Troy Churton, former Commission for Financial Capability retirement villages national manager shares tips on factors to consider. Video / NZ Herald
A retirement village resident has complained that her village took nearly a year to sell her place after she couldn't afford to stay when her husband became ill.
Consumer NZ reported on a recently widowed 80-year-old left in financial limbo, forced to pay fees for a unit she left almost a year ago, helpless to stop being charged money.
But an industry group has today hit back, saying the woman's experience was not typical.
The woman was not named and nor was the North Island village. The woman (given the pseudonym Mary) and her husband moved into the retirement village in September 2020.
But soon after, her husband was diagnosed with terminal cancer and had to be moved to a different place with hospital-level care. She couldn't afford weekly fees at the village and for her husband's hospital-level care.
So last September, she told the village operator she needed to go, terminate her licence to occupy and said she wanted to get her money back.
Consumer said occupation rights agreements which village residents signed required them to pay a lump sum, from $200,000 to more than $1.5m, for a licence to occupy the unit.
They must also pay a weekly fee to cover operating costs.
When a resident left the village, they did not usually get any of their lump sum payment back until the licence for the vacant property was resold.
The retirement village typically kept about 20-30 per cent of the resident's initial investment.
"However, as Mary discovered, it can take an excessively long time to get a lump sum back from the village," Consumer said.
"During that time, residents are often liable to continue paying operating costs, even when they are not living at the village."
The octogenarian moved out last November, at the end of her two-month notice period.
Since then, thousands of dollars were charged in weekly fees, deducted from her lump sum once her unit is eventually sold.
Nigel Matthews from the Retirement Village Residents Association (RVRANZ) said: "This village has a vested interest in not selling this villa, as they are still making money from it – from the deferred management fee and the weekly fees."
Despite the wording of the agreement clearly stating the 7.5 per cent per annum deferred management fee accrued until Mary's unit was relicensed, the village insisted, in a statement to Consumer NZ, that her fee does not continue to accrue.
Sadly, there are many more retirees in Mary's situation, Consumer says.
Last year the RVRANZ presented a petition to Parliament, seeking an urgent review of the Retirement Villages Act and Code of Practice, to address what it called the imbalance between operators and residents.
It wanted to see any resident's capital returned within 28 days of leaving a village, or upon resale of the unit – whichever happened first.
Consumer made a submission to the Parliamentary Select Committee in support of that petition.
"Consumer believes a resident, or their estate, should be entitled to their exit payment within a reasonable period after vacating the unit, irrespective of how long it takes to find a new resident for the unit.
"This would incentivise the village operator to only refurbish where necessary and to find a new resident as soon as possible," it said today.
Wilkinson said the situation with the widow was "perplexing". Photo / supplied
But Graham Wilkinson, president of the Retirement Villages Association which represented owner-operators, said Mary's situation was "perplexing" because it wasn't the experience most people had.
About 77 per cent of residents the association surveyed had money repaid within six months of leaving a village.
Most residents "left" because they died, and their estates were paid out.
"The average period for repayment of money from a unit's sale is only four months, and more than 100 New Zealanders move to villages weekly," Wilkinson said today in response to the Consumer article.
The village Consumer was citing was smaller, with only about 17 units and it did not have the financial strength to repay people immediately.
But most units were in much larger villages owned with wealthier owner-operators.
The association said it was trialling a new best-practice standard for villages to pay interest on money tied up in property if units weren't sold within nine months of a person leaving.
It planned to make that mandatory that next year if there were no unintended consequences from that change, Wilkinson said.
