Retirement Legalities: Understanding the Basics

Moving into retirement properties can be different from moving into other kinds of property, and understanding the differences is vital. The NZ government requires those seeking to buy property in a retirement village to have proper legal advice, so they are fully informed on the legal implications of any such agreement.

That’s why we’ve put together this blog post. We want to cover the basics, so you know what to expect from the process. Read on to find out more!

Getting legal advice

As mentioned above, the Retirement Villages Act 2003 legally requires that you find independent legal advice before any retirement village can consider your application. This applies to any kind of village you may be interested in, as there is a whole spectrum of retirement village types, from public institutions to private aged care services. Retirement communities can also differ on factors such as levels of medical care, facilities, and so on.

Some lawyers specialise in advising and explaining the varied technical aspects of a typical Occupational Right Agreement prior to intending residents moving into a retirement village . You can also approach the Law Society about finding a good lawyer; they can help match you to a good source of legal advice.

Types of legal titles

Once you’ve acquired independent legal representation, the next major legal consideration lies in the type of contract on offer from the retirement village you are interested in. The four most common legal titles that lifestyle and retirement villages use are the following:

1.Licence to occupy (Occupational Right Agreement – ORA)
2.Unit title
3.Cross lease
4.Lease for life

You may also come across places that use another type of title, one that combines several elements from the first two options above. However, in general, you’ll more likely be required to understand the basic details of only one of the options above.

What is a licence to occupy?

A license to occupy is the most common type of legal title among New Zealand retirement villages; about 75% of villages use this legal title. These agreements essentially allow you to live in the unit but don’t give you ownership of it. It’s more like a lease than a purchase, and this is relevant to you because it alters your options for lending; typically, you can’t borrow against the value of a unit you don’t own. Some villages may have their options for allowing this anyway, however.

What is a unit title?

Unit title agreements give you direct ownership over the unit you live in. They also commonly require you to become part of the body corporate—a group of all unit owners responsible for maintaining communal areas. This usually just means that you’re required to help pay for upkeep of courtyards, driveways, roads, and other areas that all occupants of the village use equally. Sometimes a body corporate is required to make decisions about these sorts of things, or to help manage disputes, but it’s more likely that the body corporate you join will already have an agreement with the manager of the village, who will deal with these day-to-day tasks.

What is a cross lease?

A cross lease is more complicated, but in some ways is like a combination of the two options above. Under a cross lease title, everyone who lives in a retirement village shares ownership of all units and properties, and leases each unit out to each other. In this system, you lease property from every other owner, but every other occupant is also leasing their property from you! There are pros and cons to this approach, and your legal advisor can provide further details on this type of title if it is relevant to you.

What is a lease for life?

Property or units sold under this type of title are leased to you for the remainder of your life. In many ways they are more like ownership than a lease under a licence to occupy, but there are usually also options for leaving a village, in which case the lease would terminate.

The Retirement Villages Act 2003

All the modern legal requirements that relate to moving into a lifestyle or retirement village stem from the Retirement Villages Act 2003. This act was drafted to help protect residents, both while they are moving into villages and during their time there. The act lays out two major sets of rules: The Code of Residents’ Rights and the Code of Practice. It also provides the framework for dispute resolution.

The Act also outlines some requirements that all retirement villages need to follow:

  • Villages need to be registered.
  • Villages need to have an appointed statutory supervisor.
  • All villages need to provide prospective residents with several documents before they make any payments, including the occupation right agreement, and a disclosure statement.
  • All villages are required to create a system for handling disputes inside the village, and a system for communicating with residents and keeping them involved in key decisions about the village.

You can find out if a retirement village is registered or not by using the New Zealand Companies Office, who maintain the Retirement Villages Register. Checking the above requirements against villages you’re interested in isn’t a bad idea, but it’s best to let your lawyer take care of that, as they should already know what to look for.

What does the Retirement Villages Act 2003 require potential residents to do?

Hire a lawyer! We know this point has been made several times already, but it can’t be overstated. The Act requires that you seek independent legal advice, primarily so they can read the occupation right agreement and explain it to you before you sign it.

Want to look at our properties?

Looking for an Albany retirement village with a high level of care, convenient location to the motorway and shops, and first class community facilities? Here at Fairview Lifestyle Village, we’re committed to ensuring a high level of care is maintained in the community and hospital and that the Apartments and Villas offer superb value. Contact us today to find out more!