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Retirement villages are a popular option for older Kiwis attracted by the secure, community-focused lifestyle many such residences offer, as well as the proximity to higher levels of care as needs change.
But before making the move, it’s important to understand what you’re signing up for – the financial and contractual arrangements can be complex.
Here is an article written by Vanessa Glennie from Lifetime Retirement Income detailing some of the key things you should know about Retirement Villages.
Thinking about a Retirement Village? Read this first.
Here are some of the key things you should know:
You’re not buying a home
Most retirement villages operate on a licence to occupy model, meaning you don’t actually own your unit. Instead, you pay for the right to live there under an Occupation Rights Agreement (ORA).
Because you don’t “own” the home you’re living in, you typically won’t receive any capital gains if property prices rise. While your unit may appreciate in value over time, that additional value usually goes to the village operator, not the resident or their estate. Yet, some contracts leave residents open to liability for capital losses, if the price of the unit falls.
A few operators now offer a portion of capital gains to residents (or their estate) when they vacate their unit and it’s on sold. Make sure you’re clear on how your contract deals with capital gains. Particularly: are you entitled to a percentage? And, if the unit value goes down, will you be liable for any capital losses?
The fine print: fees & costs
Moving into a retirement village isn’t just about the upfront cost.
There are ongoing and exit fees to consider:
- Deferred Management Fees (DMF): This is a percentage (often 20-30%) of your initial payment, deducted when you leave. Some contracts accrue this fee over time (e.g., 6% per year for five years), while others apply the full amount from the start. Make sure you understand how this is calculated.
- Weekly fees: Covering services like maintenance, insurance, and communal facilities, these fees can increase over time. Some villages promise fixed fees for life, while others retain the right to increase them periodically. Check what, exactly, your fees cover and if your contract caps these fees or allows them to rise with inflation or operational costs.
- Exit fees & capital repayment: Some villages require you (or your estate) to continue paying fees after you leave until your unit is resold—sometimes for months or even years. If the unit takes a long time to sell, it could mean your estate is left waiting for a refund of the initial investment.
Maintenance & repairs – who pays?
One of the biggest surprises for residents is that some contracts require them to pay for repairs or replacements of appliances and fixtures they don’t even own! This can include ovens, plumbing, or heating systems. While some villages cover all maintenance costs, others make residents responsible for certain repairs.
If you’re considering a village, ask:
- Who is responsible for fixing broken appliances or fixtures in your unit?
- Will you be charged for maintenance of communal areas?
- Are there additional costs for emergency repairs?
This issue is a focus of the Government’s review of the Retirement Villages Act, which is ongoing at the time of writing.
Can you have visitors? Pets? Personal touches?
Retirement villages have rules about what you can and can’t do in your unit. Some contracts limit how long visitors can stay, and others may have restrictions on pets, personal gardening, or even decorating your space.
For example:
- Some villages only allow guests to stay for a set number of days.
- Others may charge a fee if a guest stays beyond a certain period.
- Pet-friendly villages exist, but restrictions on size or breed may apply.
- Gardening enthusiasts may need permission before making changes to their outdoor spaces.
If you love hosting family or have a beloved pet, make sure you choose a village with policies that align with your lifestyle.
Continuum of care – a common misconception
Many retirement villages promote a “continuum of care,” meaning you can transition from independent living to higher levels of care if needed. However, this isn’t always guaranteed. Availability of care services often depends on space and assessments.
Key questions to ask:
- Is there a guaranteed place in the care facility if you need it?
- Do you get priority placement over non-residents?
- What happens if only one spouse needs higher-level care?
If future care is a key reason for your move, make sure you understand exactly what is offered and whether you may need to move elsewhere for advanced medical care.
Making the right choice for you
Retirement villages can offer security, community, and convenience, but they’re not for everyone.
Here are a few final tips:
- Talk to current residents: They’ll give you honest insights into village life.
- Read the contract carefully: Consider getting legal advice before signing.
- Think about your long-term needs: A village that suits you today may not meet your needs in ten years.
- Compare villages: Visit multiple locations to find the best fit.
Retirement villages are popular for a reason, they’re the ideal set-up for many retirees. Just make sure you do your homework first to find the right fit for you!
Keen for a prosperous and worry-free retirement?
They know that people spending in retirement require significantly different strategies to those who are saving for retirement. They manage retirees money a little differently to people who are saving for retirement. The reason for that is they have to make sure retirees savings last.
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