Retirement village residents who need to move into long-term residential care but are not eligible for a care subsidy now have access to a Crown loan agreement.
The Ministry for Social Development has developed a bespoke loan agreement to enable residents to access the residential loan care scheme.
People moving to care from their own homes in the community are able to borrow against the value of their home to help fund their care. Until now retirement village residents with a Licence to Occupy a village unit, who then need to move to a care facility run by another operator, have not been able to borrow from the Crown to cover the costs of transferring into care. This is due to the resident not having an interest in the land on which their unit is built, and therefore no security for a loan.
When a resident ends their Licence to Occupy and vacates the unit they become entitled to repayment of their capital, less a deduction. Those proceeds are usually repaid when the operator has found a new resident for the unit bring vacated. Under the new type of loan agreement between MSD, operator and resident, the village resident assigns their interest in the proceeds of their Licence to Occupy as security for the loan from the Crown.
Each village operator must review the loan to ensure that the general terms work with their unique Occupation Right Agreement offering. An important requirement for operators is to check that the resident’s proceeds from their License to Occupy have not already been assigned.