Aveo faces class action over retirement contracts

Wednesday, 13th September, 2017

Aveo Group chief executive Geoff Grady said he is confident his company can show it met statutory and other obligations.

BESIEGED retirement living giant Aveo faces further upheaval with legal firm Maurice Blackburn set to launch a class action over its use of allegedly "unfair and unconscionable" contracts on elderly residents.

Maurice Blackburn principal Brooke Dellavedova said the firm sought to sign up unhappy retirees ahead of potential legal action targeting the contracts Aveo asks village residents to sign.

"These are complex and long contracts about 60 pages long," Ms Dellavedova said. "We're looking at the terms of the contracts which appear to be unfair and unconscionable.

"The average age of residents is about 82 years of age. They're often going into a period of turmoil when they go into retirement homes and they're signing these contracts which significantly favour Aveo."

Aveo, the country's largest owner and manager of retirement communities, has recently been under a blowtorch of media, regulator, government and financial market scrutiny following a Fairfax Media investigation.

The investigation exposed questionable business practices including churning of residents, excessive fees and charges, high exit fees and exorbitant refurbishment costs charged to residents.

The intense scrutiny hit Aveo's share price but didn't stop the company last month announcing a bumper $252.8 million end-of-financial-year profit.

Aveo has sought to appease critics by promising to simplify its contracts and provide money-back guarantees and shortened buyback periods to its residents.

Aveo Group chief executive Geoff Grady said he was not aware of the class action. 

"We have and always will act with the best interests of our residents," he said.

"We vigorously deny any suggestion to the contrary and we are confident that we can show that we have at all times met our statutory and other obligations and our commitment to residents."

The class action comes as the retirement industry faces pressure from regulators and multiple government inquiries.

An inquiry is under way in NSW headed by Kathryn Greiner alongside a compliance audit by NSW Fair Trading.

The Victorian government this week released its response to another inquiry which recommended substantial legislative review, uniform owners corporation voting rights and clearly defined responsibilities for repairs and maintenance of units.

Consumer and retirement advocates say the government failed to deliver reform.

"Piecemeal inquiries ... into the sector have failed to reduce the complexity of contracts or improve outcomes for residents," Consumer Action Law Centre chief Gerard Brody said.

Mr Brody said thousands of older Australians were caught in a trap of being unable to resolve disputes with their retirement housing provider.

Introducing an ombudsman would provide a low cost, timely and binding fix, he said.

Retirement village residents typically pay large exit "deferred management" fees on leaving their accommodation and often hand over any capital gain from the sale of their unit to the operator.

Ms Dellavedova said Aveo, since 2103, had earned $328 million from deferred management fees and capital gains on residents' properties.

"It's a very significant figure," she said. "People can enter into contracts but it doesn't necessarily mean that all their terms are fair."

Another law firm, Levitt Robinson, launched a class action in August with Aveo residents and families of former residents backed by New York litigation funder Galactic.

The Maurice Blackburn action will be on a "no win, no fee" basis.

The Sydney Morning Herald

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