Retirement commissioner Jane Wrightson says the legal framework governing retirement villages needs to be changed.

"I know a creaky framework when I see one and one that favours business interests over consumer protection. We need to look at the balance," Wrightson told parliament's economic development, science and innovation committee.

That's despite the fact that the staff and village operators are "by and large outstanding" and "most people are satisfied until you're not", she said.

The current legal framework was created 20 years ago when the commercial sector barely existed and is "remarkably light-handed", she said.

"Twenty years without a review is too long when we're dealing with a cohort that can become vulnerable, not generally when they move in but very often by the time they move out" of a retirement village.

Wrightson said the associate minister for public housing, Poto Williams, has said a review of the legislation will "hopefully" begin later in this parliamentary term. "It would, of course, be helpful if this committee also supports a review."

Errors or small points

Wrightson was speaking to a white paper her Commission For Financial Capability published in June.

As BusinessDesk has reported, the paper got a number of its facts wrong, but Wrightson said "they were fairly small points, I thought"

Wrightson said she had been surprised after her appointment in February 2020 at how many complaints about retirement villages she had received and that the white paper and another that preceded it were a way "to surface the issues".

There are "two sharply divided parties" in the retirement village operators and those representing residents and their families.

"It's important to say, as I have throughout the whole process, that retirement village living in general offers high-quality accommodation," Wrightson said.

"My work here has been to lift the hood on the machinery that surrounds a village. I have concluded that it's time for a shake up, or a tune up."

The main issues of complaint arise on moving into a village and on moving out and relate to disclosure and the non-negotiability of occupational right agreements (ORAs).

The Retirement Villages Association, which represents the operators and developers of retirement villages, has a blueprint for how a village should be operated but it doesn't go far enough, Wrightson said.

Neither fish nor fowl

It's important to understand that village residents are neither property owners nor tenants.

While tenancy protection has been considerably strengthened over the last couple of decades, that hasn't been the case for retirement village residents, Wrightson said.

Among matters she wants reviewed is the sharing of capital gains – in most villages, residents are refunded the capital they paid for an ORA, less deferred management fees, and they don't share in any capital gains and losses.

This is a highly vexed issue, Wrightson said.

"An agile, simple complaints process with mediation at its heart must be a minimum in this complicated toolbox."

Wrightson noted that amid rampant house price inflation, the ability of people to move out of a village, possibly into a different village, is limited because they are priced out of the market because of the inability to share in capital gains.

"The price of an ORA just goes up and up, irrespective of what, for instance, the building cost is," she said.

Standard contracts

Michelle Reyers from the commission told the committee only about 5% of villages offer capital gains sharing, although that had been common in the 1970s.

Wrightson said she would like to see standard contracts, similar to the standard sale and purchase agreement used when buying and selling other types of residential properties, but that the industry has said that isn't possible.

She noted that while the law requires prospective retirement village residents to get legal advice, many lawyers aren't familiar with the law governing retirement villages.

"What interests me the most is the feedback from the industry saying we couldn't possibly" use the same standard contract but that she can't understand why not.

Reyers said the contracts are non-negotiable so all the lawyers can do is explain what the implications of the contracts are. "It's on a take it or leave it basis."

Asked about other property options for the elderly, Wrightson noted that developers are building four-bedroom homes, and not what future New Zealanders are going to need.

"We don't have the right stock in the right places, there's no question about that."

This story has been corrected to show that Wrightson said the legal framework was "creaky", not creepy.