Monday, July 03, 2017

Retirement Home Peddler Accused Of Using 'Complex, Draconian' Contracts, 'Rapacious' Exit Fees To Screw & Squeeze Elderly Homebuyers If They Try To Unload Their Homes In The Future; Terms Incentivize Operator To Churn Residents After They Buy To Beef Up Profits; Consumer Advocate: "It's A Bit Like A Financial Prison..."

In Sydney, Australia, ABC Online reports:
  • Residents of the multi-billion-dollar retirement village industry have described buying into a retirement village as a "financial sinkhole".

    A joint investigation by the ABC's Four Corners and Fairfax Media into retirement village company Aveo has uncovered exorbitant fees and complex contracts.

    One former resident describes Aveo's business practices as "totally rapacious, I don't know how they get away with it".

    Fairfax Media and Four Corners spoke to current and former residents, their children, lawyers, former Aveo staff and lobby groups and found several alarming business practices at Aveo — including safety issues, misleading marketing and advertising and property sales.

    The joint investigation obtained numerous Aveo contracts, which included clauses some lawyers described as complex and draconian.

    Chief executive of the Consumer Action Law Centre Gerard Brody described some of Aveo's contracts as among the worst he had seen. "Not only are they over 120 pages in length, they're dense, they're hard to understand, they're legalistic," Mr Brody said.

    Current and former residents also described the company's model — which takes an exit fee as high as 40 per cent of the original purchase price, leaving outgoing residents often forking out in excess of $100,000 — as "financial abuse of the elderly".

    Aveo has 13,000 residents across Australia and is expanding at a rapid rate. It expects to increase its resident numbers to 20,000 in coming years. Those residents live in just over 11,000 units in 89 villages.

    The company is rolling out two new contracts, the Aveo Way — which has exit fees of 35 per cent after three years — and Freedom Aged Care — which charge exit fees of 40 per cent after two years.

    An exit fee is unique to the retirement industry. It is calculated as a percentage of the purchase price charged by retirement village operators when a resident sells the property.
    ***
    Aveo is a financial juggernaut with a market capitalisation of about $1.8 billion.

    In 2016, it doubled its profit to $116 million. The majority of its profits come from exit fees extracted from residents on their departure.
    ***
    Mr Brody said some residents may want to exit, but find the cost of doing so prohibitive.

    "When it comes time to exit, some people can feel trapped," he said.

    "It's a bit like a financial prison. These fees are too high to enable them to exit, move into aged care, or back close to relatives and family."
For the story, see Aveo: Exploitation of the elderly rife in retirement villages.

See also, The price of Freedom (Its slick marketing promises a safe and sound place to live yet retirement village operator Aveo is making a fortune by ripping off Australians through complex contracts and eye-watering exit fees).

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