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Helping Your Parents When They Buy into a Retirement Village in New Zealand
28 August, 2023 | Carolyn Ranson
As our loved ones age, ensuring their comfort, safety, and well-being is a top priority. In New Zealand, retirement villages have become an increasingly popular option for seniors looking to maintain an active and supportive lifestyle while enjoying their golden years. If your parents are considering buying into a retirement village, there are several important factors to consider to ensure a smooth transition and a positive experience for all parties involved.
Understanding Retirement Villages in New Zealand
Retirement villages are designed to provide senior citizens with a sense of community, security, and access to various amenities. These villages offer a range of accommodation options, including independent living units, serviced apartments, and care facilities for those requiring additional assistance. It’s crucial to note that retirement villages in New Zealand are regulated by the Retirement Villages Act 2003 (”the Act”), which is designed to protect the interests of residents and their families.
Before your parents make any decisions about buying into a retirement village, it’s important to understand the financial implications involved. Retirement village costs can vary significantly depending the Village chosen and on factors such as location, amenities, and the type of accommodation chosen.
Buying the “occupation right” to live in the village or complex
There are very few retirement communities that allow residents to buy the property they will live in outright. Most retirement villages only allow residents to purchase an “occupation right agreement” or ORA. This grants the resident the right to live in the village and use its facilities.
Weekly or Monthly Fees
In addition to purchasing the occupation right, residents are typically required to pay regular fees to cover services and maintenance. These fees can include expenses such as property maintenance, insurance, and access to communal facilities like swimming pools, gyms, and communal lounges.
It is important to ascertain whether this fee is fixed at entry or is likely to increase, and assess whether the resident will be able to continue to afford to pay if the weekly or monthly fee increases over time.
Deferred Management or Amenities Fee (DMF)
Some retirement villages have a DMF, which is deducted from the resident’s capital when they leave the village. This fee is usually calculated based on a percentage of the initial entry fee, and it’s intended to cover costs associated with the ongoing management and maintenance of the village itself and its amenities.
Resale and Capital Gain
When your parents eventually leave the retirement village, whether due to moving out or passing away, the right to occupy the unit will be sold to a new resident. It is usual in most Agreements that the termination payment consists of the original purchase/entry price less the DMF and possibly refurbishment costs. Some operators offer a capital gain/loss provision but most do not.
Continuing fees after your loved one has moved out
Even after you have moved everything out of a unit, some villages will continue to charge the weekly or monthly fee to the original occupant while the unit is refurbished or until it is resold.
The Occupation Right Agreement (ORA): The ORA is a legal document that outlines the terms and conditions of residency in the retirement village.
It is a legal requirement under the Act, that your parents receive advice from a lawyer on the terms of the ORA that they understand and that this lawyer witnesses the signing of the ORA and provides a solicitor certification confirming that these legal requirements have been met. Given the complexity of retirement village agreements and the financial implications, it is imperative that you seek legal advice from an expert in this field. A lawyer experienced in this area of the law can recommend changes, or highlight conditions that might be out of the ordinary.
The Act includes a cooling-off period during which residents can cancel their ORA without penalty. This period usually lasts 15 working days after signing the ORA. It’s wise to use this time to consult with legal professionals and financial advisors to ensure the terms align with your parents’ expectations. There is usually a further cooling off period once they have moved into the Village.
Village Rules and Regulations
Each retirement village has specific rules and regulations that residents must adhere to. These rules can cover issues such as pets, noise, and alterations to the unit or apartment. It’s important to understand these rules before making a decision to ensure they align with your parents’ lifestyle preferences.
Legal experts can help decipher the complex fee structures associated with retirement villages. They can clarify the entry fee, weekly/monthly fees, and any potential deferred management fee. This understanding is vital for making informed decisions about affordability and future financial implications.
Choosing the Right Retirement Village
Selecting the right retirement village for your parents requires careful consideration and research. Here are some factors to keep in mind.
Consider the location of the retirement village in relation to family, friends, medical facilities, and other amenities. A convenient location can enhance your parents’ quality of life and make it easier for you to visit.
Facilities and Amenities
Different retirement villages offer varying facilities and amenities. Some may have lush gardens, communal spaces, fitness centres, and organized social activities. Assess which amenities align with your parents’ interests and needs.
Level of Care
Consideration should be made for the level of care that may be required in the future. It is usually easier (and often cheaper) for your parents to remain at the same village, allowing them to age in place.
Whilst they may go into the village completely independent, consideration should be made for the future. Is home help available? Are there smaller units or apartments available where they can be somewhat independent, but meals are provided? Is rest home level care available? What are the facilities for dementia or Alzheimer’s level care?
Reputation and Reviews
Research the reputation of the retirement village by reading reviews and speaking with current residents and their families. This first-hand information can provide valuable insights into the village’s atmosphere and management.
Consider the long-term viability of the retirement village. Is it well-maintained? Does the management have a track record of responsible financial and operations management? These factors can impact the sustainability and quality of life for residents. Are there major upgrades needed in the future? Will your parent be expected to contribute to those upgrade costs?
Family Involvement and Communication
When your parents are considering moving into a retirement village, involving the entire family in the decision-making process can be beneficial. Clear and open communication can help address concerns and ensure that everyone’s perspectives are considered. Here are some tips for effective communication:
Arrange a family meeting to discuss the decision to move into a retirement village. Share information about the options being considered, including the financial aspects and the reasons for the move. Often siblings can have strong opinions about which village a parent should be moving into.
While your parents’ well-being is the primary concern, it’s important to respect their wishes and preferences. Listen to their thoughts and concerns and work together to find a solution that everyone can support. They are the decision makers and it is (usually) their money!
Legal and Financial Consultation
Encourage involving legal and financial professionals experienced in this area of the law to ensure everyone has a clear understanding of the agreement and its implications.
Moving into a retirement village can be an emotional process. Offer support to your parents as they navigate this transition and remind them that this decision is about enhancing their quality of life.
Choosing to move into a retirement village is a significant decision that involves careful consideration of legal, financial, and emotional factors. By understanding the financial implications, seeking legal advice, and selecting the right retirement village, you can ensure that your parents’ transition into this new chapter of their lives is a smooth and positive experience. Remember that open communication and family involvement play a crucial role in making informed decisions that prioritize your parents’ well-being and happiness.
Ready to Make Informed Choices for Your Parent’s Retirement? Contact Carolyn Ranson, Your Trusted Expert!
Navigating the world of retirement villages requires expertise and insight. If you’re seeking personalised guidance to ensure a seamless transition for your parents, don’t hesitate to reach out to Carolyn Ranson. Carolyn was recently asked to consult with the Retirement Commission regarding proposed changes to the Act. With a wealth of experience in retirement village and elder law matters, Carolyn is dedicated to providing you with the support you need. Get in touch today to make the best decisions for your loved ones’ golden years.
Contact Personal Assistant to Carolyn Ranson, Suzanne Sumner to set up an appointment.
Phone: 09 836 6840
Remember, your parent’s comfort and well-being are our priority. Let Carolyn guide you on this journey.