It takes a village to raise a millionaire

The rules under which retirement villages operate are mostly laid down in law, which is now under review. The Consumers Association, the Retirement Commissioner, and the Retirement Village Residents Association have all put in their submissions. At the time of writing the Retirement Villages Association (RVA, the industry body) and the Grey Power Federation are still in preparation. However, the RVA has put out a press release condemning the Consumers Association suggestions, and saying all that is needed is a few tweaks to the status quo.

The Consumers Association says:

  • The financial model is that you pay for a licence to occupy rather than ownership; the licence can be resold but the village takes a cut, usually taking any capital gain. You also pay a weekly fee. The capital gains grab is one of the main complaints by village residents.
  • Your liability to pay for repairs for things that go wrong in your unit, despite you not owning them.
  • Getting the money if you want the unit to be sold: there is no constraint on how long villages can wait before selling your unit. This is a problem if you want to move to another village.
  • Controls on your rights: Many villages have restrictions that would not hold if you had your own home, for example on people staying, and forbidding objections to any building works.
  • Contracts are weighted against residents, and more regulation is required.
    In the meantime, Consumer has provided a checklist to assess prospective villages.

The Retirement Commissioner is saying that a review is needed by the Ministry of Housing, including improving the resale and buyback process, stopping weekly fees being required after termination, and improving the complaints process.

Currently money is flooding into the sector from investors (“Rest home businesses are hot property”, Dom Post 13 March) so maybe there will be a lot more competition for your licence dollar. However, profits increase the shorter the stay in villages; the incentives seem perverse, to say the least.

Owen Watson

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