02 Jan Large Increase In Many Departure Fees
Many retirement village residents face unexpectedly large departure fees when moving out. This is due to the ambiguity of provisions in the Retirement Villages Act (RVA). The RVRA needs your help to make equitable changes to the Act.
How does this come about?
Village operators can easily take advantage of the ambiguities in the existing legislation. Many of them do, as departure fee problems are top of the list of complaints received by the RVRA.
This ambiguity allows reduced refunds and unfair charges to be imposed on residents, who may have to move to assisted care. This is an extremely stressful time for residents and their families as they are typically unaware of the complexity entailed. A move generally involves the cancellation of a contract. This often results in financial complications that can delay final payment for months and even years.
What are the implications?
A good example is how the Capital Gain refunded to the resident within a contract, can be substantially reduced. The choice of the formula used in this calculation will reduce what the residents expected to receive, by amounts between $10,000 and $100,000 or more.
During quiet periods of sales activity or during periods of excessive unsold vacant units, some village operators introduce special sales offers. These include deferred payments of the in going contribution. This “reduces” the value of the sales price which would substantially reduce the amount of capital gain.
There will be other items of expense added to the departure fee.
Reinstatement costs between $10 000 and $25 000 are often added to the departure fees as per the Act. There are also other costs that neither the village operator nor the resident are obliged to pay. However, this has not stopped the village operators from suggesting the Refurbishment of kitchens, bedrooms, etc. in an attempt to increase the sale price.
Evidence of amounts in excess of $75 000 has been contributed by some residents, even though up to 40% of any sale price increase is eroded. Under the Act, it is clear that the responsibility for refurbishing costs is that of the village operator.