Troy Churton, former National Director of Retirement Villages of the Financial Capability Commission, shares advice on factors to consider. Video / NZ Herald
A resident of a retirement village has complained that her village took almost a year to sell her house after she could not afford to stay when her husband fell ill.
Consumer NZ reported on a recently widowed 80-year-old woman left in financial limbo, forced to pay fees for a unit she left almost a year ago, unable to stop being billed for the money.
But an industry group hit back today, saying the woman’s experience was not typical.
The woman has not been named and neither has the North Island village. The woman (pseudonym Mary) and her husband moved into the retirement village in September 2020.
But soon after, her husband was diagnosed with terminal cancer and had to be moved to another location with hospital care. She could not pay the weekly fees in the village and for her husband’s hospital care.
So, last September, she told the village operator that she had to go there, terminate her occupation permit and said that she wanted her money back.
The consumer said occupancy rights agreements signed by village residents required them to pay a lump sum, ranging from $200,000 to more than $1.5 million, for an occupancy license of the unity.
They must also pay a weekly fee to cover running costs.
When a resident left the village, they usually received no part of their lump sum payment until the license for the vacant property was resold.
The retirement village usually kept around 20-30% of the resident’s initial investment.
“However, as Mary discovered, it can take a long time to collect a lump sum from the village,” Consumer said.
“During this period, residents are often likely to continue paying running costs, even when they are not living in the village.”
The octogenarian moved last November, at the end of his two-month notice.
Since then, thousands of dollars have been charged in weekly fees, deducted from his lump sum once his unit is finally sold.
Nigel Matthews of the Retirement Village Residents Association (RVRANZ) said: “This village has a vested interest in not selling this villa as they are still getting revenue from it – through deferred management fees and weekly fees.”
Despite language in the agreement clearly stating the deferred management fee of 7.5% per annum accrues until Mary’s unit receives a new license, the village insisted, in a statement to Consumer NZ, to that its costs do not continue to accumulate.
Unfortunately, there are many more retirees in Mary’s situation, Consumer says.
Last year, the RVRANZ presented a petition to Parliament, calling for an urgent review of the Retirement Villages Act and Code of Practice, to address what it called the imbalance between operators and residents.
He wanted to see any resident’s capital returned within 28 days of leaving a village, or upon resale of the unit – whichever comes first.
Consumer made a submission to the Select Parliamentary Committee in support of this petition.
“The consumer believes that a resident, or his estate, should be entitled to his exit payment within a reasonable time after leaving the accommodation, regardless of how long it takes to find a new resident for the accommodation.
‘This would incentivize the village operator to renovate only when necessary and to find a new resident as soon as possible,’ he said today.
But Graham Wilkinson, president of the Retirement Villages Association, which represents owner-operators, said Mary’s situation was “puzzling” because it was not the experience most people had.
About 77% of the inhabitants questioned by the association were reimbursed within six months of leaving a village.
Most residents “left” because they died and their property was paid for.
“The average repayment period for money from the sale of a unit is just four months, and more than 100 New Zealanders are moving into villages every week,” Wilkinson said today in response to the article from Consumer.
The village cited by Consumer was smaller, with only about 17 units, and it did not have the financial capacity to reimburse people immediately.
But most units were in much larger villages owned by wealthier owner-operators.
The association said it was testing a new best practice standard for villages to pay interest on money tied up in property if the units were not sold within nine months of a person leaving.
He planned to make it mandatory next year if there were no unintended consequences of this change, Wilkinson said.