What happens if a retirement village gets into financial trouble?

In New Zealand, retirement villages are structured with multiple safeguards to protect residents if an operator faces financial difficulty. These protections are designed to help residents remain in their homes and ensure their financial position is protected.

The legal protections in place

Retirement villages are governed by the Retirement Villages Act 2003 and related regulations. One of the key protections is a legal notation, known as a memorial, recorded on the land title of every registered village. This identifies the land as a retirement village and helps protect residents’ rights and interests.

In addition, retirement villages must appoint a statutory supervisor (unless the village has a formal exemption). The statutory supervisor is independent of the operator and often holds a registered security over the village land. This security is usually structured so that residents’ rights under their Occupation Right Agreements (ORAs) are prioritised if financial issues arise.

The role of the statutory supervisor

Statutory supervisors are independent entities licensed by the Financial Markets Authority, responsible for overseeing the financial position of the village and safeguarding the security of residents’ interests.

A key part of their role is ongoing financial oversight. They monitor the financial position and performance of the village to ensure the operator is meeting its financial, statutory and contractual obligations.

They are also in a position to identify potential early warning signs. This can include issues such as delays in maintenance, difficulty selling units, or any indication that the operator may not be meeting its obligations under residents’ ORAs.

In addition to financial monitoring, statutory supervisors:

• Hold and oversee certain resident payments, such as deposits and settlement payments when a resident moves in which go through its trust account
• Report annually to both residents and the Registrar of Retirement Villages
• Provide a channel for resident complaints if issues are not resolved directly with the operator
• Chair Annual General Meetings to ensure transparency and accountability

This ongoing oversight means that, in most cases, any concerns are identified early and managed before they become serious issues.

What happens if financial issues occur

If an operator experiences financial difficulty, the statutory supervisor works with the operator, the lender and, where required, any receiver. The focus is on maintaining continuity of living for residents.

In most cases, the outcome is one of the following:

• The village is refinanced, or
• The village is sold to a new operator

When this happens, the village typically continues operating as normal. Residents remain in their homes, with their ORAs continuing under the new owner on the same terms.

Any sale of the village must be approved by the statutory supervisor, following consultation with residents, and ORA terms cannot be changed without the resident’s consent.

Could a village close down?

It is very uncommon for a retirement village to close entirely. If the village cannot be refinanced or sold to a new operator, the statutory memorial on the village land requires anyone exercising security (such as a receiver) to sell the village as a going concern with the ORAs remaining in place. The only exception to this is if, after receiving independent legal advice, 90% of the residents agree to the village being wound up.

In the very rare situation that this does happen, the statutory supervisor’s security over the land helps ensure residents are given priority in how proceeds are distributed. The village land may be sold, and the sale proceeds are applied in line with the security arrangements, with any amounts owed to residents under their ORAs being paid first before any moneys are paid to the funder or the operator.

Key resident protections

• Operators cannot terminate your ORA just because they are in financial difficulty or the village is sold
• The statutory supervisor is involved in, and needs to consent to, major changes such as a sale of the village or restructuring
• ORAs transfer to a new operator on the same terms
• ORA terms cannot be changed without the resident’s consent
• Residents are prioritised if the village land is sold, due to the memorial and security arrangements

Putting it in perspective

Serious financial problems in retirement villages are rare in New Zealand. The combination of legal protections, statutory supervision, and lender involvement creates multiple layers of oversight.

In most situations, any issues are resolved through refinancing or a change in ownership, with minimal disruption to residents.

Frequently asked questions

Can I be forced to leave if the village is sold?

No. Your Occupation Right Agreement continues under the new operator, and you can remain in your home.

Can the new operator change my contract?

No. The terms of your ORA cannot be changed unless you agree to the change.

Who represents residents if issues arise?

The statutory supervisor monitors residents the residents' interests, the village’s financial position, oversee compliance, and step in if issues arise.

How common are financial issues in retirement villages?

It is very uncommon. Most villages operate without financial issues, and where challenges do arise, they are typically resolved through refinancing or sale.

Does the bank get paid before residents?

Because of the memorial and the statutory supervisor’s security, residents are prioritised ahead of the bank that has lent against the village property. This is designed to protect residents’ interests ahead of that lender.