By CAM LUCADOU-WELLS
PENSIONERS are taking legal action against Willow Lodge retirement village over being slugged with costly deferred management fees.
The Consumer Action Law Centre, which is assisting the group of 14 Bangholme residents, describes the challenge as a test case into the fairness of the DMFs.
The fees, activated when the residents sell up, can strip away up to 20 per cent of their home’s selling price.
For a $200,000-plus unit, the fee could be up to $40,000.
Consumer Action policy and campaigns director Denise Boyd said the “opaque“ fees – which rise the longer residents stay – were becoming increasingly common in retirement villages.
“We’re currently hearing from older Victorians. Some of them don’t have enough money to move because the deferred management fee had stripped away so much.
“It’s an unfair contract term. They don’t understand the contracts – it’s not that it’s not written there, it’s just not explained properly.”
Under the Willow Lodge DMFs, they must pay 4 per cent of their property’s sale price per year of residence – up to a maximum of 20 per cent.
While living at the park, residents also pay a weekly fee to cover operational costs.
Consumer Action chief executive Gerard Brody said many people signed up to complex contracts and fees that they didn’t understand and at times of “great personal upheaval”.
“They may be moving out of the family home, have lost their partner, or be suffering physically, so they’re not in a position to be reading and understanding pages and pages of complex contracts.
“You can imagine their shock when they find out they’ll be slugged a huge fee to leave.”
Manuel Lang, chief executive of Walter Elliott Holdings which runs the park, said the fees were explained up-front and “in detail” to the residents.
He said the Willow Lodge sales team recommended buyers sought independent legal and financial advice prior to purchase.
“We’ve got good processes and people in place. We’re confident that the alleged non-disclosure did not occur.“
Mr Lang said the deferred fees reduced the initial purchase price of the home and the operational weekly costs for the buyer.
They would eventually help to pay for a $2.5 million bowling green and other improvements at Willow Lodge.
He said previous legal challenges against such fees had failed.
If the DMFs were found to be void, the financial impact on retirement villages would be “significant”, he said.
“We’re pretty surprised and disappointed that a number of residents have decided to challenge.”
A directions hearing is expected to start at the Victorian Civil and Administrative Tribunal within two weeks.
