Are you thinking about buying a place in a retirement village complex?
Make sure you make the right decision for you — contact our retirement village expert, Carolyn Ranson today.
18 June, 2013 | Carolyn Ranson
An occupation licence is a personal right only. You do not own the property, but you have a contractual right to occupy that particular dwelling. That right is secured on your behalf. Unlike normal property ownership, you are not usually able to mortgage the property or register any other interests such as a caveat against the certificate of title. You cannot sell or transfer the right to occupy.
Some villages allow for the purchase of the occupation right in the name of a family trust. Others take the view that this is a personal right only and cannot be owned by a trust.
Unlike a usual residential property purchase, you are usually not entitled to any capital gain from the resale of the property after termination. However, if the property sells for an amount that is less than the original purchase price, then the Village is usually able to charge you for the difference, and you may have carry the capital loss.
The full purchase price (sometimes referred to as a capital payment) usually includes a membership or amenities fee of approximately 25% or 30% of the full purchase price.
This fee amortises (or depreciates) over 3 or 4 years on a pro-rata basis. For example, if the period specified is 3 years and you leave the village within 3 years, a portion of this will be refunded. If you leave after 3 years, it will have fully depreciated and the amount you will receive back upon termination of the occupation right or licence will be the full purchase price you paid less the membership or amenities fee (usually 25% or 30%).
A topical subject in view of recent events in New Zealand is the situation you may find yourself in if the property is damaged by fire, earthquake or storm etc. The Village is not usually obligated to expend any more money to reinstate than it receives under its insurance.
If the money received is not deemed to be adequate or the Village decides not to rebuild then it usually terminates the occupation right agreement.
Alternative accommodation, while the property is being reinstated, may be at your cost or the cost of the Village.
If the Village is not rebuilt, your ability to purchase a replacement dwelling elsewhere may be severely compromised. This is especially the case in a rising market.Village operators differ as to whether the membership fee portion of the original entry payment will not be deducted from the repayment amount in this situation.
In addition to the obvious right to live in your unit, other rights and obligations under the agreement should be carefully considered and understood. These might include:
Further down the track you might want to transfer to another dwelling within the Village, such as a serviced apartment. In this case, you will usually have to terminate your existing occupation right agreement, as if you were leaving the Village. The amount that is repaid to you will be put towards the amount you will be required to pay for the new dwelling, which will be at the current market price at that time.
A major consideration will be whether the amount returned to you is going to be enough to purchase the new dwelling, especially if the market price of dwellings in the Village increases. You may also be required to pay a further membership fee.
It is a usual requirement, for obvious reasons, that you have current Enduring Powers of Attorney and a valid Will in place as a condition of entrance to the Village. An elder law specialist will be able to prepare these documents for you.
16 February, 2012 | Carolyn Ranson
23 March, 2012 | Carolyn Ranson
5 April, 2012 | Carolyn Ranson
12 April, 2012 | Carolyn Ranson