Five years ago, we concluded it was time to sell our home and move to a retirement village. Eventually, we found a village we liked. The sales agent explained that the building had a problem roof and was to be replaced. We would have to vacate temporarily while this work was done. We were not pleased to learn this but so liked the apartment, we decided to accept anyway. We put our home on the market and began purchase arrangements.
Our lawyer presented us with two documents: an occupation right agreement (ORA) and a disclosure statement. We were pleased to see in the disclosure statement that the undertaking to replace the roof was confirmed and that the job would be done within 24 months. We signed the ORA, paid the deposit and engaged a real estate firm to sell our home.
Our home sold, we paid the balance of the purchase price and moved into our apartment in July 2021. Eight months later, in March 2022, the company announced the village was to be redeveloped, and central to that plan would be the demolition of the building we had moved into. We discovered subsequently that our disclosure statement is not a legally binding document and therefore any undertaking appearing in it is meaningless.
In spite of the fact that we cannot be forced to vacate and don’t want to, unless there is a change of plan, we expect to be living under a demolition cloud until our end, hardly the relaxed retirement life the company offers.
Once the company has vacant possession, demolition can start and the remaining residents will have to endure living in a construction zone for the next three-plus years.
So here are the lessons we’ve learnt: the disclosure statement must be shown to you before signing but if there is an undertaking in it, ignore it. It is not a contractual document so is not legally binding.
Next is the ORA, which must be signed by you before you can be accepted as a resident. Your ORA may say that you cannot oppose further development at your village. Even if it badly affects you, you won’t be able to do anything about it.
Then there is the matter of cost. You will pay up front but usually you will never again see 20-30% of what you paid. This is euphemistically referred to as the “deferred management fee”.
The balance of what you paid must be refunded to you or your estate when you leave. In spite of the almost certain fact your vacated apartment will be resold at a higher price, most will not share in the capital gain to be won by the operator. In effect, you will have provided the operator with an interest-free loan for the term of your residence.
The current retirement village law provides operators with a bonanza. The evidence for this is overwhelming as we see the number of new retirement villages being built or planned for throughout the country.
So, if you’re considering a retirement village, what should you do? If you live in your own home, you could choose to sell and move to an apartment building, preferably where other seniors also live. We have a number of friends who have done this and they buy in the care they need as required.
The Commerce Commission has written to retirement village operators expressing concern about widespread unfair practices.
The Retirement Villages Act 2003 and associated code of practice are currently under review and it is hoped the new law will take account of this and other serious disadvantages.
Graham Astley & Keiko Pulin live in Auckland.
