A couple of in-depth articles explaining the recent investigation into Aveo.
It is quite clear that greater oversight and perhaps legislated change of these perfectly legal terms and conditions is required – urgently. Why are so many of our older Australians being so poorly represented? Apparently there is no federal minister who holds a portfolio that includes retirement village residents. This is unacceptable – I would be very surprised if federal ministers don’t aim their campaigns deliberately at that very specific demographic quite regularly!
“Aveo is the most aggressive listed operator in the country, stinging residents with a menu of fees that eat up a lifetime of savings within just a few years. Aveo has a stated target turnover of 10 to 12 per cent of residents each year. That is equivalent to about 1200 units a year, which is high by industry standards. It’s a numbers game.
If Aveo hits its target, and the average exit fee is assumed to be approximately $75,000 per unit, then Aveo would make $90 million in exit fees each year.
This will only increase after Aveo’s move to a new model that will lift unit prices and hike exit fees to 40 per cent after two years. Some of its older contracts have an exit fee of 20 per cent while others rise to a maximum of 33 per cent on a sliding scale over five to seven years.”
“A report titled Older People and the Law was released after a federal parliamentary inquiry into the sector back in 2007, which listed a series of recommendations that were never implemented.
They included that the Australian Competition and Consumer Commission (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.
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.
The Consumer Action Law Centre’s Gerard Brody said regulators and legislators kept passing the buck.
“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 said.”
“Aveo has 13,000 residents across Australia and is expanding at a rapid rate. It expects to increase its resident numbers to 20,000 in coming years.
Those residents live in just over 11,000 units in 89 villages.
The company is rolling out two new contracts, the Aveo Way — which has exit fees of 35 per cent after three years — and Freedom Aged Care — which charge exit fees of 40 per cent after two years.
An exit fee is unique to the retirement industry. It is calculated as a percentage of the purchase price charged by retirement village operators when a resident sells the property.
Company documents and presentations state a targeted turnover of 10 to 12 per cent of residents each year — or 1,200 units a year.”