Retirement Villages Bill

About this Item
SpeakersObeid The Hon Eddie; Gallacher The Hon Michael; Cohen The Hon Ian; Chesterfield-Evans The Hon Dr Arthur; Sham-Ho The Hon Helen; Nile Reverend The Hon Fred; Jones The Hon Richard
BusinessBill, Second Reading

Second Reading

The Hon. E. M. OBEID (Minister for Mineral Resources, and Minister for Fisheries) [5.07 p.m.]: I move:
      That this bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.
      The bill represents the most significant reform of the laws regulating the retirement village industry ever undertaken in New South Wales. In this, the International Year of Older Persons, the New South Wales Government is leading the way with this package of initiatives. People living in retirement
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villages have lived through the Great Depression and have fought in the Second World War. Many residents are war widows. They are our mothers and fathers, our aunts and uncles, our grandmothers and grandfathers. They have worked to build our communities and protect our way of life, and they deserve security and peace of mind.
      The majority of the 50,000 residents living in the 900 retirement villages across New South Wales are able to enjoy the retirement village lifestyle. And the number of retirement village residents will only grow. We all know that with the ageing of the population the provision of housing for retired people will become even more important. The Minister for Fair Trading, since becoming Minister, has been disturbed by the exploitative practices of some operators. For many residents and their families, the practices of some retirement village operators have caused great distress.
      In one case, a man purchased a retirement unit for approximately $120000 and lived in the unit for three years until his death. During that time, the monthly fees rose from $650 to $1,000, despite commitments made by the operator that fees would only increase in line with the consumer price index. The operator had exclusive selling rights and took almost three years to sell the unit for $84,000. He also took $37,000 in management fees and $24,000 for outstanding monthly fees which included fees for meals, cleaning and other services, for three years after the resident had died. This is but one example. Many others have come to the Government’s attention.
      As a result of instances such as this, the Government conducted an extensive review of the regulation of the retirement village industry in New South Wales. The honourable member for Penrith must be commended for starting the process, which has culminated in this bill. As Minister for Fair Trading, she first brought the plight of residents into public focus. The work of previous Ministers, the Hon. Brian Langton and the Hon. Jeff Shaw, must also be acknowledged. The retirement village industry is currently regulated by the mandatory industry code of practice. However, the review found the code to be ineffective in providing adequate protection for retirement village residents, many of whom are the most vulnerable people in our community.
      The majority of residents are over the age of 70, many residents receive the pension and 80 per cent of residents are women. In the eyes of consumers, the industry code of practice became a "toothless tiger". This was confirmed when the code was successfully challenged by the operator of the Heritage Retirement Village in the Supreme Court. Such problems saw older people steer clear of retirement villages, leaving many units empty and undermining the investment of residents, their families and operators. Certain unfair practices by a small number of operators have been largely to blame for the poor public perception of the industry.
      Practices such as charging dead residents for meals or fleecing retirees out of their entire life savings are abhorrent to all fair-minded people. Fortunately, most retirement village operators do the right thing and are genuinely concerned with providing quality care and accommodation. This is particularly true of the non-profit organisations which represents 80 per cent of the industry, such as the Uniting Church, the Catholic Church, the Salvation Army and others. The Government looked closely at the way these organisations operate and incorporated their best practices as much as possible into the bill. It is only those operators who seek to exploit and abuse older people who need fear the introduction of these reforms.
      The problems this bill addresses are not new. The Opposition, when they were last in government, commissioned its own review of the regulation of the retirement village industry in 1991. Their report, released in 1992, came up with 55 recommendations. Many of these recommendations sat on the shelf gathering dust. Those that were acted upon did little to address the major concerns of retirement village residents and their families. In contrast, this Government is committed to ensuring that older people living in, or contemplating moving into retirement villages, enjoy their retirement years with dignity and respect.
      Consultation is the foundation of this bill. Indeed, there has been some criticism of the time taken from the commencement of the review to the introduction of this bill. The Government strongly refutes that criticism because every effort has been made to get it right by consulting as much as possible. I will briefly outline the consultation the Government has undertaken. Consultation began when an inter-departmental steering committee was established to conduct the review in 1997. Each department which has an ongoing interest in the development and operation of retirement villages have been involved from day one. The Department of Fair Trading, the Ageing and Disability Department, the Department of Health, the Department of Local Government and the Department of Urban Affairs and Planning were all represented on the committee.
      Preliminary consultation was undertaken with the Retirement Villages Consultative Committee to assist in identifying issues of concern to residents and village operators. The consultative committee comprises of representatives of all the major groups involved in the industry. These groups include the Aged Services Association, representing church and charitable operators, the Retirement Village Association, representing private operators, and the Retirement Village Residents Association. Also on the committee were representatives from the Law Society, Legal Aid Commission, Australian Consumers Association, the Aged-care Rights Service, Combined Pensioners and Superannuants Association, Council on the Ageing, Housing Industry Association, the Commonwealth Department of Health and Aged Care, and the Australian Nursing Homes and Extended Care Association.
      The consultative committee remained involved throughout the entire consultation process. Its members are to be commended for their valuable contribution into the process of reform. An issues paper was released for public comment in November 1997 by the then Minister, the honourable member for Penrith. More than 4,000 copies of the issues paper were distributed, including at least one copy to every retirement village in New South Wales. Written submissions were sought and almost 300 were subsequently received. Meetings between the steering committee and key interest groups were held to discuss their submissions in more detail.
      Eleven public discussion forums were then held in Sydney, Shellharbour, Gosford, Newcastle, Port Macquarie, Ballina, Dubbo and Wagga Wagga. More than 1,100 people, predominantly residents of retirement villages, attended. Submissions and feedback received during consultation was incorporated into a report on the review, which was released for public comment by the Attorney General in December 1998. The Department of Fair Trading then held meetings with the consultative committee and with key groups representing operators and residents to discuss the report’s recommendations. Over 5,000 copies of the report were distributed and a further 60 submissions received in response to the report.

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      Further opportunities have been provided for constructive input into the development of the bill. As members would know, an exposure draft bill was released in July of this year. Officers from the Department of Fair Trading met with all the main industry, consumer and other interest groups, following the release of the draft bill. The Minister for Fair Trading also found it valuable to meet with 15 individual operators, industry groups and resident groups in recent months. Their input has helped the Government refine the bill. In total, approximately 700 written submissions were received on the draft bill. Over 500 of these were from residents urging that the reforms be introduced as soon as possible. I would like to read just one example of a letter the Minister for Fair Trading has received from a resident of a retirement village:
          My husband and I are in our 70s, but many frail elderly people cannot take the pressure that is upon them. We are both really anxious to see a really fair and just deal for folk who live in these villages . . . Thank you for looking into the Retirement Village Industry. I feel this is the right way to go so our lives will be a lot happier.
      There can be no doubt that the views of all parties involved in the retirement village industry have been widely canvassed and given close consideration in the final development of the bill. Let me now turn to the details of the bill. At present the term "retirement village" is loosely applied to a whole range of complexes that cater for older people. The bill includes a much tighter definition of what a retirement village is. In addition, it will be an offence to advertise or promote a complex as a retirement village if it does not meet the definition. In the past some caravan parks, for instance, have claimed to be a retirement village simply so that they can make a greater financial return. The bill will put an end to this practice.
      Buildings providing residential care under the Commonwealth Aged Care Act have been excluded from the bill. Previously these premises, commonly known as Commonwealth funded hostels and nursing homes, were covered under both Commonwealth laws and the New South Wales retirement village laws. The Government recognises that this dual system of regulation created unnecessary duplication, potential areas of legislative conflict and additional compliance cost for operators. These premises have been excluded on the understanding that the Commonwealth maintains its consumer protection provisions in the Aged Care Act.
      Should the Commonwealth move to reduce these rights in any way, this issue will be revisited. One of the problems faced by prospective residents is to be able to make an informed decision in choosing a suitable and affordable retirement village. They are often presented with an array of glossy sales and promotional material. Some operators have perfected the practice of hiding costs and fees in small print or ambiguous language. Residents have often indicated that if they knew at the time of entering the village what they know now, they would never have agreed to move in. The bill will put an end to this unfair practice. All operators will be required to fill out a prescribed disclosure statement form, outlining information such as all fees and charges, and give one to each prospective resident.
      Operators will also be required to supply a booklet produced by the Department of Fair Trading. The booklet will outline the rights and obligations of residents and operators, and give a general overview on how the industry works. These measures will, for the first time, allow prospective residents to compare different villages and to make an informed choice. If a disclosure statement is not provided or contains information which is false or misleading residents will have the right to apply to the Residential Tribunal for an order allowing them to rescind the contract. During the course of the review it was found that some operators and sales representatives, in their haste to attract new residents, were acting like shonky used car salespeople.
      Some were pressuring prospective residents to sign a contract on the spot, at times when they had only visited the village to look around. Our older members of the community deserve better treatment than this. Under the bill, operators will be required to give prospective residents a copy of any contract and give residents at least 14 days before it can be entered into. This will enable the person to thoroughly read the contract and to seek advice from an independent solicitor, a family member or somebody else before signing. A seven-day cooling off period will also apply. Some operators unfortunately were found to have promised all sorts of services and facilities that never materialised.
      It will now be an offence to claim that proposed services or facilities could be supplied unless they are set out in a village contract. The contract will need to specify a date from when the service or facility is expected to become available. If the service or facility is not provided or made available, the resident will have the right to seek compensation from the operator. In addition, residents will have three months to rescind a contract if the disclosure information provided by the operator is false and misleading. A practice which causes great concern is the way in which some operators go about pressuring their residents into signing amendments to existing contracts or terminating contracts and replacing them with new contracts altogether.
      Some threaten to evict the resident or to close down the village unless the resident agrees to sign. There was even one case where a resident was approached in her hospital bed by an operator, not with a get well card and flowers, but with a pen and a new contract in hand. Such unscrupulous tactics must end. Any amendment or proposed termination of a contract, initiated by an operator, will now be void unless the resident obtains a certificate from a legal practitioner of their own choosing, stating that the change has been explained to them and that they consent to it. The reasonable cost of obtaining the certificate must be paid by the operator, as the proposed change to the contractual arrangements will usually be in the operator’s interests.
      Residents are often required to pay significant amounts of money to secure the right to occupy premises in a retirement village. The general range is between $70,000 and $250,000, although amounts of up to $500,000 are charged at some North Shore villages. Generally, the resident does not receive any title or legal interest in the premises in which they reside. The return of their capital is at present solely reliant upon the solvency of the operator. Unfortunately some village operators have gone broke. This has left residents in the perilous position of unsecured creditors. The bill addresses this problem by providing that any village contract is enforceable against any operator for the time being of the village.
      This will mean anybody purchasing or taking over a retirement village will be bound to honour all payments which must be made to existing residents under the terms of their contracts. A prospective purchaser of a retirement village would take account of existing obligations in determining a fair price. It is a condition of entry into some retirement villages that residents sign over their rights by giving the operator an irrevocable power of attorney or proxy. This practice must come to an end. Residents should have
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autonomy and freedom of decision-making at all times. The bill gives residents the freedom to form residents committees in order to have input into the running of their village.
      Residents will have the freedom to choose the extent to which they wish to participate and will not be compelled to attend any meeting or vote on any matter. Operators will be required to seek the consent of residents on a range of matters including any changes in services or facilities. Failure to seek or obtain consent will give rise to a range of remedies. For instance, if services or facilities are reduced or withdrawn, without residents consent, residents can apply to the Residential Tribunal for compensation, the reinstatement of the service or facility, or a reduction in recurrent charges. One of the main concerns of residents is the amount they pay in recurrent charges.
      Residents are either pensioners or self-funded retirees. They have little capacity to adjust to excessive increases in recurrent charges. One operator was found attempting to increase charges by some 350 per cent, asking residents who were paying $20 per week to pay $70. If the operator discloses that fees will only rise according to a fixed formula, such as a percentage of the single aged pension or in line with the inflation rate, and the resident therefore knows their future liability for fees, the operator is required to give residents 14 days notice of the fee increase. Consent of residents will not be required, as residents have already agreed to the formula when entering into contracts.
      If operators wish to maintain the flexibility of determining recurrent charges and fees are at the discretion of the operator, residents must be given at least 60 days notice of any proposed increase. More importantly, the consent of residents will be required to the proposed increase. If the residents do not consent the operator will have the choice of reducing or withdrawing the request or taking their case up with the Residential Tribunal. A range of factors of equal weight have been included in the bill for the tribunal to consider. These include the general market level of recurrent charges at other similar villages and the cost and level of services and facilities within the village.
      It will be a matter for the tribunal to decide which factors are important, in determining what is a fair amount payable by residents, on a case by case basis. All retirement village operators will be required to seek the consent of residents to the proposed expenditure of recurrent charges each financial year. If consent is given the operator will be required to adhere to the statement of approved expenditure, unless residents consent to changes arising from unforeseen circumstances.
      In the past we have seen outlandish situations where operators have spent in excess of $100,000 over budget then sought to recoup their losses from residents at the end of the year by way of a lump sum payment or special levy. The accounts of each village will be required to be audited annually. This is an important accountability measure and will show residents where their money has gone each year. Significant reforms have been made in the area of dispute resolution providing residents and operators with a more inexpensive and accessible adjudication process through the Residential Tribunal and the Fair Trading Tribunal.
      Village disputes committees, established under the code, were proven to be an unsatisfactory and ineffective way of handling disputes. Many residents have indicated they did not have confidence in those committees. Residents and operators will now be able to apply for a wide range of orders from the Residential Tribunal. The Residential Tribunal Act has a range of mediation provisions appropriate to retirement village disputes. The Residential Tribunal already has a specialist retirement village division.
      The bill also gives the Fair Trading Tribunal jurisdiction to hear claims by residents of harsh, oppressive, unconscionable or unjust contracts under the Contracts Review Act 1980. Previously such claims could only be heard in the Supreme Court. Despite having legitimate claims, many residents were precluded from challenging their contracts because they simply did not have the means to fund court action. Importantly the bill enshrines the right of residents to security of tenure. The last thing residents should need to worry about, is the possibility of being unwillingly evicted from their homes. A penalty of up to $22,000 will be imposed on anybody who illegally evicts a retirement village resident.
      Unless a resident and operator agree to terminate a residence contract an order will need to be obtained from the Residential Tribunal before a residence contract can end. Either party will be able to seek termination for persistent or serious breaches of a village contract or village rules or if the premises become unsuitable for occupation by the resident because of his or her physical or mental incapacity. The Tribunal will need to be satisfied that there is no other reasonable course of action before terminating a residence contract for these reasons.
      During the course of the review it became clear that the single issue causing the greatest concern to residents is the way they or their families might be treated by operators after they die, or move to a nursing home or otherwise leave the village. All fair-minded people will find it abhorrent to learn that older people and their families are being charged for meals, cleaning and other personal services years after they have died or otherwise left the village. But this is precisely what is happening in certain sectors of the retirement village industry.
      The review uncovered cases where residents, or their estates, were still paying for meals, cleaning, laundry and other services five years after they had died or left the village. And we are not talking trifling amounts. Some operators charge upwards of $1,000 per month for the provision of these services. In one particular case the operator actually increased the charges after the residents had left the village.
      Under the bill, a resident who dies or moves out of a village, either temporarily or permanently, will cease to be liable to pay recurrent charges for personal services after 28 days. Residents and operators can apply to the Residential Tribunal if a dispute about fees arises. The Government recognises that savings are rarely made on general services such as staff costs, council rates and insurance when residents die or move out. It is, however, unjust that residents who no longer get the benefit of living in the village should pay for general services indefinitely.
      The bill places a six-month maximum limit on liability for general services unless the resident owns the premises within the village. The liability for general service fees for residents who own their units will cease as soon as they sell their unit. The provisions in the bill relating to the liability of fees after a resident leaves or dies are an example of the consultation undertaken by the Government. The Government received submissions from residents suggesting we further reduce the six-month cap on liability for fees after a resident has left, which was proposed in the draft bill. Some residents indicated that they were concerned that if the liability for fees was too restrictive and onerous on operators, the burden of the fees would be shifted to the residents still living in the village.

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      Operators told the Government that the contracts they enter into with suppliers for the provision of services may not easily be changed. Some operators indicated that many of their contracts with suppliers are month to month. The provisions in the bill represent a compromise of the interests of former residents of retirement villages, current residents and operators. They will put an end to the unsavoury practices, which have given the industry a bad name. Residents who own their premises in a retirement village, such as under strata or company title, are presently treated differently to all other home owners in the wider community.
      They are often required under the terms of their contract to give a share of any capital gains to the operator. If this is not bad enough, the operator also has the sole right to act as selling agent, and to set the asking price for the unit. This means that an operator can sit back and wait for the highest bidder to come along safe in the knowledge that the resident, or their estate, is still paying all the fees and charges on the unit. These practices would not be tolerated in the general community and should not be tolerated when it comes to retirement villages. The bill gives residents who own their homes the right to appoint a selling agent of their own choosing, who may or may not be the operator.
      They also have the right to set the sale price of the premises. The Government has not decided to interfere with contract terms requiring capital gains to be shared. However, the costs of selling must be shared in the same proportion as any capital gains. If a resident is having trouble selling they will be allowed to rent their homes out on a short-term basis. Presently homes for sale in retirement villages are simply left vacant. This is a waste of resources when one considers the large number of older people looking for affordable and suitable rental accommodation.
      Departure fees, or what were known as deferred fees or deferred management fees, remain a big problem within the industry. Many residents simply do not understand the purpose of these fees. All they or their families see is that large amounts, up to 25 per cent or 35 per cent, are taken by the operator once the resident dies or moves out. The industry needs to improve the public’s understanding of what these fees are all about. Otherwise departure fees will continue to cause older people, contemplating moving into a retirement village, to turn away from retirement villages as a housing option.
      The Government has chosen not to put caps on the amount of departure fees that may be charged at this time. Operators have indicated that departure fees are fundamental to the financial viability of the industry. The bill does however, require that for new contracts departure fees cease to accrue when a resident permanently vacates. This will be an added incentive on operators to find a new resident as soon as possible.
      In situations where a resident does not own the premises it is inappropriate that payment of their refund entitlement be delayed indefinitely until another resident is found. The bill places a six-month limit, from the date the resident permanently vacates, in which all moneys owed to the former resident must be paid. This is a common practice in the non-profit sector of the industry. Provision has been made for genuine cases of hardship on the part of an operator. The tribunal will have the power to extend the six-month limit if the operator has not found another resident and does not have the capacity to repay the money owing.
      In response to concerns of residents about non-compliance with existing laws the bill includes a number of offences attracting penalty provisions. Residents will have the right to apply to the tribunal for an order that the operator comply with the legislation. Any monetary penalties imposed on an operator will not be able to be passed on to the residents in any way. A practice in the industry recently uncovered is the way in which some operators use high priced lawyers to battle against residents in endless court proceedings.
      Regardless of the outcome of the case the operator cannot lose because under the terms of contracts with residents if the court does not award costs to the operator any legal fees are simply recovered from recurrent charges to pay for the legal expenses. Services and facilities in a village may suffer simply so that the lawyers can be paid. At one village in Padstow residents have received bills for in excess of $20,000 to pay for the operator’s legal costs.
      The bill clears up the issue as to who pays for legal fees. If the courts award costs against residents they must clearly pay. Otherwise residents must consent to the payment of expenditure on legal costs. If residents do not consent the operator has the right to apply to the tribunal for an order that the residents pay. The tribunal must be satisfied that the legal costs were incurred wholly in the interests of residents and the costs are reasonable in the circumstances. The bill provides for the establishment of a Retirement Villages Advisory Council as a ministerial advisory council under the Fair Trading Act to enhance industry and resident input into government policy concerning retirement villages.
      The Government believes the bill will greatly improve the rights of retirement village residents for the long-term benefit of the industry as a whole. While this bill will provide significant new protections for residents, the Government is aware that the significant change that this reform represents may concern others, that is why the Government will make sure that there will be an extensive campaign to inform residents of their rights under the new legislation. I commend the bill to the House.

The Hon. M. J. GALLACHER (Leader of the Opposition) [5.07 p.m.]: The Coalition welcomes these sensible reforms, which will enhance consumer protection for residents and prospective residents of retirement villages. The process of reform began under the Coalition Government in 1991 and these reforms are necessary to protect retirement village residents from the few unscrupulous operators in the industry who tarnish the reputation and integrity of the majority. The reforms include improving the operator’s duty of disclosure by requiring a prescribed disclosure statement form to be provided to residents that outlines information such as fees and charges that prospective residents need to know in order to make an informed decision that will in many cases be a decision that will determine the quality of their life for their remaining years in retirement.

Operators are required to provide prospective residents with a copy of the contract at least 14 days before it can be entered into with a seven-day cooling-off period. The contract must contain details of the services and facilities promised by the operator and the date on which they will come into
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operation, if they are not already available. The bill also requires operators to provide 14-days notice of any fee increase, and this must be based on a formula agreed to by the residents when entering into the contracts. Legal evictions of residents will be punished appropriately with fines of up to $22,000. The dispute resolution process may also be improved by providing that residents and operators can apply for a range of orders from the Residential Tribunal.

However, the Coalition is extremely concerned that the bill is not without significant flaws. Of concern is the clumsy manner in which this junior and incompetent Minister for Fair Trading introduced no fewer than 32 amendments to his proposed legislation at literally one minute to midnight in the other place.

The Hon. J. J. Della Bosca: You consulted him.

The Hon. M. J. GALLACHER: I will get to the question of consultation. I am pleased that the Special Minister of State interjected and I will address the consultation process in a few minutes. Of considerable concern is the fact that this bill, by the Government’s admission, was four years in the making. Even accepting, as I do, the advice of the Minister’s staff that it took three years to draw up the bill, why was it that the Minister woke up just a few minutes before he presented the bill to say that he had 32 amendments to present?

The Hon. E. M. Obeid: I thought you were supportive of the bill.

The Hon. M. J. GALLACHER: I am supportive of good government, but the Minister does not fit into that equation.

The Hon. E. M. Obeid: He is a good Minister.

The Hon. M. J. GALLACHER: He may be good, but he is not competent - and there is a difference. That is confirmed by the fact that when he proposed the 32 amendments he said to the Opposition, "I hope you are going to support these 32 amendments, although you will not have time to read them." If the Minister had read the amendments in their entirety onto the record, it would have constituted a five-minute speech.

With all due respect, the Minister for Mineral Resources should be very careful about patting the Minister for Fair Trading on the back and saying that he is a competent Minister. His incompetence is symptomatic of the way in which his portfolio is administered, whether it be in relation to petrol prices or Olympic tickets - a matter very close to the hearts and minds of members of this Chamber.

The Minister is all words and no action. The same can be said of his country colleagues. It is unfortunate that the Hon. A. B. Kelly is leaving the Chamber at this very crucial part of the debate. Country Labor has let down the people of New South Wales very badly with regard to issues that it claims are important to it. Country Labor is the epitome of sound and fury signifying nothing.

I refer now to the consultative process that the Special Minister of State mentioned a few minutes ago. On 10 November in the other place the Minister proudly announced that the 32 amendments to this bill were in response to the extra consultation that he and his department were involved in following the second reading of the bill. If one were to take the time to go through the list of amendments, one would discover that 23 of 32 relate to nothing more than housekeeping measures.

Their purpose was to do nothing more than clean up the language in the bill - like someone suggesting a full stop at the end of a sentence. Is it suggested that Government consulted on whether or not to add the full stop? Four of the amendments were to correct typographical errors. I am amazed at the suggestion that the Government consulted on these amendments. Only one of the amendments could be considered in anyway pro-operator. The Minister is drawing a longbow by suggesting that these amendments were the result of consultation with the community - I would suggest more capitulation, in the light of concerns raised by the industry about the original bill.

The Minister received many representations from all interest groups, as did the Opposition and, I suspect, the crossbenchers. It is important to put on record the concerns raised by residents and operators, whom I shall put into two distinct categories. There is the privately run side of the industry and the non-profit side of the industry. One of the serious concerns raised by the Aged Services Association of New South Wales [ASA], which represents 344 church, charitable and community-based retirement villages, is the proclamation of the bill, which has been three or four years in the drafting.

The Minister has put in writing that the bill will not come into effect until six months after the regulations are announced and made public. A great deal of what is in this bill will rest on regulations.
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As yet the Minister and the department have not revealed to anyone what the regulations will be. It will be difficult for the industry to work out what the full impact of this legislation will be until it knows what the regulations are. The regulations are crucial.

It is important that I make the point - which I will make it a number of times during my presentation - that our concern is the overall impact the bill will have on the industry and its negative impact on the residents. I am not convinced that the industry will bear the financial cost that will accompany the passage of the bill. The industry will not absorb those costs, irrespective of how steep they are; they will be passed on to the residents. The Opposition is concerned that the net effect of any economic impact on the running of this industry will filter down to those least capable of paying: the residents.

It is important that the Minister representing the Minister for Fair Trading in this Chamber addresses that proposition. What protections will be put in place against the long-term negative effects of this bill? At the same time, one cannot expect the industry to wear the cost of the proposed legislation. This is the dilemma in which the Government finds itself. Not every operator is a big operator who can simply absorb the significant costs that the Opposition and the crossbenchers have been told will take effect once the bill is proclaimed. According to information given to the Opposition small operators will be incapable of bearing the cost and will be pushed towards insolvency.

The Government finds itself in a dangerous position. Retirement village lifestyle is about achieving a balance. According to residents, in the past bad operators have utilised legislation to their advantage and to the detriment of residents. If the Government tips the scales too far the other way, the good operators may find they cannot meet the added costs, which it is suggested will occur on the proclamation of the bill.

Who will be the net beneficiary of the changes? I suspect in the long term the beneficiary will still be the industry; that the residents will be the losers. It is necessary to strike a balance, and some of the significant aspects of the bill do not achieve that balance. The Opposition is supportive of the bill for the simple reason that to give residents of villages a say in the running of their lives is fair and reasonable.

It is important also to put on record the concerns the Opposition has about the negative aspects of the bill that prevent it from achieving the balance we hoped it would. Tipping the balance in favour of the residents will, in the long term, be to the detriment of the residents. I hope the Minister addresses his mind to that issue also in his reply.

The ASA raises significant concerns about the capital replacement referred to in clauses 92 and 94 (1), as they affect the overall running of the industry. Variations to contracts, as set out in clauses 29 and 30, will impose onerous costs and administrative obligations on residents, the very people the bill is trying to protect, and give a larger say in the running of their lives. According to the submission by the ASA, clauses 29 and 30 will, in the long term, impact upon residents in a negative way.

The Opposition again asks the Minister representing the Minister for Fair Trading to respond to these concerns and allay the fears of the Opposition and the industry by expediting the ongoing negotiation to ensure that the unjust and unintended anomalies in the bill are addressed quickly, so they do not die on the vine along with the hopes of villages and residents.

If the allegations that have been laid by the industry at the feet of the Opposition and the crossbenchers are true, they cannot ignore them. It is important that the Minister give an undertaking to deal expediently with problems as they are identified. We believe interest groups have been truthful with us in their submissions, because their concerns have not been limited to one distinct area. They have come from church-run and charity-managed villages and the privately operated villages alike. There is a degree of consistency in their submissions. The Opposition is concerned that if the claims about the potential impact of the bill are true, the result will be either increased living costs for residents or insolvency for the villages.

The fines as set out in the bill are also of some concern. We recognise that the severity of the provisions will ensure greater attention to compliance - something with which all honourable members agree. The Opposition also supports the submission of the Minister - one of those rare moments in his presentation in the other Chamber when he actually got it right - when he said:
      The majority of the industry are good operators doing their best to provide a good quality of life for the residents.

All honourable members agree that there are unscrupulous operators but, overwhelmingly, there is a larger number of good operators. When I say
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"good" I am referring to those operators from the non-profit side of the industry. I do not want to draw a distinction between the private-for-profit operators and non-profit operators, as there are also good private operators. The Opposition has received a number of submissions from smaller non-profit operators who are concerned about the severity of these fines, which range up to $11,000. Fines such as this will make the potential added cost of running a village unrealistic for these operators.

It could be argued that operators have only to comply with the provisions of this bill, but it has been put to us that, because of these provisions, it will become increasingly easier for people who operate these villages to trip up in the smallest possible way and to find themselves paying quite significant fines. This bill provides for the imposition of fines of up to $11,000. We rarely see substantial fines of this nature in the criminal arena, let alone under fair trading legislation. The Opposition places its concerns on the record to ensure that the Minister, who is acting on behalf of the Minister in the other place, assures the industry that the application of these fines is fair and reasonable.

On the face of it, the retrospective implications of the bill sound quite fair, if one believes the proposition that many residents have been unfairly paying for the provision of services over many years. This bill will now rectify that situation. In fact, the honourable member for Hornsby - a member of the Opposition in the other place - has spoken publicly for some time about a village in his electorate that has been charging the beneficiaries of an estate for eight years for the maintenance of a unit because they are incapable of selling it. I am sure that many honourable members would find that suggestion abhorrent.

The retrospective implications of the bill will impact on smaller operators rather than on larger operators who may be able to bear any cost implications relating to it. Quite simply, smaller operators will find it more and more difficult to meet certain provisions in this bill. The bill will now require them to pay moneys back to residents who, up to this point, have had to make unfair payments. That retrospective aspect is unique to fair trading legislation in this State. I hope that the Government will not continue to travel down that path when dealing with other legislation that is presented to the Parliament in the foreseeable future.

I place on the record my concern about the retrospective implications of this legislation. There have been unfair and perhaps unjust practices in some villages in relation to some individuals, whether they be former residents or beneficiaries of estates who are in capable of selling a unit, and who have had to pay ongoing maintenance fees for many years. The Opposition recognises that the retrospective aspects of this bill which require village operators to return funds could make it difficult, especially for smaller operators, to continue running those villages.

Other aspects of the bill may also disrupt the harmony of the relationship to which I referred earlier - the relationship that affords residents of retirement villages this sort of lifestyle. We must try to strike a balance between the needs of retirement village residents and the needs of operators to keep their doors open. I said earlier that the Opposition recognises that some in the industry, not only in New South Wales but elsewhere, have tried unfairly to rip off residents. The Opposition is supportive of measures to rectify this unjust practice.

It is important to again make the point that, unfortunately, the positive aspects of the bill are in some ways overshadowed by its negative aspects. The requirement that retirement village operators seek the consent of residents to the proposed expenditure of recurrent charges each financial year, for example, is democratic in principle. However, many operators believe that it may prove too onerous and impede the financial management of the village. Clause 55 (2) provides that village rules will override the village contract. Operators believe that these provisions not only jeopardise the legal sanctity of the contract but also the stock of available retirement village places.

The Coalition hopes that the situation will not arise in which the financial viability of a village is jeopardised because its residents vote in favour of a facility which proves financially unsustainable. The Coalition is strongly opposed to reductions in the total stock of places available and it warns the Government that it will be held to account if any villages are jeopardised, due to this reform, and it causes distress to residents. Another concern is that many stakeholders have expressed their disappointment to the Coalition that the Government has not been consultative and open in its dealings with them.

The proposition that has been put forward by the Minister in another place, to which I alluded earlier, with regard to the amendments and there being an open and transparent consultation process is not quite right. I would like to know the Minister’s definition of "open and transparent". Specifically, this bill is much larger than the draft
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exposure bill. Therefore, in the view of the Opposition, some of the provisions in this bill have not been canvassed properly. The impact of those provisions has not been properly calculated.

Further, the regulations in the bill will have an important impact on the ongoing role of stakeholders in their consultations on the draft bill. The regulations in this bill are crucial to the industry and I suspect that they are also crucial to residents. The Minister for Fair Trading should take a break. He has been travelling around the State promising to do something positive about bringing down petrol prices. He knows that he will not be able to deliver on that promise. He never had any intention of doing so. I call upon the Minister to consult with the community and to attempt to achieve a balance in relation to these regulations for the sake of residents and the industry. If there is no balance there will be no industry - it is as simple as that.

People will simply move to other States and take with them all the proposed capital from retirement villages that this State is looking forward to. We will not see that capital until the Government brings the legislation back to fix some aspects of it, as we have suggested or, at the very least, to allay the fears of the industry to ensure that the money does not disappear from New South Wales. I thank the many residents and operators who have met with the Coalition over the past few months to express their views and concerns. Specifically, I thank the Heritage Retirement Village Residents’ Committee, which met me early in the piece. This committee was forthright and quite succinct in what it required.

I most certainly enjoyed the frank presentation of its case. I thank also the Residents’ Committee of Cardinal Freeman Village, an important village to Coalition members and some Government members; the Aged Services Association of New South Wales and Australian Capital Territory Inc.; Bellevue Gardens Retirement Village; Vasey Housing; the Returned Services League of Australia; the Council on the Ageing; and the Retirement Village Association of New South Wales and Australian Capital Territory. Having warned the Government of the concerns and their potential impact on the industry, the Coalition does not oppose the bill.

The Hon. I. COHEN [5.23 p.m.]: The Greens support the Retirement Villages Bill. Over the last couple of months a number of retirement village residents have briefed the crossbenchers about their experiences in retirement villages. These stories can be described as shocking. Clearly, some retirement village operators are exploiting their residents and making their lives a misery. The Retirement Villages Bill goes a long way to rectifying the problems residents have raised. New South Wales has approximately 900 retirement villages providing accommodation for some 50,000 older people. Most residents are in self-care situations, although some receive personal care from village operators.

The industry is dominated mostly by the not-for-profit sector: 90 per cent are operated by church groups, community groups and charitable organisations. In 1998 the Department of Fair Trading undertook a review of the regulation covering the retirement village industry in New South Wales. Public meetings were held across the State with more than 1,000 people attending, and 275 written submissions were sent to the review. The review was the precursor to the legislation; it identified a number of problems within the industry. The review pointed out that a huge power imbalance existed between residents and their village operators.

Retirement village residents are generally older people on fixed incomes and inexperienced in the operation of retirement villages when they enter them. On the other hand, village operators have much experience and financial resources. Many residents are concerned about the possibility that they may lose their investment if a village goes into liquidation or the operator suffers financial loss. Residents generally pay about $100,000 to enter the market, but can pay between $200,000 and $400,000 at the top end of the market.

Many residents do not own their units and do not have a legally enforceable interest in it. If the operator is declared bankrupt, residents become unsecured creditors. New operators of the villages are not legally bound to enforce existing contracts. If new operators do not elect to do the right thing, residents may have a difficult time recovering their loans. Residents should be entitled to recover any money owing to them under their contract. Clause 40 (1) of the bill picks up on this issue. It states:
      A village contract between a resident and a former operator of a retirement village may be enforced against any operator for the time being of the village.

Another initiative in the bill is that operators will have to disclose to prospective residents a variety of things. In the bill this is known as a "disclosure statement". In the statement, for instance, operators will have to outline all fees and charges. Operators will also have to give to prospective residents a booklet supplied by the Department of Fair Trading that will set out the rights and obligations of residents and operators. One issue mentioned at the review was payment of deposits, particularly when a
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consumer must pay a precontractual deposit. This is a deposit to have a potential resident’s name placed on a waiting list.

The review pointed out that consumers had paid $2,000 - some up to 20 years ago - to go on a waiting list. When new units became available the village operator decided to give them to individuals who had bid the highest, rather than allocating the units to people who had been on the waiting list the longest. Some horrendous cases of financial exploitation were exposed in the review and during crossbench briefings from residents of retirement villages.

Examples include massive monthly increases for services such as the provision of meals, cleaning and other services. This can be an extremely difficult situation for many residents who are on fixed incomes or receive the pension. They can least afford the increases and would probably not have entered the village if they had known what was going to happen.

Another example was that of residents continuing to be charged for services after they had left the village or even died. In some cases this practice continued for a period of up to three years. Another example was that Heritage Retirement Village residents were being totally exploited and abused by the operator. In this case the residents have had to resort to court action because the operator has been so ruthless. This operator charges all legal costs to the residents as operating costs of the village. It makes no difference whether the residents win, lose or draw in the court judgment, this operator’s legal costs were still charged to the residents. Fortunately, this absolutely outrageous behaviour is taken care of in clause 198 (1), which states:
      The residents of a retirement village are not liable to pay any costs incurred by the operator (or that the operator expects to incur) in obtaining legal advice, or undertaking legal proceedings, in relation to the village:

However, if a court finds in favour of the operator and awards costs against residents, those residents are liable to pay those costs. In the Heritage Retirement Village example the operator recently charged $10,000 to residents’ accounts for legal expenses that had been incurred. The Greens have been overwhelmed with letters of support for the bill. I shall mention just a few. A form letter from many retirement villages states:
      We have for some 18 months been seeking changes which would give residents some rights enforceable under the said Act.
      We have had an Act since 1989 but despite many efforts to get a fair go from unfair contracts and the actions of a minority of owner/operators we continue to be treated as Aged Pawns in the industry.
      At long last we have been able to have some listen to our dilemma and the proposed Act will give us some enforceable protection.

A letter from the RSL Veterans’ Retirement Villages Ltd dated 8 October stated:
      In general, we believe that the proposed Act is a great step forward, providing many of the safeguards lacking in the past and now most urgently needed.
      In our case there are large capital amounts subscribed on entry which in no way are protected under current legislation, as made evident in a number of failed villages in recent years.

The Greens support this bill. Rather than examining a balance between owners and residents, we have a responsibility to older people to guarantee them a comfortable and relaxed retirement in their later years and a lifestyle they deserve given the input they have made to the community all their lives. The Greens support the bill.

The Hon. Dr A. CHESTERFIELD-EVANS [5.37 p.m.]: I support the Retirement Villages Bill. In its original form the bill was a great step forward for the protection of rights of residents of retirement villages. I have received a huge number of letters from residents urging support for the bill, specifically in its original form. I have had contact also with the Aged Services Association, the Windsor Country Village, the Aged-Care Rights Service, the Retirement Villages Residents Association, and the Combined Pensioners and Superannuants Association of New South Wales.

New South Wales has approximately 50,000 residents in 900 retirement villages, the majority of which are aged over 70 years. I have received numerous letters, many of which are form letters. The signatures total 1,286, even taking into account signatures on multiple documents. Clearly that demonstrates many people have signed letters supporting the bill in its original form. Obviously in retirement villages many people are frail and vulnerable and need to be protected by strong government legislation.

Retirement villages presently are regulated by a code of practice, but if the stories I have heard are half true this regulation has been an abject failure. Many relatives of residents and residents have complained of fees being charged for meals, cleaning and other services along after the resident has left the village - even after their death. Quite often the village operator has exclusive selling rights
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of units when occupants die. While the unit is being sold, management fees and monthly fees accrue. In a case outlined by the honourable member for Swansea in the other place, it took almost three years to sell a unit in a retirement village for $84,000, out of which was taken $37,000 for management fees and $24,000 for monthly fees, which left a net result of $23,000.

My grandmother was in a highly respected nursing home complex for some years. She bought a unit at what, I thought, was an outrageous price. She was not well. She did not leave her own home until she was virtually unable to live alone. She lasted only a couple of months in the unit. She then lost it entirely and was in a nursing home situation, which was quite unsatisfactory. For 12 years she was the only person compos mentis in a ward of four. It was very degrading. I hope that this bill will wipe out the exploitation that sometimes occurs in retirement villages.

We are a little worried that the Government saw fit to amend its own legislation in the other place, with a total of 32 amendments, 14 of which were in response to industry-raised concerns. We do not mind the Government amending its own bill if some real problems have been pointed out, but we do not really want to see consumer protection wound back by concerns that are other than in the interests of the consumers. I trust that the Minister will justify the amendments in his reply and assure the House that the amendments are not backsliding and will not impinge adversely on the rights of residents of retirement villages. Subject to those assurances, the Democrats will support the bill and some of the amendments that have been foreshadowed.

The Hon. HELEN SHAM-HO [5.41 p.m.]: I support the Retirement Villages Bill. When I was a member of the Coalition I had carriage of the Retirement Villages Amendment Bill. Therefore, this bill and the issues it raises are not unfamiliar to me. My office - as well as the offices of the Hon. I. Cohen, the Hon. Dr A. Chesterfield-Evans and quite possibly other crossbench members - has been inundated with mail from residents from around 65 retirement villages across New South Wales, including Heritage Retirement Village at Padstow Heights, Brentwood Village at Kincumber, Henry Kendall Village at Wyoming, Rowland Village at Galston and Cutlers Village at Narrabeen, among others.

Most of these letters are appended with signatures of residents, Brentwood Village having as many as 623 signatures. Unfortunately, these letters were informal in form and therefore were not in the form of a petition, otherwise I would have tabled them as petitions. These letters stack up to a pile more than one inch thick. The signatures on them would take too long to count. I have also received letters from organisations such as the Combined Pensioners and Superannuants Association of New South Wales and the Retirement Village Residents Association, expressing their support for the bill.

I accept that this bill is the result of two to three years of consultation and negotiation. It is supported by, for example, the Uniting and Catholic churches, both of which are very significant providers of accommodation for retired people. The Uniting Church is the single biggest provider. I would like to note for the record that in the past two months members of the crossbench have attended briefings by representatives of both residents and operators of these villages; the views of both sides have been heard and taken into account at least in my consideration of this bill.

In general, I support the main thrust of this bill, which is to give legal certainty to this industry which until now has, in the main, been subject to a code of conduct under the Fair Trading Act 1987 as opposed to a framework that has had the force of law. Such codes can work well in the context of parties willing to pay mutual respect to its obligations. Unfortunately, however, some operators have chosen not to comply with what was thought to be a mandatory code of conduct.

In the course of litigation that ensued involving the residents and the operator of the Heritage Retirement Village, the code of conduct was held by the courts not to have the force of law. The confusion and absence of clarity which has resulted in the industry as a result of this finding is one of the reasons this legislation is now before us.

As a result of the court finding, the offending operators have, with confidence and without fear of legal censure, been able to rely on principles of ordinary contract law to abuse even the basic rights of residents and their relatives, that is, to rely on the terms of contract as opposed to having regard to what was thought to be a mandatory code of conduct. For example, the estates of deceased residents have been hit with charges for the maintenance and personal services in respect of the deceased residents, such as the cost of meals and cleaning, sometimes for years after their death, as referred to by the Leader of the Opposition in his contribution to the debate, or management fees have been increased unduly and without any clear justification, causing unexpected financial burdens on residents.

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This bill not only addresses these blatant abuses of residents’ rights, but generally provides the limits within which the relations among residents and industry suppliers may legally operate. For example, I particularly commend the requirement that operators are to fully disclose their fees, charges and services, among other matters, to prospective residents by completing a prescribed disclosure statement; that if the information therein proves misleading, the contracts may be rescinded within a three-month period; and that by law residents would be granted the freedom to chose their own selling agent and to set the sale price of their unit.

I welcome the improvements that the bill makes to the dispute resolution process, which are designed to minimise the expense of dealing with disputes. The jurisdiction of the Fair Trading Tribunal, for example, will be widened by this bill to hear claims regarding unconscionable, and harsh and oppressive contracts, claims that would normally be dealt with by the Supreme Court. It is also envisaged the bill will expand the role of the Residential Tribunal in this area. These are just some of the improvements that I wanted to note. The bill is extensive and I do not want to spend further time outlining its contents, which have already been extensively traversed during this debate.

Suffice it to say that generally the framework the bill will provide will be a step in the right direction. I trust that this legislation will now give the industry the certainty it needs, even if some of its features, as it is the first comprehensive legal framework for the industry, may have to be ironed out once the effect of the legislation in practice has had time to be observed. It is very appropriate in this International Year of Older Persons that such legislation has been developed to protect these very vulnerable members of our community. I congratulate the Government on introducing this bill, and I support it.

Reverend the Hon. F. J. NILE [5.47 p.m.]: On behalf of the Christian Democratic Party I fully support the Retirement Villages Bill. The bill will enact legislation setting out particular rights and obligations of residents and operators of retirement villages in New South Wales. As honourable members would know, New South Wales has approximately 900 retirement villages that provide accommodation for 50,000 retired persons. Many of the villages are operated by church, community and charitable operators, although the proportion of privately run villages is increasing.

It has been found that the predominant residents of such villages are usually women over 70 years of age. That statistic emphasises the need for the Government to be cautious in the legislation, as it has been, to ensure that the rights of those residents are protected. The implication would be that the woman’s husband is deceased. We know that in our modern society the male member of the marriage usually dies before the female. Women in the over-70 age group are vulnerable to stress, as are men in the same age group.

After they have performed their life work - in the case of many women that would involve being a mother, caring for a family and, perhaps, having served in paid employment or voluntary activities in their latter years - they have entered a retirement village at about the age of 70. They certainly do not need to be in a stressful environment in which they are dealing with, in the minority of cases, insensitive managers and owners of the villages.

This would apply more in commercial operations than in those run by church, community and charitable operators. It is important that the needs of the older community are considered along with the concerns of operators of retirement villages, in particular those run by church and community groups. If the scales are tipped too far in one direction - and I do not believe this bill does that - operators will feel that it is no longer attractive to invest in retirement villages. That happened when the Federal Government changed the taxation laws with regard to negative gearing, which resulted in a drop in rental accommodation.

We must ensure that a variety of retirement villages are available so that people can live close to where they previously owned their home - the great Australian dream. People in their seventies, particularly widows living on their own, should not have to look after a large house on a large block of land but should have other options available. Something should be done at the State and Federal levels to assist young couples to have a granny flat as part of their home so that they can look after their ageing parents. I am not critical of retirement villages, but I believe that people should have the option to care for their aged relatives, as they do in the Chinese culture.

The Hon. H. S. Tsang: I have my grandmother living with me.

Reverend the Hon. F. J. NILE: You are a good example of what I am talking about. Young couples may need financial assistance to provide care for their ageing parents by way of a subsidy, grant or reduction in taxation, but that is a Federal matter. All honourable members have attended many meetings over the past months with residents from villages, and we were all moved by the people who live in the Heritage Retirement Village. I have
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received reports outlining 19 major areas of concern, mainly in the financial area.

Apparently the former owner was understanding but other owners seem to have been insensitive. In many cases the residents have sought justice through litigation. Not only have they not received justice, but the operator has charged residents for legal expenses even though he is at fault. The money owed becomes substantial when those legal costs are added. This bill will allay some of the concerns of residents of the Heritage Retirement Village. I have received many letters of support for the legislation.

Operators say that there is a technical problem with the bill. The bill allows residents to challenge the budget or costs and to take the matter before the tribunal. I am advised that the bill as drafted creates a vacuum, and that if a retirement village budget is not approved, the owner is unsure whether he or she can expend money on the village. I shall move an amendment in Committee to include a provision that if the budget of a retirement village is challenged, the previous year’s budget remains operational until the matter is finalised. My foreshadowed amendment states:
      Page 70, clause 114. Insert after line 23:

      (5) If:
          (a) the residents do not consent to the statement of proposed expenditure (or an amended statement), and
          (b) the Tribunal does not, before the commencement of the financial year to which the statement relates, make an order under section 115 that gives rise to a statement of approved expenditure,
          the operator may expend money received by way of recurrent charges in accordance with the statement of approved expenditure in respect of the immediately preceding financial year (with minor variations, such as any necessary increases in payments required to be made in respect of annual rates and charges under the Local Government Act 1993 and the like) until the Tribunal makes the relevant order under section 115.

That is a sensible amendment and I hope the Government and the Opposition will agree to it, even if the Government does not believe it is vital. The Aged Services Association of New South Wales and Australian Capital Territory Inc. represents 344 church, charitable and community-based retirement village operators in New South Wales. It is concerned with the care of people and does not have financial motives. It agrees with the importance of this amendment. Therefore I ask the Government and the Opposition to support it.

The Hon. R. S. L. JONES [5.47 p.m.]: I welcome the Retirement Villages Bill. For too long residents have been vulnerable at the hands of some unscrupulous village operators. The bill will regulate the retirement village industry and give residents greater protection and a greater say in the way villages are operated. Retirement village residents number 50,000 at present and that number will continue to increase with the ageing of the population. We have an obligation as a community to protect the rights of those who are retired and who have provided an enormous contribution to our society over many years.

I understand that the bill has been gestating in one form or another for more than two years, beginning with a review of the code of practice that was completed in August 1998. The report found that the code of practice was unsatisfactory in regulating the retirement village industry. This was further supported when the Heritage Retirement Village successfully challenged the legal obligation of operators to adhere to the code of practice. Amongst other things, the bill sets in stone elements of the old code of practice and improves upon it by requiring the direct consent of residents in approving increases in budgetary expenditure and requiring operators to disclose to residents any fees, charges or services in a prescribed disclosure statement.

In doing this the bill recognises that residents of retirement villages are intelligent people who have a right to have a say in the running of their village. Residents are also clients of retirement villages who deserve a good level of service for the money they pay. Many members would have received letters from residents of retirement villages urging them to support the legislation. I have received letters from numerous villages, including Maple Grove in Casula, Lakefront at Toukley, Killarney in Mosman, Lindfield Gardens East in Lindfield and many more. In all, I have received letters from residents in over 50 retirement villages who support the legislation.

Some submissions contain the signatures of many residents. The same point is reiterated in all of these letters, namely, that despite many attempts to get a fair go from unfair contracts, residents say that they continue to be treated as aged pawns in the industry. The residents see the legislation as providing, at long last, some enforceable protection against unscrupulous village operators.

I have listened to the concerns of the village operators. While I understand that not all their
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concerns have been met, I believe the legislation should be supported in its current form. The Government moved more than 30 amendments in the lower House to allay the concerns of the industry. Any further change would disrupt the careful balance that seems to have been reached and would work to the disadvantage of residents.

I place on record the comments of Mr W. P. Brunsden, who is a resident of the Chatswood Garden Retirement Village. He suggests that the Capital Replacement Fund, which until recently was a mandatory requirement, be reintroduced into this bill. The Capital Replacement Fund would provide money to pay for new buildings or plants, machinery or equipment that is needed for the refurbishment of the village. Parliamentary Counsel drafted amendments for me to move at the Committee stage to re-establish such a fund, but I will not move those amendments.

I am advised that the removal of the mandatory Capital Replacement Fund was done at the insistence of church and charitable retirement village operators that subsidise residents who cannot pay for themselves. Those operators are concerned that a mandatory requirement to set aside such large sums of money would work against their ability to provide for those needy people. Mr Brunsden also pointed out that the legislation is silent regarding a resident’s right to be heard before the tribunal under clause 108. The clause applies to residents who have not consented to a proposed variation in recurrent charges.

I understand that the tribunal is required under its own legislation to hear from the applicant and from the defendant in all cases. Therefore, I will not move an amendment as this problem seems to have been addressed. However, I will move an amendment which will allow residents to discover the history of a bad retirement village operation and an amendment which will allow one resident to represent other residents who have the same dispute before the Residential Tribunal. I hope that the changes in the bill will bring greater certainty to retirement village residents. I support the legislation.

The Hon. E. M. OBEID (Minister for Mineral Resources, and Minister for Fisheries) [6.01 p.m.], in reply: In concluding this stage of the debate, I would like to address concerns raised by some members of the crossbench about consultation and monitoring of the new laws. I am sure that all parties acknowledge that the Government has, at every step of this process, actively involved and consulted the retirement village industry as well as residents. Indeed, this process has meant that many of the matters raised by operators - for example, the draft exposure bill released earlier this year - have already been dealt with in this bill.

I assure residents and operators alike that the extraordinary level of consultation to date will continue. The Government is fully committed to ensuring that the bill works and is as fair in its operation to genuine and reasonable operators as it is to residents. That means that the flexible and consultative approach adopted by the Government will continue in the next stage of the bill’s implementation - the development of the regulations.

As honourable members are aware, the bill provides for the establishment of a retirement village advisory council under the Fair Trading Act to act as a peak advisory body on the new legislation’s operation. That council will include representatives from all parts of the industry as well as members who represent residents. The Government is confident that it will be an effective forum in which potential difficulties will be able to be identified and resolved. The final issue raised by crossbench members relates to how the Government intends to ensure that retirement village residents and operators are properly informed about the new regime.

The Government acknowledges that change can be difficult and confusing for anyone, including older members of the community. That is why the Government will conduct a comprehensive education campaign to allay unnecessary fears and ensure that everyone concerned knows what their rights and obligations are. This will include ensuring that all prospective retirement village residents are provided with a new Department of Fair Trading booklet which clearly outlines the impact of the new laws.

Departmental staff will also embark upon a round of public meetings at retirement villages where residents and operators will be able to have their questions answered face to face. I have also undertaken to ensure that all members of Parliament are provided with supplies of the new information booklet so that their constituents have ready access to the information through their local members. I understand that a suggestion made by the Hon. A. G. Corbett to ensure that relevant information is available on the Internet will be adopted.

The Hon. R. S. L. Jones foreshadowed that he will move a few amendments, which I will now address, although I believe that he now does not intend to proceed with those amendments. Nevertheless, before addressing the concerns, I thank the honourable member for his contribution to debate on this bill. He proposed that the penalty
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notice provisions apply to an operator’s obligation to provide reasonable security for residents. However, the bill gives a resident the ability to apply to the Residential Tribunal about the level of security in the village and in relation to a resident’s unit. No penalty notice applies.

Making this matter a penalty provision will not remedy the situation for a resident. All it will mean is that the operator pays the penalty to the Government. Under the current provisions of the bill, the resident can apply to the tribunal for a performance order. The way in which this bill deals with reasonable security is consistent with residential tenancies in New South Wales when tenants seek a compliance or compensation order from the tribunal. The Hon. R. S. L. Jones has also sought to require all operators to establish a Capital Replacement Fund.

The Government included a similar requirement in the draft exposure bill that was released for comment. However, the proposal attracted unanimous opposition from the operators. Church and charitable organisations were particularly concerned that the establishment of a Capital Replacement Fund would tie up their resources and not allow them to subsidise residents who would otherwise not be able to afford to enter a retirement village.

The Government also received submissions from some residents stating that the fund would impose additional costs because they were already contributing to a sinking fund under the Strata Schemes Management Act. The Government’s intention was not to impact on the good work of the church and charitable sector. As a consequence, the Government has amended the relevant provisions to require the establishment of a Capital Replacement Fund only if the operator made representations to residents that such a fund would be established. This is in keeping with the bill’s intention, namely, that operators should fulfil any promises they make to residents or potential residents.

The honourable member also suggested that the bill should require operators to make available information regarding the penalty history of the village. The Government acknowledges the Hon. R. S. L. Jones’ intention to contribute to information disclosure for prospective residents. That approach would be inconsistent with other penalty notice provisions of which the Government is aware. It would be analogous to requiring an individual to disclose parking penalty notices in an employment application.

However, the Government believes that the proposal may undermine the system of penalty notices. Penalty notices are designed to be a quick and effective mechanism of compliance and are meant to apply predominantly to minor breaches of the law. If operators know that their history is publicly available - especially if the breach is essentially technical or of a minor nature - they will challenge all penalty notices in the courts.

People can already contact the Department of Fair Trading to find out if an operator has been prosecuted. The Government agrees that it is right and proper for such information to be available to prospective residents. It seems that the honourable member’s intention might be better served by making sure that all potential residents are aware that this check can be performed. That is why the Government is prepared to give an undertaking that the booklet on retirement village legislation produced by the department will include this information. Again, I thank the Hon. R. S. L. Jones for his contribution.

I take this opportunity, on behalf of the Minister for Fair Trading, my colleague in the other House the Hon. John Watkins, to thank all members of the crossbench and, indeed, members of the Opposition for the co-operative approach that has been taken to this bill. I commend the bill to the House.

Motion agreed to.

Bill read a second time.