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4 Aug 2016

Retirement Villages Bill

The Hon. A.L. McLACHLAN ( 16:25 ): I rise to speak to the Retirement Villages Bill 2016. My comments on this bill are in support of those of the Hon. Stephen Wade, who is the lead speaker on this bill for the Liberal opposition. ‘The afternoon knows what the morning never suspected’—cogent words from the American poet, Robert Frost. The ambitions that gave birth to this bill have a patina of nobility. It is an attempt to improve the regulation of retirement villages. There will—

Members interjecting:

The ACTING PRESIDENT ( Hon. J.S.L. Dawkins ): Order! The Hon. Mr McLachlan has the floor.

The Hon. A.L. McLACHLAN: And the flu. There is a will to divine a better and more just balance between the rights of the operators and the rights of the occupants of these villages. Those conceiving of the bill have thoughtfully taken some guidance from the considerations and recommendations of the select committee review of the Retirement Villages Act 1987. My own comments are informed by my service on a not-for-profit board of a company that used to own and manage a suite of retirement villages in this state and the Northern Territory. Before that, as a lawyer, I had occasion to advise those seeking to enjoy their retirement in the same.

Individuals or couples attracted to the community of village life ‘buy in’ to home units. The contractual arrangements vary between villages. Those seeking a unit are not in most instances simply renting the home or purchasing some form of title; rather, they are entering into a complex financial arrangement which often only becomes apparent when they wish to or have to leave and a financial reconciliation of their interest in the unit takes place, usually after their interest is sold on to another party. Delays in selling an interest in a unit are in most instances the fault of no one individual.

However, delay invokes stress in the elderly and their families, especially when they need to enter a new place of accommodation and level of care and support. Market conditions and increased choice of accommodation may impact the netting of any school of potential purchasers. There can be considerable delays in finding people who wish to live in a retirement village. It can be a difficult decision for a person, or a couple, to leave their longstanding home, where children have been loved, nurtured and raised, and the place of countless celebrations and happy moments. At the same time, they nervously look to establish themselves in a new phase of their lives. They are confronted with the approach of the twilight of their lives and the ending of their middle years. The purchasing decision is emotion laden and rarely quick. It is an uneasy time for potential purchasers.

Not all relish the thought of living in a closed community with shared facilities and some struggle against a sense of the inevitability of change as one grows old. This is the inherent nature of this sector of the real estate market. Retirement villages have traditionally been built and run by not-for-profits. They remain in the majority. However, there are increasing numbers of for-profit players in the marketplace.

In my experience, to ensure regularity of cash flow, whether for-profit or not-for-profit, there is an increasing commercial imperative for sizeable providers to have a sufficient scale of operation, that is, as many units as possible, and this probably can only really be achieved by being national. There is still a place for small providers, but medium providers are feeling the pressure of increasing costs and the need to find residents, while also accommodating irregular cash flow.

While the operation of the marketplace is subject to change, it is my experience with the sector which gives rise to my reservations about the retrospective effect of certain provisions in this bill. The reasons expressed to justify the need for this bill have largely been couched in terms of ensuring an appropriate balance between the rights of the consumer and the provider, yet the effect of the buyback clauses, especially their retrospectivity, means that this bill is, in effect, a very significant market intervention by the executive.

The proposed clause 26 of this bill forces operators of retirement villages to pay residents their exit entitlements after 18 months if the resident has ceased to reside in the village for this period or the property has been unable to be sold. The extant contractual rights and entitlements of our citizens are overridden by statute. Future operators of villages are being impacted and shaped.

At the same time, no evidence has been tabled to assure this chamber that there will be no adverse impacts on the operation of the market or the viability of some of the smaller and regional villages and their operators. One possible scenario is that small and medium operators are pushed out of the market, and most, if not all, villages are operated by large investment funds, which have invested in the sector to derive long-term yields, much like purchasing a bond. I am not suggesting to honourable members that this is good or bad; rather to say that we do not know, and before we legislate we should at least have before us an assessment of the market impact of passing this bill.

It does not come as a complete surprise to me, when we are being asked to legislate in a vacuum of economic considerations. The Labor benches have no inherent understanding of the importance of cash flow and the principle of investment return for risk. They have lived their lives comfortable in their union sinecures, their hands soft from having being saved from the rigours of labour. Their lifestyle has been supported by the hard work of their members dutifully paying their dues, communing only with their friends and the bureaucratic elite, whose sinecures are underwritten by the ever-burdened taxpayer, wilfully ignorant of the realities of the marketplace and what is required to attract and retain private capital.

Unless we wish as a state to build accommodation for our ageing community at the expense of the taxpayer, we need private investment. This is not to suggest the rights of the ageing and vulnerable should be abrogated. Rather, the intervention in the market needs to be well understood, measured in its nature, with the rights of competing interests sensibly balanced. Even if the provisions of this bill have a minimal impact on the operation of the market going forward, there appears to be little justification for the retrospective application.

A core principle of the rule of law is that the law must be known and available, as well as certain and clear to those who must obey it. Mr Crowe, in his work titled ‘The Morality of Retrospective Legislation’ says:

Retrospective law is not necessarily immoral—but bearing in mind the distinctions that must be made, the presumption is strongly against it.

By the use of the term ‘distinctions’ I understand him to mean the special cases where retrospective operation may be justified. He goes on to say:

Whether a given retrospective law is conformable to the common good is a matter that demands the closest scrutiny. It cannot be said that it is a bad piece of legislation simply because it is retrospective, but if the common good does not clearly require it, it is bad as law which unnecessarily confiscated an individual’s goods.

In other words, any proposed legislative initiative that seeks retrospective justification must be carefully considered, properly argued and be for the common good of the society.

On what we have before us, I do not believe the government has, at this stage, made out the case that retrospectivity is for the common good. There has been consultation, which amounts to collecting the views of the community, but it seems no analysis of the same—no business case, no cost-benefit analysis. As Plato contemplated, the provision against retrospectivity is one of the immortal rules that should constrain mortals who create law.

The retrospective operation of certain clauses offends the rule of law principle that laws should aspire to operate generally and not specifically to certain individuals or groups. Individual citizens should have the right to plan, safe in the knowledge that compliance with the law of the day will not result in unreasonable consequences resulting from the heavy hand of the state.

This bill impacts a class of citizens and violates their rights. Indeed, and what is particularly significant, is that the retrospective elements were not proposed in the report of the select committee in 2013. This bipartisan committee seems to have had greater wisdom in these matters than the minister in the other place, who has responsibility for this bill.

Retrospective laws such as these can disrupt business planning processes, resulting in high compliance costs and unintended consequences, such as responsible market players being adversely impacted. The Property Council noted in their submission that the statutory provision to buy back the properties is not necessarily in the interest of residents. They argue operators will most likely need to sell the housing at a reduced rate in order to meet the buyback provision, which will result in current properties and the housing market, in general, to compress. In other words, there will be a fall in capital value. This will result in a less than satisfactory outcome for the residents, who may need as much capital as they can muster.

During the committee stage in the other place, the minister stated that a regulatory impact statement had been completed. However, when asked whether this would be placed in the public domain she stated that she would take that under consideration. I note that this is in clear contradiction to the statement published on the Department of the Premier and Cabinet’s website. Under the section entitled Regulatory Reform it says:

To enable public scrutiny of regulatory decisions, agencies must publish the final RIS [regulatory impact statement] on DPC’s [Department of the Premier and Cabinet] website…

It is disappointing to discover that an RIS for this bill is not on the DPC’s website. The minister also considered, in the other place, that to date no cost analysis or risk assessment has been conducted in relation to this bill. I call on the government to make the case that the common good is being served by making this bill retrospective in operation. I call on the government to provide us with assurance that there will not be adverse market impacts as a result of this bill being made law.

We have an ageing population in South Australia; our citizens are living longer. We need plentiful accommodation options that are affordable for our retirees and elderly. The provisions of this bill may work inadvertently against the shared ambitions of all sides of politics in this state. I look forward to light being shed on the potential impact of this bill in the committee stage. It would be a tragedy if this bill restrained investment in this sector and contributed to people missing out on this way of living. In the words of the author James Douglas, ‘The care of the old is a vocation as delicate and difficult as the care of the young.’

Debate adjourned on motion of Hon. G . A. Kandelaars.

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