Timing for the legislative review of the Retirement Villages Act 2003 (RV Act) has been pushed out, with substantive amendments now not expected until the next Parliamentary term. However, the Government has announced the key priority areas that it is focusing on as it moves to the next stage of the review.  

Jenny Baldwin spoke at the Retirement Villages Association's Policy and Finance Forum on 7 November 2024 and provided an update on the status of the review and guidance for operators to consider during the next stages.  

Timing

It had been anticipated that Associate Minister of Housing Tama Potaka was going to outline the Government's proposed amendments to the Act, following the receipt of over 11,000 submissions in response to the Discussion Paper The Retirement Villages Act 2003: options for change released by the Ministry of Housing and Urban Development (MHUD) in August 2023.

However, as Jenny explained during her talk, in his announcement on 16 October 2024 Minister Potaka instead advised that he is expecting:

• briefings and korero from agencies during 2025
• to seek Cabinet agreement for legislative change in 2026
• that any Bill amending the RV Act will likely be introduced during the next Parliamentary term.

Key priority areas

Minister Potaka advised that the next steps of the review are to bring the RV Act into line with sector best practice and to focus on "three key priority areas that support residents", being:

• maintenance and repairs of operator-owned chattels and fixtures
• managing complaints and disputes
• options for incentivising or requiring earlier capital repayments when residents move out of a village.

MHUD Briefing Paper to Minister

During her talk, Jenny discussed a number of proposals from the Discussion Paper that remain on MHUD's agenda including:

• a key terms summary for each village
• partial standardisation of ORAs and disclosure statements
• more information to be provided on transfer to care
• weekly fees and the calculation of deferred management fees (DMF) should stop on exit
• residents should not bear any capital loss on resale (unless they share in capital gain).

Some proposals will now not be progressed, including:

• interim changes to the Code of Practice
• minimum building standards for villages
• application of the Real Estate Agents Act to resales of ORAs by operators
• any changes to the role of Government agencies, the definition of "Retirement Village" or penalties for non-compliance with the RV Act.

Commerce Commission investigation into potential unfair contract terms

MHUD's Briefing Paper to the Minister also stated that the ORA terms reviewed by the Commerce Commission in its investigation into potential unfair contract terms in ORAs under the Fair Trading Act 1986 would also be considered as part of the next stage of the review.

A term in a consumer contract will be an unfair contract term if the Court is satisfied that the term meets all of these three tests:

• the term would cause a significant imbalance in the parties’ rights and obligations
• it is not reasonably necessary to protect an operator's legitimate interests
• it would cause detriment to the resident if such term was enforced or relied on.

If the Commerce Commission considers that a provision in an ORA (or other contract) is an unfair contract term, it can apply to the Court for a declaration. If an ORA provision is declared by the Court to be unfair, an operator would not be able to enforce that term or rely on it in any ORA.

Letters sent by the Commerce Commission to a selection of operators are not a formal finding of any breach of the law and at this stage, we are not aware of any Court applications made by the Commerce Commission in respect of any operator’s ORA.

Some of the key ORA terms considered by the Commerce Commission include:

• statements regarding villages offering a "continuum of care"
• methodology for weekly fee increases (such as by reference to CPI and NZ Super) and service fee increases
• further development clauses
• operator's ability to make changes to facilities and services at the village
• costs of maintenance and repair to operator's chattels and interior of the unit.

Where to from here? Next steps for retirement village operators

While there is currently no legislative requirement to make any changes to your ORA, nor has there been any Court order declaring any ORA term unfair, there are actions that can be taken now.

We recommend that operators consider the issues that have been raised by the Commerce Commission, and, where their ORA contains any of the terms identified by the Commission as being potentially unfair consider whether such a term can be justified (for example it is necessary to protect your legitimate interests) or whether the term should be amended.

If you would like to know more about the review of the RV Act or the Commerce Commission investigation into unfair contract terms and how this may impact you, please get in touch with our team of retirement village and aged care specialists.