says.
Allerton says the family considered appointing an external real estate agent to sell the unit but found it too difficult. “We certainly weren’t encouraged to get an outside agent,” he says. “We were told that we wouldn’t get the promotional support from the village and it was preferable to use Aveo’s own agents on site.”
![Aveo Lindfield Gardens near Sydney. Photo: Aveo
Aveo Lindfield Gardens near Sydney. Photo: Aveo](/images/transform/v1/crop/frm/GJZ5TVpAk84wrTzsQfLQRB/ce8238cb-2477-423b-9f1a-52a29b26bcc9.jpg/r0_0_620_349_w1200_h678_fmax.jpg)
When Buswell died in early 2013 it became even more urgent to sell the unit and wrap up the estate, particularly given the family were being charged monthly maintenance fees. “The maintenance fees, despite the fact she’d passed away at that time, were around $10,000 to $13,000 for each year, so it was just eating a hole in our pockets … and we were concerned there was a really strong prospect that we would end up with nothing if the apartment remained on the market for too long.”
Finally, the family dropped the sale price to $199,000 but still it didn’t sell.
After two years, a family member decided to do some secret shopping. “There was a musty smell that I had not noticed in any of the other units,” she says.
Allerton’s theory is that the unit wasn’t being shopped around. “I think just the smell of the apartment, the fact that it had been dormant for so many months, tended to make us a little bit jaded in our thoughts about their activity,” he says. “My theory was that they’d built a whole range of apartments on site and clearly the priority was to sell those first, and certainly when my family members went to do a mystery shopping exercise at the village, they were shown those first, and not shown my auntie’s at all,” he says.
When the unit finally sold, two-and-a-half years later, at a 20 per cent discount to the purchase price, the family ended up with $94,000from the original $250,000 investment.
“I think one of the most galling aspects of the exercise was the fact that my auntie had passed away, the apartment remained in our hands and yet the monthly bills kept coming in …
“The price was diminishing, to the point where we were actually thinking that we’d have to pay them money to escape.”
Property research house CoreLogic estimates that over the period of the purchase and sale of the unit, similar apartments in Lindfield rose in value by 38 per cent.
Aveo says units may not sell “for a period of time” due to condition of the unit, price expectations and market conditions.
It says it charges ongoing fees after departure like any other strata complex where the property is vacant.
It says its new Aveo Way contract “provides that, upon departure, residents do not have to pay any reinstatement or refurbishment cost for their unit, they pay no selling costs or sales commission, and are entitled to a buyback of their unit in either 12 months or six months (depending upon the state) and a refund of their exit entitlement.”
It says the lack of price growth reflected the market for serviced apartments in the area.
Allerton says the whole experience left a lot to be desired. “The whole thing from go to whoa, was opaque in terms of the charges, the contracts, the complexity of the arrangements, the fees, the ongoing fees after my aunt Joan passed away. It created a very complex picture on what should have been a pretty simple exercise,” he says.
Aveo stands accused of questionable dealings in its push to transform villages with freehold titles owned by the residents into leasehold properties where residents have less of a say over the destiny of the village.
Another twist
Retired diplomat John Lander – who was Australia’s first ambassador to Iran after the hostage crisis in 1974 – has just finished a long battle with Aveo. He moved into the Veronica Gardens retirement village, in Melbourne’s inner suburb of Northcote, in October 2014.
The 72-year-old was attracted to Veronica Gardens because it was freehold instead of the more common retirement village offering of leasehold. He signed up after his lawyer looked over the contract.
Months after moving in and seeing how the village operated, he decided to read the contract. That’s when he decided to leave.
“To be paying what amounts to a fairly high rent effectively per month on top of the capital you invested in purchasing the unit and then pay a fee of a third of your capital when you leave seems to me to be a recipe for financial disaster so I decided I should get out,” he says.
Lander believes buying into an Aveo is a “get poor quick scheme” and a process of impoverishment of the occupant. “It’s a financial sinkhole ... Once you’re in, it’s very hard to get out,” Lander tells the joint Fairfax Media-Four Corners investigation.
Lander lost $78,000 on the sale of his property after paying $70,000 in exit fees for his two-year stay.
But there would be another twist.
While Lander can’t talk about his final sale price, the transition of the village to “the Aveo Way”, where freehold properties are bought up and resold as loan leases, resulted in his property title transferring to Aveo rather than the new resident.
Aveo’s conversion of freehold to leasehold is a key issue for many residents, says Lander.
“The outgoing owner gets their money but Aveo takes possession of the title,” he says. “One of our members protested at this presentation and said, ‘But that’s theft,’ and the Aveo representative said, ‘Oh no, it’s simultaneous transfer of title,’” Lander says.
The game they play
Aveo says allegations the company obtains the freehold for virtually nothing are “absolutely false” and units are purchased at a market price.
“There is no evidence that switching to leasehold has disadvantaged ongoing residents, who cannot be compelled to change to the new contract, or exiting residents.”
Aveo says its new Aveo Way contracts are simpler and give residents more certainty. It says this new contract doesn’t charge for refurbishment and reinstatement costs.
The process of buying up freehold and converting villages to leasehold is happening at Aveo villages around the country, including Mountain View in NSW’s Murwillumbah. It is part of the company’s recent business initiative, known as “the Aveo Way”, where Aveo acquires freehold rights at virtually no cost to the company.
Rod Bourke died trying to sell his unit in the Mountain View retirement village.
He moved there in 2010 and within a year he put it up for sale, appointing Aveo as the real estate agent. In 2016, at the age of 86, he died and the unit still hadn’t sold – then Aveo made a lowball offer to buy it.
Therese Toohey – Bourke’s daughter – says she sent email after email to Aveo saying, “Could you please explain to me how a unit that was worth $165,000 is now worth $119,000? How can something fall back in price so much?”
“The real estate around Australia at the moment, most cities, is going ballistic, it’s going berserk.”
![Therese Toohey with her father, Rod Bourke. Therese Toohey with her father, Rod Bourke.](/images/transform/v1/crop/frm/GJZ5TVpAk84wrTzsQfLQRB/23e3cd1e-968d-4c17-8b17-e3dc375eb2f5.jpg/r0_0_620_519_w1200_h678_fmax.jpg)
After exit fees and other fees, she would get back $81,000. She refuses to sell. Toohey says her father felt trapped. “I remember walking with him on the beach and he said, ‘I just hate it there. I don’t want to be there. It’s not the place I want to be, I just don’t like it.’ I said, ‘I understand. Well look, let’s do everything we can to move you’,” she says.
She said he felt that he was being exploited. “He felt ripped off. He felt as though the small amount of money that he had accumulated, someone was taking from him … and he couldn’t understand how anybody morally could do that kind of thing.”
Part of her decision to speak up now was to make it right for her father and all the other retirees who suffer in silence.
“We didn’t have a chance when he was alive … I kind of glazed over it a little bit and that’s the guilt and that’s the shame that I feel for not having paid more attention,” she says.
Toohey believes Aveo exploits this. “It’s a great game they play. When we get older, we get vulnerable, our voice becomes weaker and people just don’t listen and don’t pay attention, then the children are busy and just want their parents to be happy,” she says.
Aveo says that if a product has not sold for six years “it suggests that the resident has been unwilling to meet the market”. “It says the unit may be overpriced, “not of a standard that meets current market expectations or there is another issue such as no car park available or the resident still resides in the unit.”
It seems nobody is listening - not the politicians nor the regulators.
The too-hard basket
“I think organisations like the ACCC who are tasked with pursuing investigations into and prosecuting corporate malfeasance really need to become involved in looking at how this happens,” Lander says.
Despite it being a multi-billion-dollar industry, the regulation of retirement villages at a federal level has fallen through the cracks. They are not in any federal minister’s portfolio.
Consumer Action Law Centre chief executive Gerard Brody is urging the Australian Competition and Consumer Commission to become involved. “The regulatory framework is a mess. There is different legislation in every state,” Brody says. “For too long retirement living has been put in the too-hard basket by various regulators, and politicians, and policy makers.”
And while there have been calls from lawyers like Brody and residents over a decade for the federal government to take responsibility, nothing has been done.
As far back as September 2007, a parliamentary inquiry – which included in its membership Tony Abbott and Malcolm Turnbull (albeit for a short period) – was aware of the problems. In a report titled Older People and the Law, the inquiry recommended the ACCC look at exit fees to see if they should be abolished.
“The Committee believes that the ACCC, in consultation with its state and territory fair trading colleagues, should be playing a stronger role in monitoring consumer protection for retirement village residents,” the report said. “While the matter should continue to be managed at the state level for the time being, should there be insufficient improvement in the level of protection for consumers, the Australian government should consider regulating this industry using its powers under Corporation legislation.”
It supported the concept of a statutory supervisor, such as the creation of an ombudsman, and found that contracts were too complex and some of the advertising was misleading. The report’s recommendations were never acted on.
Fairfax and Four Corners approached Rod Sims, head of the ACCC for comment, but in a statement the ACCC said: “The specific state legislation will often be the most suitable regulatory avenue to address many concerns.”
It went on to say it shares responsibility for enforcing consumer law with state-based fair trading agencies.
Federal Minister for Aged Care Ken Wyatt said in a statement: “Retirement villages are governed by state and territory legislation and not by the Australian government.”
In 2011 the Productivity Commission reviewed the sector and again recommended further regulation.
And more recently in 2016, the Victorian government held a parliamentary inquiry that received nearly 800 submissions, the vast majority from elderly residents aggrieved by the financial rip-offs in the sector.
In March this year, the inquiry recommended training lawyers to understand retirement contracts, improving dispute resolution mechanisms for retirees, including possibly introducing a new ombudsman for the sector.
Victorian Consumer Affairs Minister Marlene Kairouz says the state government was still considering the report. “We’re aware of the concerns that have been raised, and will take action where necessary to strengthen regulation on retirement homes and ensure residents aren’t ripped off.”
In NSW, it’s a similar story. A spokesman for NSW Fair Trading says the organisation “acknowledges that despite the introduction of the standard contract, retirement village fees are often complex and confusing for prospective residents and their families”. As a result, NSW Fair Trading is introducing a calculator that is similar to that developed by Macquarie University senior lecturer and actuary Tim Kyng.
Brody says regulators and legislators passing the buck is a key challenge in reforming the sector. “At the federal level, they say it’s the responsibility of state governments and state regulators; at the state level there’s often not the resources or will to really tackle the industry, which has become a huge profitable industry,” he says.
The Property Council, which is the peak lobby group for the multi-billion-dollar retirement village industry, estimates that almost $2 billion is saved through delayed entry to aged care, as well as a potential $177 million saved through residents requiring fewer hospital and GP visits, earlier discharge from hospital, and better mental health.
It says most people who live in retirement villages are happy. It bases this on individual retirement village operator surveys and the national McCrindle Baynes Census, which says the vast majority of residents are happy – and happier than they were before they moved there.
Not everyone agrees. Sydney lawyer Stewart Levitt says the sector is ripe for regulation. “Let’s face it, historically, exploitation has always reigned until there was concerted reaction against it,” he says.
In the words of another desperate resident we spoke to: “At the moment, there is nobody. We need an ombudsman in order to deal with the abuse that’s going on and the drama that retirees are suffering as I speak. We need government bodies, we need parliament to do something, to anoint or give someone the power to deal with the retirement village industry … no one listens. We need to get people to listen. We need the government to step up.”
For more watch ABC TV Four Corners tonight at 8.30pm.
Know more?Contact adele.ferguson@fairfaxmedia.com.au and sarah.danckert@fairfaxmedia.com.au