Buying A Retirement Village Unit 08 Dec 2011
Retirement villages are becoming an increasingly popular choice for older New Zealanders who wish to take advantage of the security and flexibility of the lifestyle on offer. Parry Field Lawyers offer legal advice on a range of property matters including purchase of a retirement village unit.
How do I buy a retirement village unit?
If you are considering buying a home in a retirement village, then you need to be aware of exactly what you are buying and the sort of legal title that you will purchase when you acquire your new home. The most common types of legal title used for retirement villages are:
Licence to Occupy
A licence to occupy entitles the resident to live in the unit but ownership of the unit is retained by the retirement village. For that reason, it is usually not possible to borrow funds from a bank or other financial institution secured against a licence to occupy.
A unit title is issued under the Unit Titles Act 1972 and confers legal ownership of the unit or house upon the resident. It is therefore technically possible for the resident to borrow against the value of the property. However, the occupation agreement with the retirement village will probably include re-sale restrictions which will in turn restrict the resident's ability to borrow.
A cross lease title is one whereby the ownership of the freehold is shared by all of the residents who then grant leases to each other to live in the units and/or houses for a token rent.
Lease for Life
The retirement village owner grants a lease in a unit or house in the village which continues on until the resident either dies or leaves the village.
Retirement Villages Act 2003
The Retirement Villages Act 2003 introduced new compliance procedures for retirement village operators. All retirement villages must:
- Register with the Registrar of Retirement Villages.
- Appoint an independent government approved statutory supervisor (or obtained an exemption from this requirement). The statutory supervisor holds any deposit or progress payments for intending residents and residents. The statutory supervisor also monitors the financial position of the retirement village; and reports annually to the Retirement Villages Registrar and residents of the retirement village on its performance of its obligations.
- Prepare annual audited financial statements.
- Not make any offers of occupation unless they are registered and have a complying Occupation Right Agreement in place, which confers the right of occupation of a unit or house upon a resident, together with the right to use services and shared facilities in the village.
- Give every prospective new resident of a retirement village a disclosure statement that which includes detailed information about the type of legal title offered and the ownership and management structure of the village.
- Have given every current resident of the retirement village a disclosure statement that complies with the Act.
The Act makes it mandatory for intending residents of a retirement village to receive independent legal advice before signing an Occupation Right Agreement. This means the resident’s signature has to be witnessed by a lawyer who must certify that he or she has explained the general effect of the agreement and its implications in such a manner which is easily understood by the intending resident. An agreement that has not been properly certified may not be enforceable by the retirement village operator.