With an ageing population, it's boom time for the industry, with retirement villages popping up all over.
The house price boom in cities like Auckland has also been a boon to village operators as the prices charged for their units are set in reference to the prices of local homes.
But moving into a retirement village is not the same as owning your own home.
On the upside, people get to move into a ready-made community of like-minded people, with pleasant communal land and facilities, and an instant feeling of safety.
The downside is that in the vast majority of villages, residents don't own the units they move into, buying only the right to live there. Ownership remains with the village owner, and the Occupation Rights Agreement (ORA) residents have to sign before moving in, spells out not only their rights, but also their responsibilities.
Because of the complexity of the agreements, residents have to get legal advice before signing up to them, and there can be big differences between the terms different villages offer.
ORAs spell out how different retirement village living is from living in your own home.
OWNERSHIP AND SALES RIGHTS
Residents don't own the units they live in, they can't sell them, and a resident can't sell on their own occupation rights without permission. By contrast, the village operator can sell the village without permission from residents, although the new owner has to honour existing ORAs.
Should a resident decide to leave, or dies, the village markets for a new resident to occupy the vacated unit. The vacating resident, or their estate, usually gets paid the amount they paid to get in, minus a "deferred management fee" of about 30 per cent, which is a major income source for the village operators.
If you own your own home, capital gains belong to you and falls in price make you poorer. If a resident leaves a retirement village, occupation rights to the unit they vacated can be sold for more than they paid, but the village operator gets the benefit.
Some villages expect vacating residents to shoulder falls in price. If you buy your occupation right for $300,000, and there is a 30 per cent deferred maintenance fee, then you, or your estate, should get back $210,000. But should the ORA now be worth $250,000, then the exit payment would be just $170,000.
As Christchurch's Archer Village's ORA puts it: "If the amount we are able to obtain from a proposed new resident . . . is less than the entry payment, then we may ask you to accept this reduced amount in writing."
Residents pay the ordinary costs of running a village, including maintenance, staffing costs, insurance, rates and utility bills. In effect, the resident is swapping paying outgoings on their own home for paying a share of the outgoings on the village.
The ongoing fees, sometimes called the "village outgoings payment", can sometimes rise, but are sometimes fixed, depending on the village. They are generally charged monthly, and continue to be payable even after a resident leaves, or dies, and until new occupation rights for the unit is sold.
Sometimes the obligation is unlimited, and could go on for years, albeit at a reduced rate. Sometimes it's limited to six months.
The village operator organises the insurance for the village, but the resident pays for it. It's there to repair or rebuild the facility in the case of events like fire or earthquake, or at best, pay residents back the amount they paid for their occupation rights, though that may not be enough for them to buy occupation rights in another village, if prices have risen.
Some villages carry insurance that provides some temporary accommodation cover, such as Metlifecare villages. Others do not, which would mean residents would need to have their own insurance to cover that.
A resident whose carelessness causes a fire or flooding can often be required to pay the excess on the claim to fix the damage they inadvertently caused.
Pets are allowed only at the absolute discretion of the village operator in most cases, and even when permission is given, it can be withdrawn at any time. This can be like a Sword of Damocles hanging over little Tiddles' head should they annoy other residents.
In your own home, within the law, you can do just what you like. You can walk around in your underwear, experiment with chemicals, paint murals on the walls, put up shelves, etc.
Retirement village rules require residents to get permission to make alterations, which likely as not the operator will make for them, charging the costs to the unit occupier. There can be rules banning drying clothes on the balcony, or putting things on them that make the village look scruffy.
Serious breaches like threatening a fellow resident can lead to occupation rights being terminated.
Unlike in your own home, there are limits on friends and relatives coming to stay. Usually fairly permissive, the rules are designed to stop villages becoming doss-houses for non-residents.
Residents can't sublease the units without permission. If love strikes late in life, single residents will usually be allowed to move their new love in. This can be subject to provisos.
At Auckland's Hillsborough Heights, owned by listed village operator Metlifecare, married, or de facto partners can move in if they meet the "normal criteria", and must sign a "deed of covenant" agreeing to follow the rules.
RIGHT OF ENTRY
While relatively few people have a right of entry to a home you own, and then usually in very limited circumstances, such as police with a warrant, village operators have rights of entry.
These are usually with reasonable notice, but they can be without notice, if they deem there is a reason pressing enough such as a fire, or medical emergency.
Villages often offer several levels of care, starting in self-contained units, with residents able to move on to nursing care if it becomes difficult to look after themselves.
Operators have the right to require a resident undergo a health check if they consider them unsafe to live there any more, and terminate their occupation rights, if they are. The resident has a right to get a second opinion.
LAST WILL AND EPA
If a resident develops dementia, or suddenly dies, it can pose difficulties for a village operator. Because of this, ORAs require residents have a will and also enduring powers of attorney, which allow others (usually family) to administer their affairs when they are no longer able to.
As the ORA of the Aparangi Village in Waikato says, residents need to keep the operator informed of the names and contact details of executors and attorneys.
As businesses, retirement village operators often expand their facilities to be able to sell more units and earn more fees. ORAs ban residents from raising objections to this with planning authorities.
ORAs are not a one-way street. They impose obligations on the village operator to do things like adequately staff, maintain and insure villages, although these are also legal requirements, and to provide certain services such as access to medical help.
In their own homes, owners usually do not have anyone but themselves and their families to rely on in these areas.
- Sunday Star Times