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The legality and fairness of ‘deferred management fees’ will be challenged in the Victorian Civil and Administrative Tribunal (VCAT) in a case that should be watched closely by the retirement living industry. Deferred management fees require residents of retirement villages and residential parks to pay a percentage of their property’s sale price, often around 20 per cent, back to management when they leave.

A group of 14 pensioners from Willow Lodge Over 50s Resort are seeking to have their deferred management fees contained in their contracts declared void, alleging amongst other things, that the fees are unfair contract terms.  Willow Lodge requires residents to pay four per cent of their property’s sale price for each year of residence, up to a maximum of five years. This means that residents do not know how much they will have to pay until they exit the park, with some residents facing bills of tens of thousands of dollars when leaving Willow Lodge.

The case, being run with the assistance of Consumer Action Law Centre, should be of interest across the retirement accommodation industry as many contracts are similarly complex and include deferred management fees.

‘Retirement living contracts can be long, complex and are often signed before residents have received legal advice so, sadly, many people put pen to paper without understanding the ins and outs. You can imagine their shock when they find out they’ll be slugged a huge fee to leave,’ said Gerard Brody, CEO of Consumer Action.

‘People often enter these retirement complexes at times of great personal upheaval. They may be moving out of the family home, have lost their partner, or be suffering physically, so they’re not in a position to be reading and understanding pages and pages of complex contracts.

‘We need to ensure people understand what they’re signing up for and from the stories we’ve heard, many don’t.’

Mr Brody said deferred management fees was just one of a number of issues affecting older Australians in retirement living. ‘The law is different depending on whether you live in a retirement village or a residential park – they’re essentially the same thing, but residents have different rights depending on which type of retirement accommodation they buy. The residents don’t understand it and I’m not sure too many lawyers would either.

‘Residents also complain about the lack of dispute resolution services available if you have a dispute with management.  Currently their only option is a complex court or tribunal case – we’d like to see an ombudsman type scheme to help residents resolve disputes quickly and simply.

‘Consumer Action has written to The Hon Jane Garrett MP, Victoria’s new Minister for Consumer Affairs, urging a broad based review of retirement living legislation during the term of this government.

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Media contact: Dan Simpson 0413 299 567.