What is the Retirement Villages Act 2003? ×
Some items that the Act includes have been listed below:
- Ensuring all new residents receive and understand their legal contract (Occupation Right Agreement)
- Having a standardised cooling off period once an ORA is signed
- The appointment of a ‘statutory supervisor’ for each village who is responsible for ensuring the village is run in a financially responsible manner which includes proper financial reporting
- Ensuring all villages have a Code of Residents’ rights
- Ensuring all villages have a structured disputes process
- Ensuring all villages have a structured sales & marketing process when residents leave the village
What is the Retirement Villages Code of Practice 2008? ×
The Retirement Villages Code of Practice 2008 (variations 2013), forms part of the Retirement Villages Act and sets out the minimum requirements that village operators must meet, which include the minimum requirements for the occupation right agreement. These requirements include;General requirements
- Policies and procedures, notices, and induction requirements
- Staffing at the retirement village
- Safety and personal security of residents
- Fire protection and emergency management
- Transferring residents within a retirement village
- Meetings of residents with operator and resident involvement
- Complaints facility
- Maintenance and upgrading
- Termination of an occupation right agreement
- Communication with residents
What is an Occupations Right Agreement? ×
An Occupation Right Agreement is the name of the legal contact between the village and a resident. The ORA sets out payment information, the village disputes process and termination rights. It is important that you work through your ORA with your lawyer and ensure you understand each part of the agreement prior to signing.
Is it important that a lawyer looks over my Occupation Right Agreement? ×
It is a requirement that each new resident receives legal advice to ensure understanding of the occupation right agreement prior to signing. The lawyer is required to witness the residents signature after clearly explaining all content of the agreement.
The resident is welcome to use a lawyer of their choice to review, explain and witness the signature or alternatively residents can contact the New Zealand Law Society for a list of lawyers in their region who specialise in retirement village contracts.
It is important that any verbal agreements between the village operator and the resident are either amended in the contract or alternatively document separately in writing and signed by both parties. Any changes should be discussed with your lawyer who can support you with ensuring they are recorded officially in writing.
What is meant by ‘License to Occupy’ ×
Residents may also be liable for capital loss if the ‘entry payment’ the new resident pays is less than what was paid by the previous resident. This is an unlikely situation but could occur with external market factors pushing value down. It is recommended that you speak with the village manager or sales consultant to make sure you have a clear understanding of the contractual details surrounding capital gains and loses. This information can also be found in the village's most recent ‘disclosure statement’ which is listed on the New Zealand Companies Office website.Questions to ask
1. Am I entitled to any capital gain made on the unit?
2. If so, what are the details surrounding ‘sharing of any capital’ i.e. do I need to pay an upfront fee and is it split 50:50?
3. Am I liable for any capital loss and will I have a say on what price the unit is marketed at?
What is the statutory supervisors role? ×
As part of the Retirement Village Act, the operator must appoint a statutory supervisor unless exempt by the Register of Retirement Villages. The statutory supervisors role is to financially monitor the village and ensure they are performing their duties in accordance with the act. The statutory supervisor is required to report the financial position of the village to the residents and the Register of Retirement Villages. The statutory supervisor will also look after any deposits and progress payments made by residents or intending residents e.g. will hold a deposit during the ‘cooling off period’.
What is a Code of Residents' Rights ×
This document outlines your right as a resident while living in the village in accordance with the Retirement Village Act 2003. This includes:
- Your right to any services and benefits as outlined in your Occupations Right Agreement
- Your right to make a complaint and be responded to in timely manner
- Your right to have any disputes responded to in an efficient and timely manner
- The right to proper consultation of any changes in the village which would affect you. E.g. a weekly fee increase or changes to any current services offered
- Your right to be treated with courtesy by the operator and all staff
- Your right to not be exploited by the operator or any of the staff
- Your right to have a support person for any dealings with the operator if you wish to do so
What role does the Retirement Village Association (RVA) play? ×
The benefit for residents choosing a RVA accredited village is reassurance that the village is being run in accordance with the Retirement Village Act as well as demonstrating a level of commitment by village management to operate in a manner that both protects and meets the needs of their residents.
What does a residents' committee do? ×
Typically, the main role of the residents' committee is to represent the interests of residents by acting as the communication channel between them and the operator.
Specific functions of a residents committee include:
- Calling a meeting with the operator or its representative. The operator or its representative is expected to attend residents’ committee meetings when invited, unless the request is in some way unreasonable (e.g., too short a period of notice).
- If the village has a statutory supervisor the residents’ committee may call a meeting with the statutory supervisor. The statutory supervisor is expected to attend residents’ committee meetings when invited, unless the request is in some way unreasonable (e.g., too short a period of notice).
What is a disclosure statement? ×
- Who owns the village and the management structure.
- Who the statutory supervisor is and their role.
- All costs associated with entering, transferring and leaving the village. It also includes all costs while living at the village such as weekly fee payments.
- Whether residents will receive any capital gains or be liable for capital losses.
- What the cooling off period is after a contract is signed. As per the Retirement Villages Act, this will be a minimum of 15 days.
- Lists all services and facilities that the villages offers.
- The marketing & sales process when a resident leaves and what happens if there is a delay in the sale.
- How the maintenance and refurbishment of the village is handled. This is most commonly included as part of the deferred management fee paid upon exit.
What is a deferred management fee? ×
Village units sold on a License to Occupy will most likely charge what is called a ‘deferred management fee’. This fee covers the long-term maintenance and replacement of the village communal areas and facilities. It is included as part of the total amount you pay when purchasing your Occupation Right Agreement. When your ORA ends, the repayment sum you receive is the cost of the purchase, less the DFM (and any outstanding fees or money owing).
For example, lets say a village charges a deferred management fee of 25% which is accrued annually at 5% over 5 years. If you purchased a unit in this village for $300,000, then you would be paying $15,000 each year for the first five years of residence. When you leave, you would receive the $300,000 minus $75,000, which is your maximum DMF. If you left the village before 5 years, you would likely only pay for the time you had accrued, however it is a good idea to check with the village manager for clarification on how this fee is accrued.
What does my entry fee cover? ×
The entry fee gives the resident the right to live in the property for their lifetime or as long as they choose. When the resident leaves the village they will receive the cost paid (entry fee) minus the deferred management fee and any other outstanding costs due at that time.
Are weekly fees likely to go up while I’m living in the village? ×
This will be dependent on the retirement village you are looking at however it is common for managers to review fees on an annual basis. It is a requirement for all registered villages to notify residents formally by letter of any fee increases. Some villages increase fees based on the percentage increase of New Zealand’s superannuation each year where as others only increase fees if the villages operating costs go up e.g. if rates or insurance costs of the village where increased.
What is the difference between weekly fees and the deferred management fee? ×
The deferred management fee covers the long-term maintenance of the village and communal areas. In most situations the deferred management fee will cover the refurbishment costs of the unit when you leave e.g. re-carpeting and other maintenance required.
Do all villages have a complaints process? ×
Yes as outlined in Retirement Village Act, all registered New Zealand villages must have a complaints process which is made known to residents.
What is the typical sales process of village units and what happens if there is a delay in sale? ×
The majority of villages will manage the sales and marketing process of a property once the resident moves out. As per the Code of Practice, the former resident is able to introduce a new resident if they meet the normal entry criteria for the village. If this person buys the unit, then the former resident must be notified and the sales cost charged must be the the actual costs incurred.
If the property has not been sold within 3 months the village is required to let the resident (or enduring power of attorney) know in writing and provide monthly reports until it is sold. These reports will contain what steps the village is taking to market the property and the progress being made. If the property has not been sold after 6 months then the village (at their expense) must obtain a written valuation by an independent registered valuer. The resident is welcome to have his or her own valuation completed (at their cost) with a registered valuer. The village is then required to market the property according to the valuations completed. If the property has not been sold after 9 months then the resident has the option to raise a dispute notice.
Do residents continue to pay weekly fees while the unit is on the market? ×
Once a resident leaves the village when will they be paid what is due? ×
Can I have friends and family to stay? ×
It is likely that you will be able to have friends and family to stay at the village. The duration that they can stay will be outlined in your occupation right agreement. Some villages will allow you to have friends in family in your unit while others have separate accommodation either on-site or nearby which can be used.
It is also likely that friends and family will be able to use the village facilities as long as you or another resident accompanies them. However each village may have a slightly different policy around this so make sure you check with the village manager.
Can I have pets in the village? ×
Most villages will allow small well-behaved pets in the village as long as it is agreed to by the village manager first. However this is not the case for all villages and some will have a 'no pets' policy so it is important you ask this question.