Retirement Village licence to occupy facts. Retirement villages are booming as the population ages, but there’s a lot of work to do schooling up older people, their families and lawyers on how they work.
About 12 percent of people over the age of 75 live in a retirement village and the number continues to rise.
In some regions, it’s even higher.
In Tauranga, it’s 16 percent, says John Collyns, the head of the Retirement Villages Association, and in Auckland its 14 per cent.
In all, some 33,000 people live in retirement villages, making it a mainstream choice.
In some parts demand exceeds supply, which gives the village operators a lot of power in setting prices.
People like retirement villages because they are resort-like residences offering company, security, amenities like swimming pools, gyms and cafes, and an end to home maintenance.
But their comfort comes at a price.
Usually the in-coming resident buys a licence to occupy (also called an occupation right) paid for from the proceeds of the sale of their own home.
A licence to occupy gives its holder no property rights, just the right to stay as long as they are fit enough to do so, and when they do vacate, they or their estate only get back around 70-75 per cent of the sum they paid for the licence, as the operator will deduct a deferred maintenance, or management fee of 25-30 percent.
Spend $350,000 on a licence, lose 25 percent on resale, plus another $770 on legal fees, and nearly $11,000 on a “marketing fee” charged by the village, will result in only around $250,000 coming back on vacating the unit.
And even if it is sold at a higher price (prices are set in regard to house prices in the immediate area), the departing resident gets no share of the gains, though in time this could change, as the country has seen its first village open which does share “capital gains” open.
It is not just the purchase price prospective residents must consider.
Residents also pay weekly fees covering things like rates, security, gardening and maintenance.
Collyns says these are broadly similar to the costs of maintaining a stand-alone home.
Some villages charge a fee that will not rise. Other villages do not, and retirement village specialist Troy Churton from the Commission for Financial Literacy says many residents rely entirely, or to a large extent, on NZ Super to make those payments.
Churton said only 35 percent of village residents have $100,000 or more of capital after they sell their home to buy their licence to occupy. 30 percent have less than $25,000.
In addition to the weekly payments, the resident is still responsible for some of their own costs like contents insurance.
Research suggests that people making the decision to move into a retirement village are not as well informed as they could be. And often younger family members do a lot of the research.
One study by the Centre for Research, Evaluation and Social Assessment (Cresa) found, for example, that 28 per cent of prospective retirement village residents had not realistically considered their ability to terminate their residence at the village.
Another 16 percent had not considered the affordability of the village if their financial circumstances changed, such as of their partner died and the superannuation coming into the household fell.
And 45 percent had not considered whether they could access district health board in-home care while they lived in the village, or instead were required to buy services from the village.
Greater efforts are being put into schooling up the older population on how to buy into a retirement village, especially as it is recognised the decision to do so is often prompted by a negative event.
Churton said one village operator told him that 80 percent of residents decisions to opt for village living are “grudge decisions”.
“They are making the decision because their spouse has gone, or the lawn is too big, or because of illness,” Churton says.
Efforts include the commission producing a 38-page guide, and holding roadshows around the country for lawyers (it’s best to seek out a specialist for advice), who are called on to explain the complex licence to occupy contracts to prospective residents.
Getting used to reading long documents is a must when shopping around.
Comparing villages’ facilities is easy. Licence to occupy agreements by contrast are long, complicated documents setting out the rights and obligations of each party.
On top of that every village will also have a “disclosure statement”, and there will be a code of conduct for the resident to understand and sign, and a code of residents’ rights.
Prospective residents must read and understand these to grasp the nature of the deal they are entering, to be able to check they can afford to move into a village and to be able to work out what happens if they become so frail they have to move into a form of more intensive care. 70 per cent of villages now have rest home care.
The contents of these documents vary from village to village, though if a village is both registered under the Retirement Villages Act, which all should be and is a member of the Retirement Villages Association, they will share minimum standards.
Gathering these documents is not as easy as it could be.
Disclosure statements and licence to occupy contracts are available on the Companies Office register (the trick is to search “Other registers”), and are available from each village, but they are not routinely put on village websites.
RETIREMENT VILLAGE LIVING
Pros:
- Villages are secure and friendly places to live. There are plenty of like-minded people, so loneliness and isolation should not be a problem.
- The village operator maintains the place and the administrative burden of owning a house is removed. If you have a problem, there is someone to call to sort it out.
- Many villages have rest home care facilities on site, which means that should that day come, you won’t have to move far.
Cons:
- There are significant costs to retirement village living. This will leave your estate depleted.
- You have to live by a code of conduct and must seek the village operator’s agreement for things like getting pets, and moving in a new spouse.
- The code can vary by village. Dealing with a corporate owner is not always easy to do.
See Full article Stuff.co.nz Retirement villages are booming, but school up before making the move
Barton Fields Lifestyle Village, building freehold retirement homes that you own
Educating yourself to know the differences between Retirement Villages and Freehold Lifestyle Villages is crucial. A retirement plan based on building assets rather than spending savings is the first step to living the lifestyle you deserve.
Freehold titles are the best alternative to existing models, inherently superior to Licence to Occupy arrangements or Life Interests.
The main practical advantages are that purchases of Barton Fields Villas:
- Avoid the financial penalties that are attached to the usual retirement village offerings under the “licence to occupy” or “deferred management fee” options available in other retirement villages in Canterbury
- May borrow against their title if they choose to,
- May pass title on to descendants or family trusts, and
- Remain fully entitled to any capital gains made upon sale.
- In addition to your freehold title you also share in the ownership of Barton Lodge
10% deposit is required to secure the build, nothing more until completion. Depending on your finance arrangements, this would take the form of equity in your home.
Each year, the Barton Fields Residents Committee will work with the Body Corporate Manager to compile a budget for the operational costs of running and maintaining the village. This is divided by the number of villas, and a weekly fee per villa is derived. The only other additional costs would be individual villa utilities, telephone and rates.
Get the full list Barton Field Villas frequently asked questions Retirement villages versus Freehold lifestyle to learn more about the benefits of Freehold Lifestyle Villas.
To speak with a sales agent contact Barton Field Villas to discuss your freehold lifestyle villa.
Mike Greer Homes offers you the latest in appliances, finishes and colour palette, add the landscaped gardens and you have the reason why Barton Fields Lifestyle Villas is becoming the number one choice for active over 55s looking for a new home in Canterbury.
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