Decisions about retirement villages are important; they tend to have a long-term personal and financial impact. Buying into a retirement village is different from buying a house, and legal and financial matters are also more complicated. Retirement villages are operated in different ways, and what they offer varies.
Don’t rush it! You’re more likely to choose the right retirement village if you don't make a quick decision:
There are usually significant costs when entering and leaving a village or transferring within it, as well as ongoing expenses while living there. It’s important to know what the charges cover and exactly how much they will be. These will vary from village to village, so comparing the ‘deals’ will help you find out the potential upside and downsides of different offers.
Your needs may change in the future, so keep this in mind when working out the financial details of moving to a retirement village.
This financial checklist will help – it suggests questions to ask, and might prompt ideas for a few others.
You'll need to know about the costs involved in leaving a village in case you decide you want to live elsewhere, or you want to leave money in your will. Be aware that you may come out with significantly less money than when you entered the village, particularly if there are deductions from the price you originally paid for the unit and if you do not get any share in the ‘capital gain’.
Buying into a retirement village is different from buying other residential property. The financial structures and legal titles can vary from village to village, so it's important to talk to a lawyer to understand their implications.
Get independent legal advice before signing up with a retirement village. You are required to do this by the Retirement Villages Act. Find a lawyer with experience in retirement villages, who is independent of the village you're thinking about. If a lawyer doesn't have this experience, ask them for a recommendation or go to the Law Society to find a lawyer who can help.
There are four basic legal titles commonly used for retirement villages:
Some villages combine the features of 'licence to occupy' with 'unit title' to create their own type of title.
The Act requires all legal titles to include a 'memorial' that protects a resident's interest in their unit and helps to ensure the village's continued operation.
About three-quarters of New Zealand's retirement villages offer licences to occupy. A licence to occupy gives you the right to live in the unit, but it doesn't mean you own the unit. This usually means that you can't borrow against the value of the unit, though some villages may offer this option.
In a village based on a unit title structure, you own your own unit. You also become a member of a body corporate that is responsible for the upkeep and maintenance of communal areas. Often the body corporate has a management agreement with the village manager (who is responsible for looking after the day-to-day operation of the village) to administer and look after the affairs of the body corporate.
If you have a cross lease, you share ownership of the land and its units, and grant leases to one another to live there. The leases include agreement about the length of the lease, the use of the land and the residents' rights to live there.
In this case, you have a lease for a unit or property in the village, which remains in place until you die or leave the village. Some villages also offer rental units.
The Retirement Villages Act 2003 protects people entering into and living in retirement villages. It introduces a Code of Residents' Rights and Code of Practice as well as dispute resolution.
The Act requires all retirement villages:
The Act also requires all intending residents:
The Ministry of Business, Innovation and Employment is responsible for administering and implementing the Retirement Villages Act.
The Retirement Villages Register is operated by the Companies Office. Use it to check a village is registered and to search their required registration documents.
Thinking about moving to a retirement village? Print these checklists out and take them along when you visit retirement villages. When asking questions, remember to think about your future needs and how they might change.
This lists many different aspects of the retirement village lifestyle, from entry criteria, location and management through to rules, care, services and facilities offered. You’ll need to decide which ones are most important.
This suggests some important questions to ask about entry, transfer, living and leaving costs, as well as questions about the retirement village's financial operations.
This lists the steps to take when signing up to enter a retirement village.
When you're considering moving to a retirement village, download our free booklet here: Thinking of living in a retirement village?
Retirement village information – free phone 0800 268 269
For general information about retirement villages, free phone 0800 268 269. There's also more information on the Commission for Financial Capability website.
My kid brother – who is just starting out in his career – met with a financial adviser the other day, his first foray into financial planning.
2 Comments | 17 Aug, 2015