Life in a retirement village is like living in a resort, and residents
should expect to pay the price.
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.
CAPITAL GAINS
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."
ONGOING FEES
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.
SHARED INSURANCE
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
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.
PERSONAL CONDUCT
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.
CO-HABITING
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.
HEALTH CHECKS
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.
NO OBJECTIONS
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.
OPERATORS' OBLIGATIONS
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
