Retirement villages are unique neighbourhoods that cater to elderly and disabled citizens who are looking to enjoy their golden years. These villages provide services and facilities that, when used outside of these schemes, are usually out-of-pocket living expenses.
While many residents are satisfied with the lifestyle and experiences, the majority still agree, however, that retirement villages can be a huge financial sting. For prospective villagers and their relatives, it is important to realise that moving into a retirement village is very different from purchasing a home. It can be dynamic and villages differ in housing, service, and governance, legal and financial systems.
Many people settle for a retirement community near their original home. When you are thinking about going farther away, get your relatives interested in figuring out what new services are available in the larger city, as well as within the area. If, after you visit a retirement village, you believe you would like to stay there, get a copy of the village-related disclosure statement from the operator or manager on the specific unit you are interested in.
How Does a Retirement Village Work?
The control and maintenance of retirement villages vary in a number of ways. Businesses, other organisational bodies, or individuals can own retirement villages. Several operators engage a manager to take care of the regular operations. It is important to be satisfied with how well the village is managed.
The Statutory Supervisor
All villages need to be registered and they must have a statutory supervisor unless an exemption is made. The statutory supervisor is an autonomous individual or company elected by the operator to oversee the financial operations of the village and to secure the residents’ security interests and the village management. The statutory supervisors also have the power, among others, to steer an operator to manage a village in a given way.
Every contribution you make to the village will be transferred to the supervisor to be kept on your behalf in a trust account. During a cooling-off time, the operator can only collect the money up until you change your mind and cancel the deal. The time of cooling-off is usually 15 working days in total, though it is lengthier in some villages. One easy way of verifying if the village has a formal overseer is to review the declaration of disclosure. You have the right to contact the statutory village supervisor at any time and if you cannot find the necessary contact details, the operator or village manager has to give it to you.
What are the Benefits of a Retirement Village?
- Unrestricted access. Residents have unlimited, free access to premium facilities, such as pools and libraries. You could also take part in pre-arranged outings and activities.
- It is very low-maintenance. Residents get lots of help when it comes to general property maintenance.
- You are part of a collective. As a resident, you would have neighbours close to your age, probably with similar interests. Living in a retirement community could offer a chance to submerge yourself in your preferred culture. It makes transfers smoother down the line.
How do you Make the Right Choice?
Making the transition into a retirement village can be a contentious issue. You should take your conditions and reasons into account for choosing a retirement community lifestyle over other options.
You ought to understand certain important legal principles and terminology used in the village-retirement contracts. This is important if you are going to find the right retirement environment, as it can be financially strenuous for retirees. If you plan to enter a retirement village, you’ll need to understand what you’re signing up for, to avoid compromising your savings on retirement. Seek advice from a legal or financial adviser who is familiar with village retirement contracts.
How do you Own and Occupy a Unit in the Village?
Memorial and Other Interests of Security
All residential units in registered retirement villages have a land title memorial. The memorial gives security for residents ahead of any creditor who has lent money against the village property to your operator. This means that if your operator is unable to repay the loan, the lender will not be able to evict you and sell the unit to retrieve their money.
A regulatory overseer also holds registered control over the village land ownership to help obtain residents’ financial interests from creditors. If the conditions are altered, your counsel will clarify your possession or occupancy rights, and the freedom to move from one unit to another.
What will it Cost you?
When you enter or leave a village, or transfer within it, there are costs, as well as ongoing expenses. You need to know what the different costs will cover, and how much it will be. If you leave, few villagers share any capital gain on the value of an entity.
Costs When you Arrive as a new Tenant
You must spend a nominal amount for your unit to buy the right of occupation. The arrangement on occupational-rights grants allows you to live in your unit and appreciate the village facilities under each of the legal frameworks provided in the contract.
During the first five years or so of the occupation, between 20% and 30% of the capital balance will belong to the operator. This is intended to cover the civic services, administration, or long-term repair expenses. This limit of 20% to 30% is also referred to as a ‘fixed deduction’ which is deducted after the contract is signed. Usually, the fixed deduction accrues during the first two to five years of your occupancy, so if you leave the village within that time, you would not necessarily lose the entire 20% to 30%.
Operators sometimes use other terms rather than ‘fixed deduction’, in their employment agreements, such as ‘capital sum deduction’, ‘donations’, ‘amenity’, ‘facility fees’, ‘depreciation’, ‘deferred management fee’ or ‘village contribution’.
You will get access to a statement of disclosure from the village operator, listing the daily costs, and when it is charged or deducted. The declaration will provide an estimation of the financial return that you might hope to obtain on the sale of the unit or other disposition in two, five, or 10 years.
Costs When you Live in the Village
You incur monthly fees while you live in the village. They cover village expenses such as rents, insurance, and other running costs, and facilities such as protection, planting, and maintenance. Some villages include a wider range of services in their fees or offer different packages of personal care. Others leave it up to you to pick and pay for the services you need or like.
You might like to figure out why the village is charging a fee on such facilities, whether it is only collecting costs or whether it is subsidising the services. You can ask the operator if you are in a position to receive local district health board programmes and support should you need help, medical facilities, or both later.
In most situations, in addition to your usual household and personal expenses, you’ll have to pay for your telephone and electricity, material protection, and medical costs. Serviced apartments are an exception. They usually provide all costs in one bundle, which may even include food, laundry, and maintenance.
Change of Costs
Residents need to be aware of any potential improvements to the facilities, incentives, or charges that may affect them. Ask the village director if they make improvements, for their rates to find out if and where their higher charges are passed on. Some villages have set weekly rates that are not going to change during the period of work.
Many operators will work with you to come up with a practical financial solution to assist you in getting situated. Ask the village operator if they offer a way to defer regular payments or unforeseen charges until you leave. Understand the process involved and what interest cost, if any, is paid. You and the operator need to sign this amendment in writing and you may want to clarify the case with your lawyer or family before you agree.
Mortgage Your Property
You will be able to repay against the loan you paid to stay in your unit with a mortgage or a form of release of equity whether you own a cross lease or title unit. If this is a possibility before you buy, ask the village operator or your counsel.
Ask for federal funding for education, wellness, and hosting expenses. You may be consulted by a solicitor, a financial planner, a civic law firm, a government service such as an age issue or residents’ advisory bureau, or the village manager. Whether you qualify may depend partly on whether you live in a village alone or as a couple, rather than in the community, and also whether you own your unit or simply have the right to live there.
If you rent a unit in a village or own a title unit, you may be eligible for the supplement to the accommodation. The Housing Supplement is a non-taxable income and asset-tested supplement that assists with the cost of your accommodation. To receive this supplement you must satisfy certain criteria.
If you are the “named ratepayer” on your rate demand (which is most likely if you are in a village title unit), you may be eligible for a rate discount as long as your income is below the government’s threshold. If their weekly fees include paying a share of the rates for their village, eligible residents holding a license to occupy a unit, may apply for a rate rebate.
Your needs may change. Keep this in mind when selecting a village and working out the financial details. You may want to relocate to a different place within the village or you may decide to live alone instead of cohabiting with someone or vice versa.
What are the Rules of the Village?
Many villages have their own unique rules covering everything from guest numbers and pets, to parking, redecorating or adding to your unit, renting your unit, gardening, and whether or not you’re permitted to run a village company. Many settlements have to put the rules in the correct arrangement for the settlement.
Village operators need to consult with residents on certain issues, such as fee increases or renovations. Residents in some villages will be involved in the running of their village. Some villages have active citizen councils that will help you navigate the village, if you so wish.
Speak to the citizens and committee chairperson or the residents, and ask whether there is one before determining to which village to move. Ask how they are interested in managing the village, and how the management is sensitive to your involvement.
What is the Complaint Process?
Retirement communities are akin to any other group. Individuals often have divided opinions when things go wrong. You may have a concern about the village operator or manager, or some other person.
Complaints Policy and Process
Every retirement village needs to have a framework for complaints. A copy of that should be provided to you by your operator. Residents may complain to the operator about the village operation or another resident. An operator may also make a complaint regarding a resident.
Your operator will try to settle the complaint within 20 working days after you have submitted a complaint. Not all grievances, however, are easy to fix. If the issue cannot be settled readily, the director will encourage the use of alternate dispute settlement mechanisms, such as mediation. Disputes can be resolved by mediation between residents or operators if both parties agree to this process.
As an example, mediation helps residents and operators discuss and resolve their problems, without having a member of the dispute panel holding a dispute hearing. A mediator can help you discuss the issue, identify what the issues are, and help you find a workable solution that could help restore relationships. The mediation outcome often remains confidential, as opposed to the published dispute panel hearing. Mediators are experts qualified to help settle conflicts between citizens. They are generally autonomous and neutral.
If a complaint has not been resolved within twenty working days of the complaint being filed, a dispute panel may address the matter. Within six months of the original complaint, a dispute notice must be given. The panel consists of members chosen from a list of independent adjudicators approved by the Commissioner for Retirement. The rules of the act and the arbitration tribunal outline a comprehensive protocol for the orderly settlement of disputes.
What are the Costs When Leaving the Village?
These are the costs involved when leaving a retirement village.
Costs Related to Leaving a Village and Selling the Unit
In case you decide to live elsewhere, or you want to leave money in your will, you will need to know about those costs. How much could you possibly get when you leave? After your unit is sold or disposes of, the operator keeps a fixed deduction of about 20% to 30% of the initial capital sum you paid for the unit.
When you apply to the village manager, you must include a notice of registration that specifies the sum you are expected to get if you leave the village after two, five, or ten years of buying into the village.
The work arrangement and accounting statement will inform you whether you get a slice of the capital benefit from the residential unit sale or other disposals. In most cases, tenants do not get any share of the capital gain from their occupation on their house.
Capital Loss Clauses
Some employment law agreements contain a clause on capital losses. This means that if the operator sells or disposes of your unit for less than you paid for it, the loss of the operator might be expected to be covered. Before signing the contract, you should ask your lawyer to check the agreement and explain that to you.
The Selling Process
The operator controls the sale of the unit in most villages when a resident leaves. Usually, the resident has to wait until after the sale before they receive the repayment for their exit. Refurbishment work can put off a sale. If you are in this situation, it is also possible that until your unit sells you will have to continue to pay weekly charges. Some operators halt charging weekly fees on the departure of a resident. Weekly fees must be reduced by at least 50% if you have not sold your unit within six months of leaving it. The Code of Practice sets out the unit sale process. Find out how long a redemption of your money would take for you or your assets. Villages are not inclined to decline property prices, but be cautious about time frames for purchases.
The disclosure statement includes information on village unit disposal, including the average time taken and unit-specific details. Some villages do not charge fixed deductions when moving between units, or, when setting the fixed deduction for your second unit, they will take into account the time already spent in your first unit. Ask your lawyer to check this, and ask your operator about the transfer policy before becoming a resident.
Residents cannot be required to pay for fair wear and tear if they have signed their right of occupation agreement after 25 September 2006. Not all agreements signed before September 2006 on the occupation right require you to pay for the refurbishment when you leave. Owing to your liabilities for harm beyond justice, wear, and tear, several operators tend to take responsibility for complete refurbishment in the job arrangement. Tell the council to clarify what your responsibility would be for any harm or modification work that you have been allowed to do in your house.
How do you Sign Up?
Getting Professional Counsel
You are expected to seek impartial legal advice before signing the correct job contract. The council will clarify the correct work arrangement for you in a manner that is fair, observe your signature and verify that they have done so.
How do I find a lawyer who is experienced in village retirement matters?
- Contact New Zealand Law Society to find an independent specialist lawyer in your area. Go to propertylawyers.org.nz/public/find-a-lawyer
- Take advantage of the family lawyer, but ask them what up-to-date expertise they have with retirement village law and business problems, because this is a specialist field.
- Ask residents of the retirement village to recommend a suitably experienced lawyer.
- Ask local support agencies such as CAB or Age Concern to refer you or help you conduct an internet search
- Try ‘Google-searching’ terms such as ‘old law’ and your area, or ‘retirement village lawyer’ and your area. See what names of lawyers appear, then investigate what their experience is. Have an estimate or quote from the lawyer about their costs. It is going to cost more than renting a home, since something more specific is involved.
Some experts will advise you to have a meeting with family members. It’s a perfect opportunity to study your assets and any arrangement you have on a land partnership.
An operator will also ask you to have an attorney’s will and powers in place while you live in the village.
Signing the Key Documents
Before you can sign the contract, the village manager must provide you with the following documents: Disclosure Statement, Code of Resident Rights, Occupancy Right Agreement, Retirement Villages Code of Practice.
The disclosure statement sets out the type of legal titles, such as occupancy license, unit title or otherwise; it needs to be written clearly and unambiguously. You should also ask the village manager for copies of the current audited financial statements and the regulations for the village.
The Occupancy Right Arrangement
This is your lease granting you the right to buy or use a unit and use the retirement village amenities and shared facilities. It also lays out the applicable terms and conditions, such as salary responsibilities, duties of the manager, meetings and negotiation processes, firing rights, grievances, and conflicts settlement mechanism. The agreement must be transparent and explicit and can include more than one text.
When you buy via contracts rather than into a village that is already full, speak to a knowledgeable agent early on in the process, so as to avoid any unforeseen risks. Similarly, before you sign or pay for something that you are uncertain about, find out what the date of completion is. If the unit is not essentially finished within six months of the date of completion, you will void the contract with the correct occupation.
The Code of Resident Rights
This outlines your fundamental rights under the Retirement Villages Act, which are: care and other privileges provided to you under your right-of-occupation arrangement, updates on issues concerning, or expected to impact, the terms and conditions of your residence, and advice from the developer on any possible amendments to the code of resident rights.
You must respect the rights of others, and treat them with courtesy.
Operators must include details for the manager of the village and other people that you may need to contact if you want information about your rights or complaints. You can search the Retirement Villages Register to view copies of key documents for any registered village, or compare terms in various agreements. You can access the register under the website of the Companies Office or call 0800 268 269 for assistance.
The Retirement Villages Code of Practice
This sets the minimum standards for the operation of the village to be met or exceeded by operators. The operator’s requirement to comply with the Code of Practice is also included in the right-of-occupation agreement for each resident.
The Code covers:
- Security and personal security
- Fire protection and emergency management
- Transfer of residents within the village
- Meetings and participation of residents
- Regular fees
- Maintenance and upgrade
- Termination of the agreement
The Code sets out a process for what happens if you damage or destroy the village or your unit.
Where can you get More Information?
Get copies of the Retirement Villages Act 2003 and regulations. You can visit Legislationdirect.co.nz, listed bookshops or call (04) 568 0005) to get the statute.
All New Zealand legislation can be accessed at legislative.govt.nz and downloaded free of charge. Copies of the Retirement Villages Code of Practice 2008 can be accessed from hud.govt.nz, free of charge.
The director should have put a copy of the Code of Practice in the Village Library or the office of the director. If your retirement village cannot find a copy, ask your manager or neighbours if they have one.
Work and Income
If you are 65 years of age, Work and Income has a variety of financial support options including accommodation assistance. Call 0800 552 002 or see work and income.govt.nz/eligibility/seniors for information on residential care subsidies or loans call 0800 999 727
Financial Capability Commission
The retirement commissioner has a lead role in promoting and publishing retirement village information and education. He or she has a broad oversight role in the act, is responsible for maintaining a list of appropriate entities to hear grievances, and oversees the litigation process. The financial capability commission can be reached on (09) 356 0052 or at email@example.com.
The retirement village registrar has the following duties:
- Receiving and checking registration forms
- Maintaining a registry of retirement villages
- Providing exemptions from the Code of Practice
- Performing other monitoring and enforcement tasks