It's Time for Federal Regulation of Retirement Villages

Abstract

As Australia's population ages, increasing numbers of seniors move to a growing number of retirement villages. Unlike time shares, which are ‘managed investment schemes’ and therefore regulated as ‘financial products’ under corporate law administered nationally by the Australian Securities and Investments Commission (ASIC), the Commonwealth withdrew from the regulation of retirement villages in the 1980s on the basis that at that time they were local, usually run by religious bodies and charities and were not of national concern. The regulation of retirement villages was taken over by the states and territories under their non-uniform Retirement Villages Acts and the common law. Until then retirement villages, often indistinguishable from Commonwealth regulated timeshares, were regulated in the original State and Territory Uniform Companies Acts in 1961 as ‘interests’, and then in later Commonwealth legislation as ‘prescribed interests’ by the forebear of ASIC, the then National Companies and Securities Commission (NCSC) with the State and Territory Corporate Affairs Commissions as its ‘delegates’. Today retirement villages, which are largely owned and managed by the corporate sector, raise many issues of national concern such as accountability, fees and the rights of residents. Some aspects of retirement villages such as directors’ duties, fundraising, prospectuses and unregistered schemes are regulated as corporations by ASIC under the Corporations Act 2001 (Cth), but retirement villages are not regulated as ‘financial products’ under corporate law.

This article challenges the effectiveness of state and territory regulation of retirement villages and calls for federal regulation of retirement villages by bringing retirement villages into the definition of ‘financial product’ in the Corporations Act 2001 (Cth) and in the Australian Securities and Investments Commission Act 2001 (Cth). As financial products, retirement villages would then be regulated by Commonwealth legislation which deals with financial services and financial markets, as regulated by ASIC. These laws include consumer protection provisions such as the prohibition of misleading or deceptive conduct, unfair contract terms, unconscionable conduct, licensing and high standards for those in the retirement village industry. This would result in a return to Commonwealth leadership of the regulation of retirement villages to harmonise and to consolidate the current mix of state and territory regulation with federal legislation including an enforceable Retirement Villages Code of Conduct.