Occupation Right Agreements for living in a retirement village are becoming increasingly popular retirement lifestyle choice for Kiwis. An Occupation Right Agreement (“Agreement”) is the common name for an agreement entered into between the operators of a retirement village and a resident of the village. The Agreement provides that in exchange for a capital sum, the resident is provided the right to occupy a house, villa, serviced apartment or care suite (“Unit”) in a retirement village. The resident will usually be required to pay a weekly fee to the village, and on termination of the Agreement, a deferred management fee will be deducted from the capital sum before the balance of funds are returned to the resident.
There are over 450 registered retirement villages in New Zealand to choose from, so when making your choice of retirement village here are some points to consider:
- What costs are involved?
- Is the weekly fee fixed for the term of the Agreement, or does the village have the ability to increase it over time?
- What is the deferred management fee? How is it calculated, and over what term?
- What utilities are included in the weekly fee, and what services will you be required to pay for yourself?
- What pathways to care are provided by the village, and what are the costs and processes involved if you were to need a higher level of care? Is it possible to receive a higher level of care in your Unit and if so, what costs are involved?
- What would happen if your Unit were to be damaged by a destructive event such as a fire, accident, natural disaster? Does the Agreement provide that you will be sufficiently provided for in such an event?
- When the Agreement is terminated, when should you or your estate expect the balance of your capital sum back, and are you entitled to interest on the repayment figure while your Unit is for sale?
If you are considering entering into an Agreement to move into a retirement village, it is important to note that the Agreement does not provide you with a registerable interest in the land like traditional land ownership, and there are limitations on how the Unit is used. You cannot register a mortgage over the Unit (reverse or otherwise), transfer your interest to another person, or rent or sublet the Unit.
Under the Retirement Villages 2003 Act, residents are required to obtain independent legal advice before signing the Agreement.
Here at Harmans our experienced team regularly reviews Occupation Right Agreements and can provide tailored advice to your specific needs. Please contact Victoria Agnew on 03 550 2854 or victoria.agnew@harmans.co.nz.
