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The Retirement Village Option - advising your client on the benefits and pitfalls

NZ $35.00
Michelle Burke John Greenwood
Michelle Burke
Anthony Harper
John Greenwood
Greenwood Roche Chisnall

This book is only available in PDF format

Published: 29 November 2013
Pages: 31


The retirement village industry continues to be a major player in the growth of residential accommodation with Statistics New Zealand predicting by 2050, New Zealand will comprise over 1 million people aged 65 years or over. The predicted growth rate of units is in excess of 6% per year, with the major players Rymans, Metlifecare and Summerset trumpeting significant growth plans to their existing portfolios.

The primary drivers of aged citizens desiring that their last place of residence be in a secure, caring and collegial environment, such as a retirement village, with responsibility for ongoing maintenance and looking after payment of bills being that of someone else, will continue to hold strong attraction. This, notwithstanding the fact that the bulk of retirement villages are self-funding, relying on capital deductions in many cases between 20% and 30% of original cost and taking the upside on any resale gain in capital value to help maintain the quality of a village maintenance and capital replacement programme.

There are well over 330 registered retirement villages currently in New Zealand, some 279 of which are members of the Retirement Villages Association. In the Retirement Villages Association Annual Report 2013, some interesting statistics from their members reveal the following:

  • Of the 20,523 units, 6,397 are situated in Auckland.
  • The most popular village size ranges from 181 to 200 units, being some 2,500 individual units, while the larger unit size villages comprising 241 to 350 units which total nearly 2,000 units. At the lower end, there are over 1,100 unit sizes in villages comprising 31 to 40 units.
  • Company Group villages make up over 65%; Individual Companies 20% and not for profit 15%.
  • Over 80% of occupation right agreements (ORAs) are licences to occupy agreements.

A feature of the industry is the introduction of consumer protection legislation for residents viz. comprising the Retirement Villages Act 2003 (the Act); Retirement Villages (General) Regulations 2006 (General Regulations); Retirement Villages (Disputes Panel) Regulations 2006, Code of Residents Rights, and Retirement Villages Code of Practice 2008, with variations to the Code coming into force on 14 October 2013. Allied to the legislation is the need for a complaints facility and disputes panel regime plus for registered villages memorials on titles to, among other things, protect ORAs from being disclaimed on liquidation or insolvency of an operator.

The combination of the Act, Regulations and Code has resulted in an improved quality of presentation and standard of care of villages and enhanced the attraction to the elder community in New Zealand.

There seems little doubt that the consumer legislation has brought about a reasonably significant increase in quality control. The Retirement Villages Association itself has played a major role in promoting and enhancing the attractiveness of village living. Nevertheless, abuse still results, as identified in the Retirement Commission’s Monitoring Project Report of July 2011, such as in the following areas:

  • Fees adjusted automatically on an annual basis. NZLS CLE Webinar
  • Reduction in quality of services and amenities provided.
  • Changes in ownership and management without consultation.
  • Operators and managers controlling the sale process with limited input from residents and their families.
  • Amenity development being promised but not delivered upon.
Other areas of concern include:
  • Refurbishment charged but not actually carried out.
  • Complaints being suppressed or not fully actioned, even though the legislation provides for a complaints facility and separate dispute panel forum being initiated in villages.
  • Statutory supervisors taking a hands-off role.
  • Powers of Attorney being granted to managers without adequate family knowledge or input.
  • Misleading advertising and promotion.
  • Deferred maintenance and upkeep of some villages not actioned.

Discussions with the Retirement Commissioner concerning enquiries and complaints made during the period June 2011 to December 2012 revealed the following:

  • Villages with no complaints facility process.
  • Villages not registered.
  • Maintenance not attended to in villages.
  • Delays in arranging disposal of units.
  • No consultation on change of operator and/or management.
  • Weekly fees – fixed or adjusted.
  • Problems with the legislation – too complex and prescriptive.
  • Insurance issues, particularly post Christchurch earthquakes.

The Retirement Commission has advised that for 2013 to date, most complaints lodged have related to process around sale of units (lack of consultation and sums deducted) and weekly fees (complaints related to overcharging and move to increase or fixed without consultation).

Notwithstanding claims of abuse, the industry is by and large healthy, and the perception is that there are many more good news stories than others in the market, with the better villages having dynamic village committees and engaged managers and staff, which serves to fuel the growth. All this means that legal practitioners (who are required to certify that an intending resident has received an “explanation” of the general effect of the ORA and its implications) need to up-skill their specific advice on contractual documentation and general advice concerning the need to ensure that intending residents fully understand the implications of their move into a retirement village. The Monitoring Report considered that advice by lawyers and financial advisers is too narrow and failed to provide appreciation of implications. Therefore, to overcome such reports and perceptions the need to “lift the game” is ever present. For example, contesting clauses and omissions in ORAs and specifically covering off in the prescribed form of certification of advice, the cooling off period available: see s 28 of the Act.

The checklist which forms part of this paper, updated from the NZLS CLE Ltd seminar on retirement villages in February – March 2004, illustrates the many questions which need answers. The checklist reinforces the fact that buying into a retirement village is no ordinary house purchase and specialist knowledge and understanding is required in the giving of adequate advice. Also, there is the checklist on the Retirement Village “Sorted” website: https://www.sorted.org.nz/life-events/moving-to-a-retirement-village. Plus, the useful booklet “Thinking of living in a retirement village?” available online through the Ministry of Business, Innovation and Employment (MBIE) on http://www.dbh.govt.nz/thinking-living-retirement village.

It is imperative that practitioners understand and appreciate that they are largely dealing with elder citizens, which requires extra sensitivity and patience in the delivery of advice.

This webinar paper should be read together with the NZLS CLE Ltd’s 2004 and 2007 seminars on retirement villages.

Content outline

  • Draft Checklist for Intending Residents
    • Why the Move and What Initial Enquiries Made
    • Status of Village
    • Ownership and Management Structure
    • Village Security and Amenities
    • Financial Issues at Entry, Ongoing and At Point of Sale
    • Impact of Earthquake Damage or Destruction
    • Health Care Facilities
    • Use and Enjoyment Threats
    • Statutory Supervisor
    • Complaints Facility and Dispute Resolution
    • Security of Tenure
    • Personal Client Affairs
  • Advising A Resident on Entry
    • Occupancy Types
    • Application Process
    • Documentation Available for Review
    • Disclosure Statement
    • Occupation Right Agreement
    • Code of Practice
    • Code of Residents' Rights
  • Protections for Residents
    • Explanation of The Occupation Rights Agreement
    • Statutory Supervisor
    • Exemption from Statutory Supervision
    • Statutory Memorial
    • Cooling Off and Cancellation
  • The Sale Process
    • Disposal of The Unit by The Operator
    • Disposal of The Unit by The Exiting Resident
    • When Must Periodic Charges Stop?
    • Termination Statements and Permitted Deductions
  • Property Damage and Insurance – New Code
  • Complaints Facility and Disputes Panels
    • Bentley v Summerset Management Group – Panel Hearing – 12 June 2007
    • Perry and Others v Waitakere Group Limited – Panel Hearing – 30 October 2007
    • Waters and Helm v Perry Foundation [2013] ZnS 576 and Panel Hearing– 25 October 2013
    • Barnes v Anglican Care (Waiapu) Limited – Panel Decision 20 September 2013
    • Robinson and Loveday v Oceania Village Company Limited – District Court 15 March 2013
    • Oliver and Others v Oceania Village Company (No 2) Limited – 6 November 2009
    • Features of The Dispute Regime
  • Resource Materials
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Retirement Villages

Publication Date: 25-Feb-2004

Author(s): John Greenwood, Simon Marks

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