The group representing retirement village operators says government legislation needs to act as a backstop to ensure a fair situation for residents and operators.

The government is proposing changes that would see residents and their families paid interest after six months of leaving a unit, and fully repaid no later than 12 months after a unit was vacated.

On Tuesday, Retirement Village Residents' Association national vice president and complaints coordinator Di Sinclair told Morning Report programme that currently it was taking from nine months to two years for the capital sum to be returned to residents or their estate when a unit was vacated.

Sinclair said in the worst case she had ever dealt with it took three and a half years for the money to be returned.

Retirement Villages Association executive director Michelle Palmer agreed there should not be unnecessarily long delays in people getting their money back.

"The average repayment time at the moment is seven to eight months and of course if we were talking four years ago it was four to five months when the property market was far more buoyant than it is now."

It was about the ability of incoming residents being able to sell their properties and to have the outgoing resident or their estate repaid, she told Morning Report on Wednesday.

"It's just the same as you would in a residential property when your money's tied to the property, you don't get it back until it's sold."

Operators were incentivised to sell that unit as quickly as possible when a resident left or died, she said.

On Tuesday, Sinclair said Retirement Villages Residents' Association would like to see the money paid back within three months of a unit being vacated, rather than within 12 months as proposed by the government.

But Palmer said that would not work for operators.

"You know a three month rule might sound fair but it forces huge borrowings and the need for reserves and you're going to see a lot less investment into the actual property and the care beds that we desperately need in this country."

Deferred management fee

People in retirement villages do not own the property they are living in, they have an occupation right agreement.

Palmer said they were paying for the right to live in that property and to enjoy all the village's amenities.

"They're also getting that at a reduced cost, so their weekly fees do not cover the full running costs of the village, so that's why at the end when the property or the contract is on sold, the deferred management fee is taken out."

Currently, the deferred management fee was usually 25-30 percent of the property's value, she said.

Asked why this was so high, Palmer said if that fee was charged all the way through rather when residents vacated the property it would be too expensive for people to live in villages.

Residents were generally not paid capital gain on the property when they left, she said.

"The capital gain, some villages do offer that and that's a choice that people can make, but some of those villages may not have the same level of amenities that villages that don't provide that share of capital gain do have."

‘No power imbalance’ between operators and residents

Retirement Village Residents' Association national vice president Di Sinclair told Morning Report  on Tuesday there was a power imbalance between retirement village residents and the owner/operators.

Palmer said she did not agree.

"We really encourage people, and they're required to by law, to really do their homework, talk with family and friends before they go in, they have to get mandatory legal advice."

The operators were in this for the long haul, with a report from  Grant Thornton last year saying that it takes 20 years for a village to break even financially, she said.

"The village capital's invested in those homes, it's invested in the care facilities, the maintenance, the services, the shared facilities. There isn't just a cash pool sitting there."

There are 56,000 retirement village residents with about 130 people every week moving in, she said.

"They're making choices to go in and have that lifestyle, you're not just buying an isolated property in the community where you have no one around you, you don't have the facilities to go to."

Law change should create 'backstop'

Palmer said she would like to see the government's legislative response to the sector to create a backstop.

"That fair backstop which is what the government's proposed in 12 months, a mandatory repayment timeframe, so that that provides certainty for residents and their families but also enables villages to stay viable."

More than 80% of villages were already stopping fees once the unit was vacated and Palmer said they would like to see that mandated in law.

"We're hearing horror stories where those fees continue afterwards, we don't think that's fair."

Palmer said they also supported the government's proposal for an independent complaints scheme.

"The Residents Association have said there's 140-odd coming through, 12 to 14 a month, you know if we talk about the numbers, 56,000 residents, that is less than one third of a percent of people making complaints."

She acknowledged "genuine complaints matter" but said the numbers needed to be kept in perspective.