Franks Stephen: Retirement Villages Bill — Second Reading 
Franks Stephen: Retirement Villages Bill — Second Reading 
[Volume:609;Page:7029] 
STEPHEN FRANKS (ACT NZ) 
: The previous speaker Mike Ward attempted a substantive review of this bill in the form in which it was returned from the Justice and Electoral Committee. He showed the kind of confusion that I had expected. He talked warmly of diversity while supporting a bill that in fact sets out to create a monoculture and without apology. 
This bill could have been sound. I believe that it was simply terrible when it was introduced in terms of the intrusive patronising attitude it took to old people and the interference it would have made in their property rights and the rights of those who dealt with them. Retirement villages would have been an undesirable industry for anyone who valued any kind of certainty in the contracts he or she had because of the political power to change the rules midway through any kind of enterprise. 
I believe that the bill has been dramatically improved. I was certainly grateful to have the acknowledgement from the Associate Minister of Justice just as I was grateful that the Minister did not have such a stock of pride in her initial product as to reject the suggestions that came from the Justice and Electoral Committee. I felt that made it a worthwhile exercise to be involved in. But I still believe that the outcome is sadly short of what it should be. 
When the bill came in it simply told the lenders to retirement villages that they would not be able to exercise their securities. It told the operators that they had to produce a simple clear and comprehensive disclosure statement which I know as one who has spent years trying to do that is simply impossible. Comprehensiveness in the face of liability becomes voluminous and simplicity and clarity disappear to almost all readers in the face of size. The bill told people that they would have a cooling-off period before they could have reliability in their contracts but there was mystification expressed at the suggestion that that would mean older folk would not be allowed to move into their properties despite their having feelings of full confidence and despite their being adults with their own money. They would not be allowed to enter into a contract without some third party telling them that they could not move in until a specified period was up. The bill provided for a level of supervision that had not been sought by the industry to date and it overrode contract in such a way that the Law Commission said to us quite simply in its terms: “If you are going to depart from freedom of contract you might as well do so in a way that is effective in achieving the consumer protection that is aimed at.” In other words the Law Commission which originated this bill felt that it had fallen woefully short. 
What had happened by the end? We had a process of slow and agonising improvement. I believe we have largely fixed the retrospective and arbitrary interference with financing contracts which it seemed the original proposers felt could just happen with no cost. From my experience in the related area of lending to farmers who quite often oppose enforcement there is a consistent and otherwise unexplained premium on lending to farmers that this industry would have rapidly attracted. Lending to even the best farmers costs about 0.5 to 1.0 percent more than lending to an equivalent business in town of exactly the same cash flow and security characteristics and from the studies it appears that that is because of the risk that it will be hard to enforce the security. We had a Government that was going to tell the lenders to this entire industry that it would rewrite their contracts and that would mean they did not have their fundamental right to sell up on default. 
That has been sort of fixed. We have sort of fixed the overriding nature of the code and its ability to rewrite the contract that had been the basis of the risk allocation and the financial arrangements that people go into these villages with. But we have not fixed it completely and as the Law Commission expressed it: “It seems to have happened here. There has been industry capture of the law reform process. There is a genuine risk of ending up with a measure that is a mere facade rather than a genuine safeguard.” That was from the very well-known Dr Dugdale who does not mince his words. He would have abandoned all pretence of freedom of contract and would have simply stipulated what all contracts would contain. 
In the committee we tried to make sure instead that the code could address only matters clearly stipulated for the Minister to address and towards the end of it we tried to make sure that the drafters of the code were required to take into account the anti-competitive effect of such a code. A minority on the committee proposed the very simple suggestion that the Minister make sure that the code is not so onerous as to act as a barrier to persons of modest means gaining access to accommodation in retirement villages. It seems absolutely self-evident that the code should not be a barrier. We also suggested that the Minister ensure that the code is sufficiently flexible to permit the operation of villages with a range of pricing structures and offering a range of services and facilities to residents. 
To my absolute astonishment the officials recommended strongly against those provisions. Not only did they recommend against them on what I believe were spurious technical and legal drafting grounds but they actually said that this measure is not intended to assist people of modest means. It does not matter if this code “gold plates” because it is intended to affect only those who are rich enough to afford a gold-plated retirement village. Their advice said: “It is not the purpose of the retirement villages legislation to widen the range of retirement living options for people of modest means. It should not therefore be a requirement for the Minister to take into account the effect of code requirements on a group of people for whom retirement village living is not currently or in the foreseeable future an affordable option.” 
So here we see nakedly what this bill is about. This bill has been captured by the industry. This bill is all about buying votes from the lucky ones who are conscious of what the law can do for those who get their hands on its levers. This bill has become a charter for the majority in the industry to limit access by those pesky untidy often incoherent often over-optimistic new entrants who keep pricing pressure on the industry and make sure it grows fast. This bill now makes sure that old people will never have the very best protection that they could have. The best protection for people in any industry is competitive tension. The very best protection that old people could ever have would be an over-supply of retirement units—retirement villages going broke because there were not enough residents to fill them. That is the very best protection we can supply to people in this industry because when there are too many units everyone in the industry has to find ways of attracting and increasing the number of people in his or her units. The way that every successful market economy works is by making sure that people— 
Hon Lianne Dalziel 
: This is not a market situation. 
STEPHEN FRANKS 
: The Minister just tells me this is not a market situation. That says it all. 
Hon Lianne Dalziel 
: It’s all one-sided at the moment. 
Murray Smith 
: There’s no bargaining power. 
STEPHEN FRANKS 
: Listen to them. It is coming from two sides. We have United Future saying there is no bargaining power. An operator cannot force people to go into a village. An operator has no show whatsoever of getting people to go somewhere they do not want to go. An operator does not control people’s money. This is absolutely hilarious and just as I expected. They have shown themselves. What we have here is: “The Government knows best. The Government knows far better than the people.”