• Trustees Private Wealth

Feb 28, 2020

Retirement Villages - How Retirement Village Residents and Intending Residents are Protected

The first in this series of articles looked at how retirement villages are organised and how they relate to the legal framework of the Retirement Villages Act 2003. We now examine the Act in more detail and how residents and intending residents are protected.

If you or a family member is considering buying into a retirement village it is important that you understand how you are protected and what you are legally entitled to receive in order to make an informed decision.

The Retirement Villages Act 2003 and how it Protects You

The purpose of the Act is to provide protection for residents and intending residents of retirement villages and to set out the obligations of retirement village operators to achieve this. In particular it ensures that residents understand their financial and occupancy rights.

The Retirement Villages Register

Before a retirement village makes any offer of occupation it must first be registered with the Registrar of Retirement Villages. To register, operators must lodge certain documentation to ensure they meet legislative requirements under the Act.

Making the decision to join a registered retirement village affords residents greater protection under the Act.

The Register is available at http://www.other-registers.companiesoffice.govt.nz/

The Statutory Supervisor 

The Act requires the appointment of a statutory supervisor, an independent watchdog appointed to overview and monitor the retirement village’s financial position.

A statutory supervisor is a licensed market supervisor and is appointed under a ‘deed of supervision’. This deed contains a number of covenants which the operator must abide by. The deed of supervision must be registered, and a copy must be made available to residents or intending residents.

If an operator thinks that a statutory supervisor is unnecessary, it can apply for an exemption to the Registrar of Retirement Villages. However, the Registrar does not grant many exemptions.

Trustees Executors is the statutory supervisor for a number of retirement villages and the Act requires us to perform the following roles:

  1. Provide a stakeholder facility – We hold the intending resident’s deposit on an occupation right agreement in a trust account for a “cooling off period” of up to 15 working days. If the decision is not to proceed with the purchase, the statutory supervisor ensures the deposit is returned to the intending resident with interest. If the resident continues with the purchase, the resident (or more normally their solicitor) pays the funds to us to ensure the occupation right agreement in is order before paying the funds to the operator. Note that different rules apply if the unit is not yet built.
  2. Monitor the retirement village’s financial position – We receive  regular financial statements and other compliance related reports from the operator. We review these reports and seek further explanation from the operator, if necessary.
  3. Communication with residents – We report annually to the residents on the performance of our duties and any powers we have exercised. We generally do this at the village Annual General Meeting.

We also have other obligations imposed by Regulations and the Code of Practice. We:

  1. Hold security – We generally have a first registered mortgage over the land the village is situated on to protect residents’ interests.
  2. Check insurance – We ensure that the operator holds appropriate insurance over the village.
  3. Participate in dispute resolution (if required) – We can be part of a formal dispute resolution process (should the resident want to involve us) if a resident has a dispute with the operator.

Essential Documents

The Retirement Villages Act requires that before an intending resident signs an occupation right agreement, the operator must provide the following documentation:

  1. Disclosure Statement – This is a key document. It is important that you read it very carefully. By law this contains, in clear language, such information as the ownership structure of the village, details on occupancy rights, whether there is a right to sell, market or borrow against units, the identity of the statutory supervisor, and how agreements can be terminated. It also contains information about the state of the village, services and facilities available and charges.
  2. Occupation Right Agreement – This is the actual written agreement between an operator and a resident, and gives you the right to occupy a unit and to use services and shared facilities. It sets out relevant terms and conditions.
  3. Code of Residents’ Rights – This document summarises the basic rights the Retirement Villages Act gives to residents. This includes services and benefits promised in the occupation right agreement, the right to complain, have disputes resolved quickly and the right to information on proposed changes.
  4. Code of Practice – This document is designed to protect residents and intending residents by setting the minimum requirements that operators must carry out to meet their legal obligations. It covers information to be included in occupation right agreements, staffing, safety and personal security, fire protection and emergency management, communication, maintenance and transfer of residents within the village.

Independent legal advice 

The Act requires that all intending residents obtain independent legal advice before signing an occupation right agreement. The lawyer must witness your signature and certify that they have provided you with advice and that you understand the full effect of what you are signing.

The laws relating to retirement villages are complex. Talk to your local Trust Manager who can put you in touch with a suitable lawyer. It is important that you get the right advice from a professional that is experienced in this area of the law.

Part 3 in this series of articles will recommend what questions to ask and actions to take as your final steps in making the best decision before investing in a retirement village.

The information contained in this article is of a general nature only, and does not take into account any individual’s particular circumstances, financial or otherwise. It is not intended to provide a substitute for comprehensive or specific investment advice. Readers should obtain professional, independent financial advice relevant to their individual circumstances before making any decision to invest

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