Retirees Warned of Resort Pitfalls – Big Business Cashes in on ‘Grey Tsunami’ (Heffernan, R. The Sunday Mail, June 01, 2008, p. 11)

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Big business is calling it the ‘grey tsunami’ – the growing wave of affluent baby boomers moving into retirement and looking for somewhere to live.
With an estimated one million Queenslanders aged over 65 by 2021, high-profile public companies are investing heavily, taking over many of the state’s 250 retirement and lifestyle villages and preparing to build and manage upwards of 500 more.
Research indicates 120,000 people will be living in this type of accommodation, many on the Gold and Sunshine coasts.
But lawyers and elderly residents of several villages have accused companies of profiteering and putting shareholders’ interests first.
The disgruntled village residents say they feel trapped by costly leases that heavily favour the big companies. There are now calls to standardise complex contracts and cap lucrative “exit fees” that can run into hundreds of thousands of dollars, although the industry denies there is a problem. Retirement industry lawyer David Wise said it was a situation in which “people who are driven by the duty to maximise profits for shareholders collide with pensioners in a fascinating juxtaposition.”
He said retirees were “often treated like fools and cattle because it is not in the interests of companies to do otherwise.”
Retirement villages were once a cottage industry largely run by churches and charities.
But today it’s the province of big public companies such as FKP, Babcock & Brown and Prime Trust. Macquarie, Stock land, ING, AMP Capital/Meridien and Lend Lease also have a presence.
Some estimates put the industry’s worth in the billions of dollars.
Bond University professor George Earl, who is making a three-year study of the industry, said the market has been underestimated.
“With corporatisation there will be a greater robustness in the industry,” he said. “The cost of building villages will now reduce and that will improve affordability.”
The arrival of big business has transformed the market. There are now luxury villages in which a lease on a waterfront property can cost more than $1 million.
The benefits include access to heated pools, bowling greens, fine dining, theatres, party rooms, tennis courts and golf links at some villages.
The downside is the cost, which some retirees claim they weren’t aware of when they signed contracts.
Many village residents sign lease/licence contracts where they pay a purchase price, which includes the operator’s legal fees, and are up for monthly maintenance and operating costs of $100 – $150 a week and other costs including meals and laundry.
On leaving, they are often required to pay for the restoration of the unit, outstanding maintenance and exit fees that can run into hundreds of thousands of dollars.
In some cases, they will not receive their share of the money until the home is resold to a new buyer, which can take up to 12 months.
The same rules apply if the unit owner dies or has to move elsewhere because of failing health. “These companies make absolutely no money out of operating the villages,” Mr. Wise said. “They make all their money when people leave and have to sell. If a resident is unhappy or has a problem and they go to the operator to remedy the situation, it is absolutely not in the interests of the operator to resolve the dispute. In fact, they are far better off if the person just leaves. People often don’t realise this until it’s too late. It’s after they have bought in that they discover the hard truths.”
Association for Residents of Queensland Retirement Villages president Les Armstrong said he regretted paying $500,000 for his Sunshine Coast villa four years ago. Despite strong capital growth in the four years since he moved in, Mr Armstrong claims he would lose money if he wanted out: “People have spent their whole lives being careful with their money… but the lifestyle they buy is not what they expected. But they are stuck because they can’t afford to leave.”
Retirement industry body Aged Care Queensland says contracts are clearly outlined and operators follow the Retirement Villages Act.
“Provided exit fees are in accordance with the contract signed when entering the village, it’s a matter for the marketplace to sort out,” ACQ chief executive Allan Pidgeon said.
He knew of only about 30 complaints made against retirement villages each year and unhappy residents could take issues to the Commercial and Consumer Tribunal of the Office of Fair Trading.
Mr. Wise called on the State Government to regulate exit fees and standardise contracts.


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