The Retirement Village option: What you need to know before purchasing a Villa or Apartment
If you’re thinking of moving into a retirement village, you’re not alone. Up to 20% of people over 75 live in retirement villages. With an ageing population in New Zealand, this percentage is continuing to grow.
Many pensioners are seeking the convenience and practicality of retirement village living by purchasing a villa or apartment. How does this work? Who owns what? And what are the different parties responsible for?
Retirement Village contracts can be incredibly complex and detailed which is why you need expert legal support to ensure you know what you’re signing. There are many more questions than we answer in this article so feel free to contact us to discuss your options.
What is an Occupational Right Agreement?
In short, an Occupation Right Agreement is any written agreement that gives a person the right to occupy a villa or apartment in a retirement village, and sets out the relevant terms and conditions.
The first two questions we often hear when our clients are considering living in a retirement village are:
- Do I own my Retirement Village property?
Simply put, no, you are not granted ownership rights but rather a right to occupy, or a licence to occupy, the villa or apartment. This is not the same as owning your own home.
- Do I need a Will and Enduring Powers of Attorney?
The retirement village will need to see that you have a valid Will and you’ll also need to provide them copies of your current Enduring Power of Attorney documents.
Irrespective of living arrangements, both of these legal documents are really important for all Kiwis.
If you don’t own the property, what happens when you leave the retirement village?
You or your estate will lose a proportion of the purchase price, often called a deferred management or exit fee. This proportion will be used to refurbish your villa or apartment property for the next incoming resident.
The village will organise the sale of your villa or apartment on your behalf to a new resident. It is only once the village receives the purchase price from the incoming resident that you or your estate will receive any funds. Unfortunately, you will not receive a capital gain when leaving, and you won’t incur a capital loss should the property market drop.
Who pays for repairs and maintenance, and do I need insurance?
You’ll be pleased to know, in consideration of no capital gain benefits, that general repairs and maintenance of your villa or apartment are paid for by the village. The village also pays for the upkeep of the village buildings and common grounds.
However, if you cause damage to your villa or apartment you will incur the cost of repairs yourself. And if you require any internal alterations, such as hand-rails, then you will need to pay for those too, provided the village has consented to the alterations.
You’ll need to arrange and pay for your own insurance for personal chattels and effects. You should consider indemnity insurance for accidental damage you may cause in addition to insuring big ticket items owned by the village such as a heatpump. Check with your insurer to confirm your cover and any exclusions.
What other fees do you pay?
Retirement villages charge regular ongoing fees to cover some of their management costs.
If you want any optional extras such as Sky Television, a personal alarm, or laundry service, then you will need to pay for these services separately. You’ll usually also need to pay for your utilities such as a telephone line, so check carefully which utilities incur an additional charge.
The costs of common or communal areas are generally paid for by the village. This includes gardens, Council Rates, exterior maintenance of buildings and the cost of insurance of the buildings.
As your circumstances change can your living arrangements change with you?
Absolutely, yes. You can arrange wrap-around services as your health circumstances change. For example, there is often access to medical facilities in the village or assistance with transport to see your own Doctor. And if required you can leave your villa or apartment and move to an assisted care facility within the village (if available).
Additional services such as prepared meals, private alarm, check-ins by village staff, laundry and many others are often available.
Where to from here?
Retirement Villages work to a Retirement Villages Code of Practice (the Code), which sets minimum standards that all retirement village operators must comply with. You can visit the Te Tūāpapa Kura Kāinga – Ministry of Housing and Urban Development website to download a copy of the latest version.
Retirement Village operators must register their standard form of occupation right agreement with the NZ Government and provide a copy to any intending resident along with the disclosure statement, occupation right agreement and Code of Residents Rights before the intending resident enters into an occupation right agreement.
Our advice is to request a copy of the above documents from any Retirement Village you are considering, then discuss your options with us.
We’re here to help. Please visit our Property Law team here or call Richard Natusch on 06 835-9367 or email richard@cardow.co.nz.
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