The Retirement Villages’ Residents Council has welcomed the Government’s decision to impose a mandatory nine month repayment period to return capital on units vacated by retirement residents, calling it a sensible step forward for the industry.
The Council, an independent body representing the interests of retirement village residents, said the updated reforms announced by the Government bring certainty for residents and their families.
“We believe a nine month maximum period to repay capital to residents and their families strikes the right balance,” said Council Chair, Carol Shepherd.
“Any longer imposes unnecessary costs on residents and families. Any sooner, would create financial difficulties for many small operators.”
The reforms include mandatory payment of capital on unsold or vacated units at nine months, with 10% of capital repaid within four weeks of the unit being vacated. The reforms would not apply to current contracts.
Research shows around 90% of units are resold within nine months.
Chair Shepherd said residents “rightly want earlier access to their capital and greater certainty around when repayment will occur and this decision, while not pleasing all residents, strikes the right balance in our view.
“Residents have consistently indicated that they would prefer earlier repayment wherever possible. However, consultation has also shown that around 60% are not prepared to accept significantly higher costs in order to achieve that outcome. That is the reality of far sooner repayment – many operators would have to borrow capital to fund that and that raises the cost of operating which residents would have to bear.
“The 10% payment after four weeks when a unit is vacated will also ease the burden on families who face upfront costs on behalf of their loved one or the residents themselves who move on for whatever reason. It provides funds they may well need for their ongoing care.”
She said a compromise won’t please everyone, but it is vital that the industry is sustainable.
“As our population grows and ages, it’s even more important that the regulatory framework continues to ensure residents have choice, their assets are protected, and the industry can continue to provide affordable options.”
“Today’s announcement provides the certainty that is needed, benefiting residents, their families and the retirement village sector as a whole.”
The Government will also retain the hardship pathway and other agreed exit protections for residents, including stopping weekly fees and fixed deductions after an occupation right agreement ends.
“Operators will still have to take all reasonable steps to enter into a new occupation right agreement for a former resident’s unit in a timely manner and at the best price reasonably obtainable. They will also be required to provide regular updates and obtain a valuation if the unit has not been relicensed after six months,” said Minister, Tama Potaka.
“A more efficient and effective dispute resolution system will be introduced for cases where operators are not meeting their obligations.”
The 10% upfront payment requirement will not apply to villages with fewer than 50 units – which is about 10% of all villages. Exemptions will also apply where the resident controls the sale and price, the outgoing resident or their estate receives at least half of the capital gain, or the village is in receivership.
The Retirement Villages Amendment Bill will be introduced in the next Parliamentary term, and the new repayment requirements will apply to occupation right agreements signed one year after the legislation comes into force.
