If you’re considering moving into a retirement village, you’ve probably come across the term ‘licence to occupy’. What does this term mean and what do you need to know?
In this article, we explain how a licence to occupy works, as well as touch on some other less-common legal titles such as unit titles and rental units.
Please note: Although we have done due diligence and sought the advice of experts, we are not legal professionals. This article is intended as a guide, and all content is for informational purposes only. If you require specific assistance, please consult your lawyer.
A licence to occupy, which is often referred to as an occupation right agreement (or ORA), confers on a person the right to occupy a unit within a retirement village in New Zealand.
With a licence to occupy you purchase the contractual right to occupy a property, but you have no legal ownership of the property itself or the land.
Here are some typical characteristics of a licence to occupy:
Capital gains policies vary from village to village; please contact the sales manager for more details.
An ORA is an umbrella term for any occupancy contract you enter into with the operator of a retirement village. It sets out the terms of your occupation, including your rights and obligations, and those of the operator.
A licence to occupy is a type of ORA, and is the most common form of occupation on offer in retirement villages in New Zealand.
In New Zealand, every intending resident is required by law to seek legal advice prior to signing an ORA (under the Retirement Villages Act 2003).
A licence to occupy allows you to enjoy the benefits of living in a retirement village without the burden of property ownership and worrying about the potential need to sell the property someday in the future, as the village operator is generally responsible for resale.
Another benefit is transparency and predictability. Terms, conditions, ongoing charges and fees are agreed at the outset, removing much of the uncertainty from financial planning.
Licences to occupy vary from village to village. It’s important to ask the sales manager plenty of questions about their specific licence before you commit. As noted above, you will also need to obtain independent legal advice from your lawyer before you sign a licence to occupy or ORA.
Although a licence to occupy is the most common form of ORA to grant an occupation right for a unit within a retirement village, other forms of ORA do exist.
You may also come across unit titles or rental agreements.
Some retirement villages offer stratum in freehold units or apartments (called unit titles). This usually means that you own the property and have some control over when it is sold (and whether you or the village operator sells it), and that you’re entitled to any capital gain. Villages that offer unit titles also tend to have a lower age-of-entry, usually between 50 and 60 years of age.
The exact ownership terms for unit titles varies from village to village. Below, we have outlined some different scenarios to provide guidance about how unit titles typically work in New Zealand retirement and lifestyle villages.
One scenario is for a developer to manage the build of the village, then once all the properties have sold the village is essentially run by its residents who all form the body corporate (similar to how a residential apartment block might operate but with some exclusions from the Unit Titles Act).
Another scenario is for the body corporate to appoint the operator to manage the village. In this scenario, you would be responsible for maintaining the inside of your unit, and village staff would maintain the exterior, the village grounds and any communal areas.
In both cases, residents would be required to pay a body corporate village fee to cover costs.
Every unit title is different so it’s important to discuss the terms thoroughly with the sales manager or contact person.
A very small number of retirement villages offer rental units. Most village rental agreements are residential tenancy agreements.
Licences to occupy are the most common way to live in a retirement village in New Zealand, although exact terms and conditions vary from village to village. You may have the option of purchasing a unit title or entering into a rental agreement, but these legal titles are less common. As with any contract, it’s important to consult a lawyer before making a commitment.
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