After 24 years, the Retirement Villages Act is due for a significant overhaul to better protect residents' interests. From clearer maintenance responsibilities to faster repayment terms, proposed reforms aim to address long-standing concerns about retirement village living, though changes may not take effect straight away.
Retirement Village living differs from home ownership in several key areas. One of the key distinguishing features is that you do not “own” outright the apartment, villa or suite as with a freehold title to a home. Typically, a resident has the right to occupy via a licence that is governed by an Occupation Right Agreement (ORA) – the contract between the Resident and the Operator.
The ORA sets out the rights and obligations of both the Resident and the Operator. It is governed by the Retirement Villages Act 2003 (“RVA”) – a law which seeks to acknowledge these facilities provide for some of life’s most vulnerable who often have ailing health, may be frail, can be lonely and have cognitive impairment.
With the RVA coming up 24 years in its making, many involved (especially the Retirement Villages Residents Association “RVA”) have the view it is long overdue for an overhaul.
As more New Zealanders choose retirement village living, proposed reforms aim to modernise outdated rules and better protect residents' interests.
In particular, the RVA is lobbying for the Statutory Supervisors (which every Retirement Village must have to act as an independent referee) to have more teeth in dealing with dispute resolution between Residents and Operators.
Another key difference peculiar to ORAs is that the Operator can impose what is generally referred to as a Deferred Management Fee (DMF) or exit payment. This is typically charged at 10% of the Entry Payment and will likely be capped at either 20 or 30% (possibly more depending on the specific ORA). The DMF is deducted from the amount paid back to the Resident on the termination of the ORA (or his or her Estate if it has terminated due to the death of the Resident).
In most cases, the Operator has until the apartment, villa, or suite is re-sold to repay the Resident (or his or her Estate), and that can take quite some time. The RVA is lobbying for Operators to be required to pay the Resident in a more timely fashion. Among other things the Government is also being lobbied to:
- Provide clarity on who pays for the repairs and maintenance on chattels in the apartment /villa/suite – recognising that the Residents don’t “own” these.
- Increased transparency, including the re-write of the Code of Practice in plain English;
- Increased protection for residents for example., restrictions on Operators passing on insurance excesses to the Residents
However, given progress to date (these reforms have been on the table for quite some time already), it is unlikely that any change is likely to be enacted into law before 2027/2028.
We will keep you abreast of any changes that do happen. In the meantime, give Steph Gifford a call if you would like to know more about the implications of signing up for a Retirement Village.