It’s an interesting phrase “licence to occupy”. As one resident of a licence to occupy retirement home put it, “It takes away the sense of ownership, but in the end, do we really own anything?”
Choosing a place to live is one of the most significant decisions people make when they reach retirement age. Many opt for licence to occupy (LTO) communities. According to Village News, “Licences to occupy are the most common way to live in a retirement village in New Zealand”.
It has, however, generated a lot of controversy over the years. So why do people choose this lifestyle? Is what you gain from living in one of these communities greater than what you lose in capital gains?
We talk to couples who made this choice, offering insights for others thinking about doing the same.
You’re buying into a lifestyle
“You’re buying into a lifestyle”, explains Jim, a resident. “And all the facilities we’ve got here, like the bowling green, the gymnasium, the swimming pool, the sauna, the movie theatre, the library, the cafe….” It’s all here to be enjoyed, and it’s so easy.
“It’s like being in a hotel at Surfers. You walk in and go wow, ‘this is lovely’. It’s like living there”.
In our community, you can participate in a wide range of activities, classes, and facilities without having to worry about additional fees. Besides saving money, you also have the convenience of having them right at your door.
Getting older can make it easy to fall into a rut and not participate in as many activities. This can impact cognitive and emotional well-being. Some seniors limit pursuits to just the basics because it’s easier than getting out. Budgetary concerns can also weigh heavily on their decision to pursue hobbies and activities.
Coming into a community like ours can help you regain your zest for life. It’s so much easier to stay active and pursue interests when they are literally on your doorstep. There are many activities each day – check them out here.
You’re part of a community that’s connected
Remember the days when you knew your neighbours? When you felt comfortable enough to pop over for a cup of sugar or to borrow a tool? There was a time when neighbours felt like family. They looked out for each other, and they connected on a level that’s rare these days.
Many residents spoke of a change in their suburb over the past 20-30 years, a feeling of disconnection. Today, it is not uncommon to live among strangers. When you’re working and raising a family, that may not bother you, but as you get older, you may feel isolated and lonely.
Many of the residents we talked to missed the days when they could wave hello to someone on the street and know their name. Being familiar with people around you brings a sense of comfort. Retirement communities like Fairview provide that.
“You have a shared outlook on life, a shared vision, and camaraderie that you don’t get out in the suburbs. It’s the same sort of thing that you get by belonging to a club. You never get lonely. There’s so much to do”.
You have certainty around budgeting
One of the most significant advantages of licence to occupy is the certainty it brings to financial planning. The couples we spoke with noted that the terms, conditions, and charges were agreed upon at the onset, thus removing the uncertainty around financial planning. The fees are fixed for life, giving residents a clear understanding of how much they need to budget.
However, not all retirement villages provide fixed fees for life, so it’s really important to check this at the onset.
“We added up our rates, our water rates, insurance, tree trimming, gardening etc. and you don’t have to worry about it – worry about who is ripping you off. And you don’t have to worry about it [costs] going up”.
The cost of living is a concern for many people, but for those who are no longer working, it can be even greater. Take rates for example. As part of a plan to plug a $325 million budget hole, Auckland Council increased rates by 7.7 percent earlier this year.
Next year, those rates could nearly double from a starting point of 13.75 percent, as the council seeks to balance its books. Source: RNZ, Possible rates hike for Auckland will make city even more unaffordable, residents say
“You don’t have to pay rates, water rates, gym memberships, maintenance – all of those costs keep going up, but our fee is fixed for life. That’s a huge relief when you’re on a fixed income”.
“We are saving more money here than we were at home. Your rates aren’t going up. When something needs fixing you put a form in and it’s fixed within a day”.
Rates, water rates, gym memberships, and maintenance costs continue to rise, so having fixed fees for life offers long-term stability.
You can relax and let go of worries
If everything was taken care of for you, what would life be like? With a nurse on site, gated security, maintenance services, and gardening assistance, you can live without worry. You can get help with meals, housekeeping, and even transportation. Again this is all part of the lifestyle you are buying into. You can learn more about support with everyday living at Fairview by checking out this article.
There is peace of mind that comes from knowing your needs are being met without worrying about how much it will cost you. Those who live here say they are free from undue pressure and can do more of what they want. Which brings me to the next point.
You can free up time
If you don’t have to worry about home maintenance and gardening, you can focus your energy on doing what you love.
“As you get older you have less energy but you now have more time. You can use the energy to do the things you want to do, rather than the things you have to do”.
“Four years ago my husband had a stroke. This is another thing that coming in here gives us – the opportunity for nursing, and you’ve got the alarms if anything happens”.
“We have 5 call buttons in our apartment. I pushed one by mistake once and the nurse was up in seconds!”
You can free up cash
Depending on the value and equity in the house you’re selling, buying a LTO retirement home can often free up quite a bit of cash. This cash enables you to enjoy your retirement comfortably knowing that you have cash in the bank to fall back on, travel and so on.
“We could provide the children with an early inheritance and add another investment property to our portfolio”.
To sum up, there are many advantages to choosing a licence to occupy community, as shared by couples who have made that decision. These include buying into a certain lifestyle, peace of mind, saving costs, accessing equity, and obtaining greater budgeting certainty.
However, it’s important to note that agreements can vary significantly, so it’s crucial to seek legal advice. Take for example fees. Not all retirement communities fix them, and that’s an important consideration.
Sadly, there are negative experiences with licence-to-occupy agreements in some villages. So, it’s crucial to have a full understanding of the legal agreement you are entering into before making any decision.
It’s important to understand that you’re not buying real estate but rather a form of licence to reside. By itself, that can be a difficult concept to grasp.
Yes the loss of capital gains is a consideration, but for so many of the couples who have made the choice to forgo that, it was worth it for the lifestyle they’ve gained. To maintain capital gains, some even invested in investment properties with the equity they freed up from selling their homes. This gave them the best of both worlds.
Disclaimer: Please note that we are not retirement law experts. The content of this blog is for informational purposes only and provides perspectives of a small sample of retirement village residents. You should consult a lawyer before making the decision to move to a licence to occupy village.