When you’re thinking of living in a retirement village


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Moving into a retirement village can be a great option to live out your later years. But with so many different options and decisions to make both personally and financially it’s important you have all the information to make the call.

In most cases you will need to look at selling your home or using your other savings to get into a retirement village and likely have to top up your NZ Super to make the most of living there.

Buying into a retirement village is different from buying a house. Legal and financial matters are a bit more complicated with retirement villages. They’re operated in different ways, and what they offer varies. Here’s what to consider.

When you’re thinking of living in a retirement village

Moving into a retirement village can be a great option to live out your later years. But with so many different options and decisions to make both personally and financially it’s important you have all the information to make the call.

In most cases you will need to look at selling your home or using your other savings to get into a retirement village and likely have to top up your NZ Super to make the most of living there.

Buying into a retirement village is different from buying a house. Legal and financial matters are a bit more complicated with retirement villages. They’re operated in different ways, and what they offer varies. Here’s what to consider.

Are retirement villages right for you?

Retirement villages are a perfect solution for some, but they’re not for everyone. To help make your decision easier, try breaking it into three parts:

Be clear about your circumstances and lifestyle preferences

It helps to be clear about your personal and family circumstances and future lifestyle preferences. Will the retirement village suit your lifestyle needs now and in the future? What are things that matter most – great community, facilities, pet-friendly, social scene, support if your health needs change? It needs to be the right fit.

Consider the costs

Understand the costs of entry, costs while you are there, and exit costs. You must be comfortable with the financial implications of becoming a resident, depending on your unique financial position.

Use our tools to work out how much equity you may need to retain for the lifestyle you want on top of your fixed costs. Consider how your assets might be needed if you have a change of circumstances later and require full-time residential care.

Understand how retirement villages work

It also helps to be honest about whether you fully understand and accept the legal framework, occupancy model and key consumer protections of living in a registered retirement village.

Tips for choosing a retirement village

If you’ve decided you do want to live in a retirement village, you’ll need to decide on which one. The main thing is not to rush your decision. You’re more likely to choose the right retirement village if you take the time to make the choice that’s right for you:

  • Think ahead and consider what you might need in the future – will you be able to continue to live there if your health or mobility declines?
  • Imagine the ideal lifestyle in a retirement village, and make a list of the things that are most important.
  • Visit different villages and find out about the lifestyles they offer, including housing options, facilities and services.
  • Talk to the residents – they know better than anyone what life is like in the village they live in.
  • Take time to read the documentation associated with buying into, living in, and leaving the village, including the disclosure statement and occupation right agreement.
  • Find out the total costs. How much is payable on entry? What are the ongoing expenses? Will you share in any capital gain when you leave? Will you have to pay for any capital loss? How will these affect your future and the choices you have?
  • Get independent legal advice from a lawyer with experience in retirement villages. Ask them about the different legal titles and what they mean.
  • Get independent financial advice from a financial planner or accountant with experience in retirement villages.
  • Involve family or friends in the decision.

Retirement villages are just one of a number of options you have for where to live in retirement.

Get independent legal advice before signing up to a retirement village

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 what they are and what the implications are.

Not only is getting legal advice in your best interest, you are required to do so 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.

How to find a lawyer experienced in retirement village matters

  • Search the New Zealand Law Society database to find an independent specialist lawyer in your area.
  • Use your family lawyer. Ask them what recent experience they have had with retirement village law and current industry issues, as this is a specialist area.
  • Ask residents in the retirement village you like to recommend a suitably experienced lawyer.
  • Ask local support agencies like CAB or Age Concern to help you or refer you to lawyers they know who specialise in retirement village work.
  • Try searching on Google for key terms such as 'elder law' and then add the specific region you are in, or 'retirement village lawyer' then the area you are in. See what search results appear then investigate what experience they have.
  • Lawlink is a nationwide network of independent law firms with a list of elder law specialists.

Most retirement villages will require you to have a valid will and powers of attorney in place before you can move in.

Common legal titles for retirement villages

There are four basic legal titles commonly used when you buy into a retirement village: licence to occupy, unit title, cross lease, and lease for life. These agreements will generally grant you occupancy of the unit only, and unlike buying a home, you will not own the land or the unit itself.

Your move into a retirement village may be your last residential transaction. Some villages allow you to transfer from independent units to units offering care option.

Licence to occupy

These are among the most common occupancy rights agreements in retirement villages. This gives you the right to live in the unit, but it doesn't mean you own it. You typically can't borrow against the value of the unit, though some villages may offer this option.

Unit title

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.

Cross lease

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.

Lease for life

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.

Key terms to know for retirement villages

Disclosure documents can be challenging

Disclosure documents provided by retirement villages are often lengthy and hard to read. In most cases there should be a ‘key terms’ disclosure summary available to help you understand the main financial terms of the disclosure statement and occupation right agreement.

Here’s an example of the key terms template. The content of each term in the template will differ from village to village.

Four key disclosure documents

Before you sign up to become a resident in a village, you’ll need to discuss four key disclosure documents with a lawyer who is experienced with current retirement village practice. 

The key documents are:

  • Disclosure statement
  • Occupation right agreement
  • Code of Practice
  • Code of Residents' Rights

Every so often Retirement Villages amend their standard occupation right agreement or disclosure statement. You may have some terms in your documents that are different from other people who have been in the village for longer.

You can see the most recent amended documents for a village by searching the Retirement Villages Registry.

Retirement village costs

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 ‘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 the costs of leaving a village in case you decide you want to live elsewhere, or you want to leave money in your will. 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 in most cases you don’t get any share in the capital gain. This may reduce your options for alternative places to live if you want to leave the village later.

There are costs when you enter and leave a village or transfer within it, as well as ongoing expenses while you live there.

 

Types of costs and financial implications

Entry costs

Capital sum

You’ll need to pay a capital sum to purchase an occupation right agreement for your unit. This gives you the right to live in your unit and enjoy the village amenities. This capital will be returned to you, or your estate, when you leave the village, less the deduction of a deferred management fee, which generally amounts to between 20 and 30% of the capital. If you leave the village within the first five years, the amount deducted may be less than the 20 – 30%.

The 20 – 30% rate is often called a ‘fixed deduction’. It is used to cover the costs of communal facilities, management or long-term maintenance. Retirement villages may use other terms in their occupation right agreements instead of ‘fixed deduction’ such as: ‘deferred management fee’, ‘capital sum deduction’, ‘depreciation’, ‘village contribution’, ‘donations’, ‘amenity’ or ‘facility fees’.

Deposit

You may need to pay a deposit before moving into the village, this deposit will be passed to the statutory supervisor, who acts as an independent stakeholder for deposits and progress payments. If there is no statutory supervisor, then this deposit will be passed to a lawyer to be held in a trust account on your behalf. The retirement village will only receive your money after a cooling-off period when you may change your mind and cancel the contract. The cooling-off period must be at least 15 working days. In some villages it is longer.

Costs while you’re living in a retirement village

While you’re living in a village you’ll pay weekly fees. These cover rates, insurance and other operating costs as well as services such as security, gardening and maintenance. Some villages include a greater range of services in their fees or offer various personal care packages. Others leave it to you to choose and pay for the services you want or need.

In most cases, you’ll have to pay for your own telephone and power, contents insurance and medical costs, in addition to your normal household and personal expenses. Serviced apartments are an exception – generally they include these costs in one package and may cover things like food, cleaning and care services.

Exit costs

Usually when you terminate an occupation right agreement, you (or your estate) are repaid the original capital sum minus any deductions, such as:

  • The deferred management fee, or may also be referred to as 'village contribution', 'fixed deduction', 'facilities fee' or 'amenities contribution'
  • Any administration, sales or legal fee that were agreed to be deducted'
  • Any specific service fees you’re charged but haven’t yet paid at the date of termination.'

It’s important to remember these deductions generally mean you will be left with less money than the original capital sum that you paid when you entered the village.'

This is particularly important if you decide to exit the village to move somewhere else. You may not have sufficient funds remaining to buy into another retirement village, or to buy another type of property if you decide you no longer wish to live in a retirement village.'

Also keep in mind that in most villages, the operator controls the sale of the unit when a resident leaves. This means you (or your estate) will usually have to wait until your unit is sold before receiving your exit repayment.'

Changes in circumstances – care costs

There may be additional costs if you or your spouse need extra home help or need residential care while you are living in a retirement village. Premium care rooms will cost more, with additional daily premium charges.

Independent financial advice

You may be planning on releasing equity from your home to help pay for a retirement village unit, or rearranging other investments or estate matters. Using a financial adviser can help make decisions about your money easier if you want to become a retirement village resident.

Here's how to find a financial adviser to help with your investment decisions. The Financial Markets Authority also has helpful information on how to find and choose a financial adviser.

The difference between retirement villages and residential care

Residential care and retirement villages are different. The purchase into a retirement village is a lifestyle choice. Residential care is for people with high dependency needs who have been needs-assessed by a District Health Board assessment team.

Residential care facilities are separate operations from retirement villages and subject to different legislative requirements.

Many retirement villages have residential care facilities co-located on their sites, which can include rest home level care, hospital level care or dementia-level care.

You can find local rest homes and download recent reports from the Ministry of Health website.

You can also find further information about the cost of different care options on the Seniorline website.

To understand the different types of care costs, here’s our Care Pathways for Retirement Village Residents flowchart. It includes tips and links to further sources of information.

How to find a registered retirement village

Find a retirement village close to where you want to live

The following websites offer village-finding tools by region:

How to search the Retirement Villages Registry

You can use the Retirement Villages Register to check a village is registered and to search their required registration documents. Here’s how:

  1. Search for the name of the village on the Companies Office website.
  2. Select 'Search the Retirement Villages Register', then 'Other Registers search’.
  3. Tick the Retirement Village Registry, then enter a word from the name of the village. If the name of the village appears, you can look at all the recently registered documents relating to that village, including its annual return.

Retirement villages helpline: 0800 268 269

If you are having difficulty searching the registry, you can speak with a call centre advisor on our retirement villages information line on 0800 268 269.

Ask the operator to show you proof that the village is registered and has not had its registration suspended or cancelled.

If the village is a member of the Retirement Villages Association, ask if it has provisional membership or fully accredited membership. The RVA only accepts members who satisfy its audit and accreditation requirements, which includes the need to be lawfully registered under the Retirement Villages Act 2003.

About the Retirement Villages Act

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.

To understand more about how the Act protects your interests and what retirement villages are required to do, see the Te Ara Ahunga Ora website.

Retirement village resources

Thinking about moving to a retirement village? We recommend you download our free booklet as it contains further information and details to take into account when you’re considering moving to a retirement village.

We also suggest printing these checklists out and taking them along when you visit retirement villages. When asking questions, remember to think about your future needs and how they might change.

Retirement village lifestyle checklist

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.

Retirement village financial checklist

This checklist suggests some important questions to ask about entry, transfer, living and leaving costs, as well as questions about the retirement village's financial operations.

Retirement village signup checklist

This lists the steps to take when signing up to enter a retirement village.

Natural disasters – how residents are protected

The following flowchart gives you an idea of the process if a village is damaged by natural disasters. Here’s what happens if a retirement village or unit is damaged or destroyed.

Things to consider when choosing a retirement village

This video contains four tips about what you should consider when choosing to live in a retirement village. The financial implications of moving into a retirement village are explained in more detail in this video.

Two-part webinar

You can also hear about practical tips and information for intending residents and their families in this two-part webinar series that we recorded in 2020.

Retirement village information

For general information about retirement villages, free phone 0800 268 269. There's also more information on retirement.govt.nz.

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