A Review of the Retirement Villages Act

Review of Retirement Villages Godfreys Law Christchurch

Moving into a retirement village is a major life decision and can be a complex and often daunting process. There are many things to weigh up; residents in retirement villages have better access to amenities, can form new friendships through regular social events and close knit communities.

However it is also a sizeable financial commitment, in most cases residents pay a lump sum for a license to occupy their unit, then weekly fees which cover the costs of the amenities and of running the village.

Reviewing the Retirement Villages Act

According to President of the Retirement Villages Residents Association, Peter Carr, 98.5 percent of members support a major review of the Retirement Villages Act 2003, the main piece of legislation covering retirement villages.

Under the current system, when the occupier either moves units or passes away, they may receive their original sum back, minus a percentage in “deferred management fees.” When the retirement village operator sells that unit to the next occupier, the operator keeps all of the capital gains, according to Carr the gain on many of these units could be $250,000, so giving occupants a chance to share in this capital gain could be a huge financial boon for residents (or their families).

Another issue that causes many retirement village residents concern is that some operators continue to charge fees after the resident has either moved into full-time care or passed away. At the moment, this is legal under the Retirement Villages Act 2003.

Suggestions from the Retirement Commissioner

The Retirement Commissioner, Jane Wrightson, has published a White Paper which is looking at changes to the way retirement villages operate.

Topics up for review include:

Improving the resale and buyback process, the White Paper suggests guaranteed time for buy-backs, interest payable during a vacant period, or allocation of capital gains;
Charging weekly fees after a resident vacates a unit, for example, one option would be to reduce weekly fees by 50% after three months and set a maximum of six months for fees to be charged on an empty unit;
A review of disclosure statements in order to produce simple and accessible documentation;
How the presence of care services changes the nature of a retirement village;
Whether the definition of a retirement village needs to be changes to include lifestyle villages; and
Reviewing the rights and consumer protections of occupants to ensure they are not being taken advantage of by operators.

A full copy of the white paper is available here:

Download Retirement Commission White Paper

The law should balance residents’ rights and operators’ responsibilities. The Retirement Commission’s White Paper recommends that the Ministry for Housing and Urban Development review the law as it stands and propose changes.

While changes to the Retirement Villages Act 2003 aren’t likely to happen soon, the team at Godfreys Law are monitoring the situation. We will keep you up to date when changes are made to the legislation and will let you know how they might impact you.

Thinking about moving into a retirement village?

In the meantime, if you or your loved ones are considering moving to a retirement village, the experienced team at Godfreys Law can advise you about what to look for in the contract and Occupation Right Agreement, so there are no hidden surprises down the line.