Living in a retirement village: what you need to know

Webinar two-part series

Living in a retirement village offers a great lifestyle for many people. However, it’s a big decision and not as simple as buying a house. There is a range of important things to consider; personally, legally, and financially. Let our experts guide you through what you and your family need to know so you can be sure you make the right choice.

Thinking of living in a retirement village: Webinar part 1

Thinking of living in a retirement village: Webinar part 1

  • Part 1: video transcript

    [00:00:04] Okay, welcome, everybody. This is Troy Churton and from the Commission for Financial Capability. And you have joined us for thinking of living in a retirement village, the first of two parts, and make sure you come again at this time tomorrow. There's quite a lot of information, and that's why we split into two parts.

    [00:00:23] Joining me today is my guest, Maggie Owens. 

    [00:00:28] Maggie has been a stalwart of the retirement village industry for 30 years, as previously a formerly a director with BUPA and a past president of the Retirement Villages Association, a wealth of experience that Maggie brings. And I'm extremely grateful for her time. So the target market of this seminar, I know looking at the list is a lot of very experienced people joining in today. But the target market, of course, is intending retirees and their families. And the purpose of a webinar like this is to help you get alert to the implications of becoming a retirement village resident and to help you make the decision whether being a retirement village resident is the right thing for you to do or not, because as we'll see over the course of the two webinars, the implications of getting the decision wrong grow over time.

    [00:01:13] So slow down, find out as much as you can at the starting end and make the right decision first time up. So today, what we're going to do is look at some of the trends, some of the legal framework, find out who's in the industry, look at what retirement village operators are actually offering, what you're buying, and start to look at the clear proposition as well. Tomorrow, we're going to dive into more about the legality side of things, more about the financial implications, and look at a case study of somebody weighing up whether they should move into a village or not and how it could affect them financially. Now, for all you folks out there, if you've got a question during the webinar, please do. I've got Paul and Nick and Kate as the production team behind the scenes. So thanks to them, you can click that little icon. You can see the question mark, which should then take you to something that looks like that and enter a question. And remember, if you want to post your question anonymously, click that little box, which says post as anonymous, and then click the dart. And that should be sent through. And we'll stop every now and again as best as we can to take questions. And I should say, if I can't fit questions in we'll make the effort to to publish the questions and some answers to them on our website later on, because we've only got 45 minutes.

    [00:02:31] So very briefly, the Commission for Financial Capability, sometimes known as the Office of the Retirement Commission, that deals with a number of things retirement income, policy, financial capability of New Zealanders, but also has quite a specific mandate under the Retirement Villages Act, in which we monitor the effects of the Act, the regulations and the codes of practice, we'll talk about later. But why is this important? Because almost 14 per cent of 75 plus year olds in the country now live in retirement villages and looking at the demographics and the aging population, if you hold that 14 percent penetration rate steady, it means against the aging population chart that the number of retirement village residents is going to at least go up by 50 per cent in the next decade and probably double over the next 20 years. So for people have already chosen to become villages in terms of education and information. We can't help them as much. But for intending residents and consumers today, we can certainly do our best to help them make the best decision. If you are going to become a retirement village resident, you are going to become part of quite a unique industry. And it may pay you to know that there are some other players in that industry other than the retirement commissioner's office and the functions that we have. And those include the Ministry for Housing and Urban Development is now the government department responsible for the regulatory environment and potentially reviewing policy to do with the regime.

    [00:04:03] If you've incorporated a company before, you'll notice a company's office registrar well there's one for retirement villages as well. And that's quite important because point one, if you are looking at a village, you absolutely have to know that the village is a registered retirement village because the registration gives you the consumer protections under the statute. And I know there are a lot of marketing campaigns out there with loved up silver haired people walking on the beach and they're promoting lifestyle subdivisions. But are they actually retirement villages or not? So there is a registry that you can search through the company's office website to get to retirement village specific registry information. And you can go on that site to find out every registered document for any village in the country. The registrar also has some quite useful powers in terms of enforcing operator responsibilities under the Act. The Financial Markets Authority is important because it licenses the next regulatory type of person, which is called a statutory supervisor. Maggie and I will return to that role shortly. The Retirement Residents Association is a growing body of residents from around the country and a very important lobbying voice and policy influence for the development of the industry. But Maggie time for me to shut up and you to come in and tell us about the Retirement Village Association, as well as what it does and why it's important.

    [00:05:29] Yes, so the Retirement Village Association represents the operators in the industry and it represents a very, very large number, more than 90 per cent of the industry. But what it also does is ensure that its independent accreditation of the villagers and that actually there's a whole lot of ways in which we assist and support our members to do the right thing by the residents, which includes things like, you know, a mentoring committee to help resolve any issues that the residents have and just to ensure that the industry, you know, lobby it has good consumer protection and it works with the stakeholders like the retirement Commissioner to ensure that the outcomes for residents as they should be.

    [00:06:16] So almost like an extra layer of quality assurance and the independent audit that you mentioned, Maggie.

    [00:06:24] Yeah, that results in my right and a certification that RVA members display.

    [00:06:30] Yes. So there's a certification. You can look for it. It should normally be on the door of the retirement village that, as we've said, is independently assessed. And it's a requirement of all members of the Retirement Village Association that they have their accreditation as a sort of a quality mark for the standard of their service in the operation, for instance.

    [00:06:55] So I talked earlier about the act providing consumer protections. I just really want to gloss over a few of the key ones. Now, registration, as I mentioned, gives you the consumer protections under the Act. If you are buying into a lifestyle village, which is not a registered retirement village, then your rights will be a common law. And under property law, depending on what you've actually bought. And more often than not, what I've seen is that people have simply bought a unit titled a subdivision and have no no greater rights other than their normal land owning rights under that statute. But for every registered retirement village, the law requires them to have a memorial entered on to the certificates of title for the land on which the village sits.

    [00:07:38] And that's an extra protection for consumers because it gives notice to any creditor that if the creditor needed to exercise its remedy, say if the business of the village was getting into trouble, it would have to go through a high court application process, by which time you can bet the next thing on the screen that you can see the statutory supervisor would be involved. And statutory supervisors, as I mentioned earlier, are licensed by the Financial Markets Authority. So they carry quite a high professional responsibility reporting to the FMA on what they do. But their primary role is really to ensure that the financial interests of the residents, the community of residents that is in the village are adequately protected at all times. That's the primary role. They do become involved in the little niggly stuff that some residents might raise in conjunction with dialogue with the operator. And they do have other types of powers. Other things about the supervisor that you want to add at this stage Maggie?

    [00:08:39] Well, I think it's really good that the residents know they can approach the statutory supervisor, that all those details are always in the village. And while they are looking after the group of residents as a whole, they they are really interested in the outcomes for each and every resident. And it is their job to ensure that they are adequately protected and that they looked after and all the things the operator claims they're going to do are actually follow through and done.

    [00:09:06] But and I think reflecting the reason why this is important is because, as we've discussed throughout tomorrow, mostly for the great majority of Occupational Right Agreements which are licensed to occupy modules, you the potential customers are going to be paying a large sum of capital for no title in return for a licence. So if you think about the amount of money you're spending, you want to do so under a framework that gives you the confidence that your investment is going to be adequately protected. And so the statutory supervisor is one of the consumer protection tools to give you that confidence, another consumer confidence tool, if you like, which is almost unique in New Zealand. More states in Australia are coming awake to this, but in New Zealand, you just can't sign up to become a retirement village resident, until you go through independent legal advice and have the implications of the Occupational Right Agreement explained to you and the general effect of those documents explain to you, so there's a lot of emphasis on you, the consumer, to get it right at the front end, you might be picking up that message. And that's something that we at the commission are very strongly trying to make people aware of, that you do need to take your time and understand all the effects of this documentation and get it right personally at at the front end, because it's the very disclosure led. The four key documents. Just briefly, for those of you who are active investors and look at prospectuses of companies offering shares, well, retirement villages have a disclosure statement which does the same sort of thing. It's a like a prospectus which tells you a bit about the business of the operator, the business of the village, the nature of the village, what it contains, what the facilities are. The state of completion of the village would indicate to you what your capital return would be should you terminate after two, five or 10 years, that sort of thing.

    [00:11:02] Anything else about disclosure statement? Well, I think I think to anyone that is an investor, it is similar and it has grown out of that previous regime. And these are the sort of things also that the lawyer will look on behalf of the resident so that not only are you looking in potentially your family members online, but also you've got this list with those different eyes and looking at the disclosures and.

    [00:11:28] Absolutely. And the solicitor by law has to specifically go through the next disclosure document, which is the occupation and write agreement itself, which is actually the contract that you will sign personal to you, you and your spouse and the operator. And it doesn't matter if your wealth is buried in trusts your solicitor can easily insert a clause into the Occupational Right Agreement with the operators consent to indicate that the finance for the transaction will be coming from the trust. And then later on when you pass on, because usually folks are saying it somewhat soberingly, this whole arrangement is designed to be your last property transaction. Really? Really. So the clause would say that at the end of the of the transaction, finance goes back to the trust. Very easy, simple thing to deal with. And the lawyers are good lawyers will know how to deal with that, that there is a code of residents rights, which is a high level two page type of document. Thou shall not be exploited. That has the right to be consulted, to be informed, to be treated fairly by staff, et cetera. And then there's the code of practice itself, which is a set of minimum standards, operational standards that operators must at least meet. And what you tend to find nowadays is that more and more operators in their occupation right agreements are setting duties upon themselves that exceed those minimum standards that the code in place. But the code includes standards, for example, on what the minimum process for complaint making should be or what the minimum standard for reselling or re disposing of the unit should be and that sort of thing. It's important to know, though, that the code is contractually enforceable by you, the resident, so that if there wasn't a term and an Occupational Right Agreement or the term and the Occupational Right Agreement imposed a lower standard than the code, you can still enforce the code against the operator. Maggie from the summary of key terms because the disclosure is a big bundle of stuff.

    [00:13:27] Yes. So sort of following on from that, I think you will have imagined, even if you've never seen one, when it comes to a disclosure statement and an Occupational Right Agreement, they large legal documents. And while they written and it's possible with plain language, you know, they are big and complex. So the industry, together with the commission, have designed a key terms summary. And the idea is that the basic information like it, like an executive summary or an appendix is laid out in a couple of pages. And the idea is that everyone in the industry uses the same kind of template so that if you look at three villages that are in your suburb, you can look at the key terms summaries for all of them and compare. And you can also quickly pick up the key points of the offer to you as a potential resident by looking at the key terms summary without going through the 80 or 100 pages of documentation that will sometimes be included in a disclosure statement and an ORA, which is the abbreviation for the Occupational Right Agreement.

    [00:14:38] Yeah, so. So that's good to know. And for people tuning in, if you've got access to a website, Internet on our website, this little demonstration put together by the wonderful Kate Reddington of our office tells you how you can find where these resources are. So we've got a resources web page within the retirement village section. And if you scroll down, there's a lot of good stuff there. You can see. You'll eventually get down to there retirement village summary of key terms, and there's the RVAs logo at the top. I'll just say that again Retirement Villages.

    [00:15:15] Resources. Brings up a new page.

    [00:15:19] There it is, resource page. Well worth spending a lot on that page.

    [00:15:24] Scroll down, some videos, some downloads. But there it is RVA summary of key terms, template download.

    [00:15:32] Really useful to have a look at that. If you want to focus your mind on important terms that have financial implications especially. And we're going to cover financial implications more in tomorrow's session. So that might be a chance for any Q&A. I don't not seeing any come in at this stage, so I'll keep coming and going. Maggie and if Paul comes across any I don't see any posted at this stage. He might just look them up. So this is a good time.

    [00:16:03] Maggie, let's just talk a little bit about what Retirement Villages Operators are offering. Can you talk a little bit about the difference between different types of operator? Sure.

    [00:16:12] So the first thing to realize is lots of variation. So there's everything from large, large complexes to small. They are in the metropolitan centers. They're in small suburbs. They're in provincial areas. Some of them have very, very large community facilities of swimming pools and quite grand, large hotel style community centers. Others have quite simple little clubhouses or and then these villas, which is a sort of on the ground little house, and there's apartments and then there's service department. So they days with the cost of building, particularly in the metropolitan centers. Apartments are quite common, but really so we've got large and small operators. We've got a publicly listed companies, we've got not for profit operators. We've got sort of small and medium businesses that are offering villas, apartments and serviced apartments and a whole lot of locality's right through the country.

    [00:17:19] So a big question and a face to face environment get is what's the difference between independent and serviced apartment?

    [00:17:26] So a service department is for someone usually who who needs a little bit more care so an independent apartment won't have a whole lot of care attached to it or services really. There will be a standard set which comes with a very villa or apartment.

    [00:17:45] A serviced apartment will have extra care orientated services like maybe cleaning, laundry, and usually something like one meal a day.

    [00:17:56] So is it more in the nature of the typical home help care? We're not talking care here as in hospitals.

    [00:18:02] Yeah, and full time residential, you know, so we're talking about the the kind of services that you can get in from the community, probably home support for cleaning, perhaps laundry, but not always. And that sort of happens once a day. And then usually there's a meal offering, right. Of at least one meal a day. Yeah, right. And usually the environment a wee bit smaller, often one bedroom.

    [00:18:29] So so is it. My understanding is some operators will make sure that the costs of that home support, care or any other home support services will be provided by the operator of charge to the operator, preventing the person from using say government provided home health care type services that happen in some it does.

    [00:18:51] It is quite OK to access those services from the community, just like you might have done before you move to the village. Yeah, and that's one thing you actually should inquire about. Are you committed by moving to that particular village and only taking that care service from the complex, which could be an additional cost for you, rather than using that entitlement that you might have in the community? Yeah, but like we said at the beginning, lots of variation, lots of flexibility, lots of different things. And the key point is that you inquire closely about the one that you prefer as to whether or not some of these things are actually there for you or not. They're for you. And if so, is there any extra charge?

    [00:19:36] So we should take this opportunity to distinguish some of the service departments which offer a level of home help care or services.

    [00:19:42] And then around 70 per cent of all retirement villages nowadays have co-located on the same site a care facility. And there are different types of care for that facility, right? Yes. What are those?

    [00:19:55] So so I think it's quite good to describe what we've just been talking about as services. Yeah. And then care as like we're talking about age residential care, where you have to qualify due to need and frailty. And then you live in a and you're in a home which provides you with the care that you need and that care can be rest home, which is quite low level care, where you only need some assistance, hospital level care where you're going to need assistance from at least two people for walking and just the activities of your daily living, there's services that relate to dementia and then specialist dementia where you have physical frailty as well as dementia. So all of that will, could be on the campus. That includes the retirement village, but it is a separate entity and a separate business. But as a resident of that community, you may well have access to it, but it's not. It's a care offering. It's not a retirement village as such.

    [00:21:04] We'll move to care a little bit later. We're going to be pushed for time a bit. But just quickly, entry any any tips about entry ages?

    [00:21:10] So some facilities have guidelines about the entry ages and the and they're anything from really usually sixty five to seventy five and sometimes a little bit younger and the more lifestyle orientated villages. But one of the reasons for that is because the community around a retirement village with a care facility has a different look and feel. And as an older community. Yeah, and generally speaking, the residents that move there into the village think that maybe they or their spouse might need to access that care one day. And that's what's attractive to them. Absolutely. So so there are some sort of age guidelines for some. And that's something that you need to ask about and usually will be between 65 and 75 years for the age of entry.

    [00:22:04] Very quickly, in terms of the most common reasons people choose retirement village living, ultimately, what would you say?

    [00:22:10] Well, it's a security, its like minded people. It's the fact that they are protected from a lot of cost increases in the community, particularly in rates. People can be really lonely living in a little unit, maybe not much family around. They don't see too many people. So most people are looking for security, companionship, a bit of a hedge against loneliness, the ability to be around like minded people and future care needs taken care of and some sort of a plan.

    [00:22:43] What I've heard is most really seen actually, as most residents have come from within around 10k of the area they've lived in and anything about the design of the village, which is people should be considering as well.

    [00:22:56] Well, I think, you know, for instance, if the resident has decreased mobility, you need to look at how far is it from your apartment that you might be shown to the community center. How easy is that for people to visit? Can you park your car? You know? Do you have a garage? Maybe if you're looking at a villa. So I think you're going to say, what are my current physical needs and my needs for socialization and community? And is it going to be easy day to day to get about? And are things close to me?

    [00:23:31] And and if something's a long way away and you have difficulty managing stairs or, you know, moving for any distance, then maybe you have to wait for something a little bit closer to the community center, for instance. Yes. And just make sure that you can get about and that day to day life is going to be practically easy for you. But you will always have elevators, of course, and multi-storey buildings. And generally a whole lot of things to do with disabilities are taken care of in the design.

    [00:24:04] Excellent. Some practical tips there. We are some dogs and cats up here ruff ruff. Before you decide to buy. So a number of villages, aside from the disclosure stuff we talked about earlier, a number of villages have additional rules specific to them. And on the common query we get, as can I take my pet. And incredibly, a lot of villages do allow pets, but there may be a rule that says, well, OK, you're allowed to Alsatian when you came in at the age of seventy five, but your Alsatians dead. You know, I thought you may not be allowed another Alsatian. There may be a restriction on just how many pets you can bring in or the time in which you can bring in a new pet commitment. So check if there are other village rules. Another one I think I've seen, which was quite interesting, is that not hanging your laundry out on the balustrade?

    [00:24:47] Yeah, I think the point is look at what the rules are in the village that you're interested in.

    [00:24:52] Another thing which I've seen and the previous position of meeting a lot of residents and a lot of villages over the last five and a half years is the importance of a residents committee. And the code of practices that every village is allowed to have a resistance committee and not all villages do. But it seems that the residents in villages that do have a residence committee have a very buoyant lifestyles. My anecdotal observation.

    [00:25:15] The presence of a residents committee, I think, is important because consumers of all types, but particularly if you're in that vulnerable category that some people say the elderly is, there's a continuum where at one end you may be if you know yourself, you may be quite passive, introverted, not willing to engage or make a fuss about things that annoy you.

    [00:25:37] And on the other end, you might be more extroverted and outspoken about things that annoy you and are prepared to make complaints and that sort of thing. But if you know where you are on that that continuum and if you know honestly that you are at that more timid or introverted end, then maybe the presence of a residents committee is something that will be important to you because there isn't a committee apart from usually arranging social stuff and hobby stuff has a specific right under the code of practice to call meetings with the operator or a supervisor. And so de facto, they become a little bit of a voice for the residents for issues that may be niggling residents. And so I would suggest if you are looking around villages asking if there is a committee and in particular asking to speak to somebody who's on it and finding out about how they get on with management, because that relationship with management and residents seems critical, right?

    [00:26:32] Absolutely. And actually, the Residents Committee can be quite a help to the operator and kind of and also they're a mouthpiece for the peer group as to what, you know, running things past them. You know, agreeing changes. Yes. Looking at downstream effects of some things that operators might be intending to do if they are really important part of the operation of a successful village.

    [00:27:00] A third practical tip is to look at whether there are any future development plans that a disclosure statement should talk about the state of completion in the village. You've found a unit overlooks a petanque court. It's in your interests, obviously, to find out if the operator is eyeing up that petanque court for a multistory apartment block at some stage in the future. Maggie just quickly operators they retain a general development right, don't they?

    [00:27:24] Yes. And and so over time, things can change. So the village may be fully developed, but then the neighbor comes and says, well, would you like to buy my house? So that might make another development possible they hadn't thought of before. And the other thing is that villages last forever. And so at a point, the operator will be required to update and modify old buildings and maybe even replace older buildings that are actually within the village environment and on the village land. But the point is that these there will be disclosures made about any alterations to the policy development with the statutory supervisor initially and then with the residents.

    [00:28:08] Excellent. So ask about future development plans. Have a look at the disclosure statement. Another important point is looking at the long term maintenance plan. So so every operator is required to have a long term maintenance plan. I've been with intending residents, I'm glad to say, when they've been looking at units in a retirement village and I've seen this, the starry eyed glaze that some of them have had looking at their unit, freshly painted new curtains, fresh whiteware, it's a wonderful transition from the family home, perhaps. But the point I would encourage people to remember is that when you're buying into a village, paying for that capital, you're paying for more than just the unit. You're paying for access to all the common facilities and amenities of the village. So you want to be looking beyond that glazed affecting unit at the quality of the environment and notice things like the spoutings and the driveways. And Maggie talked earlier about the mobility and access around the village and how good and what state of repair all that amenity is in. And if you think that things are looking a little bit depreciated or unmaintained, then it would be worth asking the question of the operator about its long term maintenance plans for the village and what's going to be spent when in the coming year or two, so that you can get a sense that some of the things that might concern you are going to be addressed or not and make your decision from there. So for more info on pretty much everything that we've spoken about so far and the checklists, I strongly encourage going to our websites. Both the CFFC website and the Sorted website have checklists. Earlier you saw when we were looking at the key terms summary, a page of resources, which has a whole range of checklists and things that are designed to help you in your decision making. Let's move on to if circumstances change.

    [00:30:18] Do we want to look at that question? Do people OK? We do have a quick. Do people pay extra if they have to move to frail dementia care where we already coming into that topic now. So we are without so I've I had suggested to any consumer who is in their 60s seventies or even 80s, looking at a retirement village that is important to ask that ‘what if’ type of question and it's an ugly one to have to confront. But it's the what if I did have a health-related incident in five or six years’ time. that rendered me less mobile or rendered me in need of care, what would be my position? What would be my rights? What are the options for transferring within this village? So Maggie thinking about circumstances and change that change. Can you talk a bit about the ways that retirement village residents could transfer into their different type of care? What's involved?

    [00:31:16] So firstly, a retirement village residents who has care on their site can transfer to access that care. They would need to be assessed as requiring it, and I think that's something people don't usually know and understand. And then they would you would need to speak to the individual operator about how you transfer into that care, but for most operators you would transfer when you needed to and then your residence. Your house or apartment would be held maybe for a little while in case there was a opportunity for you to return to it because sometimes after a period of respite care you can return.

    [00:32:01] But if it was clear that you weren't able to return and your future was living in the age care facility then you would sell your unit or apartment and then those funds would be held for you in a way just as if you had sold and moved to another town. But the way that you pay for the care is different in the age care facility, then it is in the village. And for most of the time you're paying a weekly fee, a weekly rental fee if like for the care home room and you're not paying a capital sum you do pay a capital sum if you look at the graphic on the right hand side there. If you have a care suite so that's an option.

    [00:32:55] But that would depend on the level of care and the availability in your particular village. But to most villages, 70% of them that have care on site you would be enabled to access that key when you required it, and then the selling of your house to the next resident or the re licensing would be taken care of by the village staff in conjunction with you and your family.

    [00:33:25] And of course, if its a couple, yep. And one of them is, the couples need to be assessed and has to go into a care room. The remaining healthy one stays on. Yes, still paying the weekly fees. Yes, they stay on just like they would if you were at home in the community and one of you had to access care. So in that situation there’s greater chance that the needs assist one would have to apply for a residential care substance.

    [00:33:55] Yes, part of the process of entering aged care would be doing that anyway, and some people will qualify and some people won't. And WINZ are very good at going through that with individual people and working out how you're going to finance it. And so are the staff in the age care facility who are doing that with all of their residents at some point. So there's various pathways in which you can access the funds required to pay for the care.

    [00:34:27] And also protecting the fitter partner who remains in the retirement village unit. But if think of that like that fitter person remaining in their own home, it is very similar, yeah? We this graph is really just trying to distinguish what is quite a complex thing to get your head around sometimes is that it's possible for retirement village residents to transfer between units during their time in the village.

    [00:34:55] And if they're in a serviced apartment, that means they may not have to move anywhere, because they can make it needs assist levels of care by staying put but they can also. Some people do choose to enter into a fresh occupational right agreement for a grander type of care room called a Care Suite.

    [00:35:14] Yeah, so a care suite which is like a one bedroom serviced apartment or one bedroom retirement apartment but here under the care home care is delivered into that space. And for some people they may never have to move beyond that.

    [00:35:36] And so that's kind of something fairly new, and it works really, really well for people, but it's not available everywhere. So again, you'd have to inquire into the pathways to care for your particular village that you're interested in. That's a really important point. Shortly will show you a tool which I think is really important for people who are attracted to retirement villages because of the potential to access care that they should look at this tool and will come to that in a minute. One other thing putting aside care suites, which I know some operators are promote heavily.

    [00:36:12] Some of the care rooms and these facilities in that are co located on site have standard rooms, some have premium rooms so should people at the front end who are interested in care find out with a standard rooms are available or not. Yes definitely, this is something that you should think about when you're entering the retirement village.

    [00:36:31] You may never need it, but what you need to know is does that care provision on the site that you're looking at include premium rooms because a standard room is the size that has to be for a baseline care.

    [00:36:48] Remembering that the care itself does not vary. The care will be the same, but the environment that the care is delivered him will be either like the minimal standard required or if it's larger you may need to pay extra. So it's a bit like sitting in the back of the plane and sitting in the front of the plane. If you're in the Koru club, you get some extra things, larger windows maybe? Bigger space, a little bit more vista or something that makes it extra special, but you are paying extra for and that's the part that you need to understand before you need it, because when you will need it, you'll be frail and you'll be probably be unwell and so that's not the time to be considering that option. Absolutely, you should be considering that back before you need it so that you are the one that is making the decision, and it's not something here to do in a hurry after you have sort of fallen down the stairs and ended up in hospital. And I would recommend at least leaving your children know of your adult children of these sorts of things as well, 'cause it's certainly where I sit the number of calls that we get from children who hadn't realized that there was an additional daily charge for premium room and whether that $20 a day or $80.00 a day that can be quite significant financially.

    [00:38:12] For some people, particularly those who might have moved into a village and not left enough equity to be a buffer to supplement their superannuation. So I mean no one size fits all but just generally a good idea to discuss the implications of moving into care one day in the future and understanding of what your options are before you make the decision to go into a village. If the offering of care that villages make it as something that attracts it to that village.

    [00:38:40] So I talked about a tool and the graphic you can see takes you to that same resource is page earlier. And now we have a Lightspeed type of graphic from memory that takes it Down to the resources page. There it is. Down in the same area at the retirement village summary key terms is a bit lower down under Care and Assitance, ‘Bing’. Disclosure guidelines for transfer to care. That document is information that retirement village operators offering care are now using as guidelines for what they disclose to you, the consumer.

    [00:39:21] If you're looking at a village, it offers care suggestion that we would make is have a look at that set of guidelines to help inform you about what you want to know about your access and your rights to care. One day in the future should you need or want care and co-located site. So that tools on our website as well. So on the RVA's website, A best practice guidelines to disclosure of information about care.

    [00:39:50] Another really good source of independent information about care. Because the Commission, I should say, is not mandated to monitor the care facility industry. It's under its own regulatory regime. We are mandated to monitor the retirement villages regime, but overtime with more and more villages offering care, there can be some confusion that perhaps the retirement commissioners office is responsible for monitoring care. And we're not. But Senior Line is a great advisory service that's pulled together by the district health boards with an 0800 number.

    [00:40:24] And some very experienced advisors. And Maggie who else would you suggest is for general information about care and care facilities? Yeah, there's a great website that actually called ElderNet, which actually tells you about availability because another thing that sometimes trips people up is that occasionally you can't just sort of move into this slowly.

    [00:40:52] Sometimes the Frailty and the need happens quickly. And if that's the case, you can be sort of scrambling to find somewhere, so that's where ElderNet is particularly good, because it has on a daily basis that will update availability and it will tell you whether the service that you need to access is actually provided at that location. And this is something that members of the public just don't really get their head around because I don't have to. You don't really want to know about this sort of thing until you need to know or tell your family member needs to know.

    [00:41:29.057] And a lot of members of public assume that every care services on every site. For instance, Dementia, Hospital, rest home and specialist dementia, but that is not the case, and so you'd need to say firstly what level of care is my loved one being assessed for and is that level of care available at a particular facility? And then as there availability of that level of care on the day that I need it?

    [00:42:00] And Troy mentioned the guidelines. The guidelines are there because this is complex, it is not straightforward and were just trying to kind of find ways of helping you through it if and when you even needed it. And obviously you don't want to be overloaded with a lot of information for a service that you might never need, but if you needed it quickly and you're planning on looking at a village, this is something you really should understand how your preferred village would deal with the situation if it came up for you or for somebody else.

    [00:42:40] Thanks, Maggie and look we're going to stretch for five minutes at the final five to take some questions. And just to highlight and remind you. Come back at 10:30 tomorrow for part 2 when we dive into financial implications and look at some case studies and things of that nature and more about some of the legal terms. But there are some questions that have come in. I qualified by age 66 at a village we've looked at, but my wife doesn't, 61. Is there a way round it. In the real world. partners are different ages and what operators will normally do is if there one of the couple is “age qualified” then they will admit that couple they can become residents. But the point is, pose the question to that particular operator. In this particular situation and they will give you a straight answer.

    [00:43:39] Yeah, if I'm purchasing a care suite do I incur the risk of two DMF or DDMS at deferred management fees or fixed deductions percentages of the capital that's the purchaser pays. yeah well what you would do is you would sell the first one, so if you were going into a care suite from a retirement village unit, you would sell your retirement village unit entitlement to another resident and then move to the care suite or move to the care suite and then sell it. There would be no point in holding on to two unless of course you had a spouse in the other one. And then there's various financial mechanisms that can be used if you get yourself into that situation But yes, so if you had a spouse and you move to a care suite, then there would be 2 DMFs in that family. In that case I would encourage it with your lawyer to look at the specific terms of how those DMFs might be charged because it does differ between different operators, some operators do an apportionment at the end of your time altogether, rather than draw down the DMF at the time of initial transfer. So very much a point to take up with the lawyer on transfer.

    [00:44:59] And the other two questions are almost the same. What happens if one person in a couple needs higher care and the other person still independent? And we kind of touched on this. So it's the principle is that you do have to pay to access the care here. And some people think that if you buy your retirement village unit then that's your ticket to ride through all the stages That is not the case. So in principle it's a capital sum for your retirement village apartment and it's a weekly rental for like for the care. Unless you're in a care suite where there's a capital sum. So that's the kind of variation So the principle is you have to pay somehow. And you could make inquiries both would before you move to the village and at the time how it would work for you in your particular situation in for each level of care you'd have to access there's a different charge. So obviously if you have access, a higher level of care, it's a bit more expensive.

    [00:46:01] So just quickly more information through those portals there. The website and 0800 number a booklet which is downloadable from our website. Orderable if you like hard copy through our Sorted free resources website. Just a reminder tomorrow. 10:30 start part 2 we're looking at the LTO model. The license to occupy that stands for and the financial implications in more detail and will finish contrasting the case of a widow who is wondering whether she should sell the family home and go to the village or stay in the family home or whatever options maybe.

    [00:46:41] Hey, thanks very much for joining in today. Thanks to Maggie and will see you at 10:30 tomorrow. Bye.




Thinking of living in a retirement village: Webinar part 2

Thinking of living in a retirement village: Webinar part 2

  • Part 2: video transcript

    [00:00:09] So welcome back to all those who joined in yesterday. I'm Troy Churton from the Commission for Financial Capability. And next to me is Maggie Owens, who's had 30 years of experience in the industry and formerly a director of BUPA and a past president of the Retirement Village Association. So just to remind you that this is 'Thinking of Living in a Retirement Village' targeted for retirees who are thinking of living in a retirement village. Yesterday, you'll recall we covered off the reasons people look at villages as a former type of accommodation, looked a little bit of care and some of the intricacies of transferring across from village units into care. Today, we're going to dig down a little bit more into the license to Occupy model, talk a bit about how it works, the financial implications of that model and round the session off with a case study example of a widow who's considering whether to stay in the family home or move to a village. So that's hopefully going to fill in the next 45 minutes. And as usual, with housekeeping on these webinars. Just a reminder, if you want to send a question through, we've got Paul and Nick behind the scenes as our producers today.

    [00:01:22] Just click that little question mark, which should take you to something that looks like that, where you can enter your text question. Remember, on the bottom left of your screen, you can tick post as anonymous if you prefer to remain anonymous and then click the dart on the right hand side and it'll flow through to the producers. And we will make time to try and get through those questions and answers as best as we can. But if not, we'll make sure that we publish stuff to our website anyway. All right. So where we left off yesterday after looking at different ways of transferring to care, was signaling that we wanted to talk a little bit more about the occupational right agreement itself, which is a type of contract. And there are subtypes of occupational right agreement and the most common occupational right agreement, Maggie, is a license to occupy. So let's pick up by just clarifying, you know, what are the key features of that license to occupy contract.

    [00:02:23] The point about a license to occupy is that the operator owns the land. So one of the essential differences is that you have the right to occupy that unit for you and your partner's lifetime. But you don't have any interest in the land. That's held by the operator.

    [00:02:46] You have a very clear contract which says that you will leave behind a portion of the money at the end and then you'll get paid out when, you know, usually when the the unit is relicensed to another resident. So the key differences are that you don't own the land and that there is a deferred management fee. There's like a contribution taken at the end of the tenure by the operator.

    [00:03:17] So if a resident was living in the village and they wanted to go on a European trip for six months, could they rent it out?

    [00:03:23] No, you can't. Generally speaking, no.

    [00:03:27] And if you wanted to go away and like a relative, you know, you wanted to stay for a shorter time or a relative was visiting from another country, then you would talk to your village manager about that. And within reason, you know, that would generally be agreed, but it is not the same as, you know, where you live now. If you live in the community and you own your own home, you have the right to rent that to anybody you like.

    [00:03:56] But actually in a village that's not, for I think for pretty obvious reasons, that's not allowed in general terms. But we can work around the edges of that for individual circumstances. So the Retirement Village Association has told us before that around 95 percent of the occupation right agreements in villages are fruitless license to occupy model. But that other five percent cent, most likely unit title type arrangements. Yes. And in comments about unit title arrangements.

    [00:04:27] Yeah, well, there are unit title arrangements and these sort of body corporate arrangements as well. And I think if you're interested in a village that has that type of tenure, then you need to make inquiries about that. And your central inquiry is once you understand kind of how, you know, most retirement village structures work, then how is it different? Yeah, and it may well be different, in fact. And you may even have a share of capital gain in those instances. But the main reason that the likelihood is that you need to know, is that a registered retirement village or not? What is the 10 year? How is it different? And what are your rights and obligations and the rights and obligations of the operator?

    [00:05:13] I've got to reinforce that, especially with unit title arrangements. There are a number of unit title arrangements through occupational right agreements in some villages around the country. But remember yesterday we talked about, you know, 101, check whether what you're looking at is actually a registered retirement village because that brings that consumer protection that the Act gives. And in actually the exits out what an occupational right agreement has to have in it, which is another type of consumer protection. So you'll expect a sense of consistency in the terms and occupational right agreements, whether they're licenses or unit title type arrangements, unit title type arrangements.

    [00:05:51] What I've seen are just a bit more complex and falling out of favor with operators by and large.

    [00:05:56] And of course, we'll also talk about the place that you are lawyer plays in your decision. And we're coming onto that. This is where they are a very, very strong help to you in making your decision about what structure is right for you.

    [00:06:13] Well, let's let's talk about it now.

    [00:06:15] Maggie, down the bottom of the slide, it says and we again yesterday, a reminder, you just can't become a retirement village resident until you've had that mandatory independent legal advice on the implications of the occupational right agreement.

    [00:06:28] It's a common question around the country. How do people find the lawyer? You know what? Where do they go, is the GP OK?

    [00:06:36] Right. Well, the point is that it is quite a specialized, but retirement villages have spread out right through the country, including in some quite small provincial and rural towns. And it probably is the case that even if you live in a smaller center, that the three or four lawyers in the town who are used to dealing with people. Who have been practiced for a long time, well, know the retirement village structure, and will have probably had other clients who have bought into the local villages. And if they don't, they may actually seek some help and advice from specialists in their own interests in advising you correctly. And you can go to a firm who are more specializing in the area. But I think our experience is that, generally speaking, the resident will go to their family lawyer or the lawyer that's helped them with other, you know, house sale transactions in the past. And generally speaking, they will be experienced because we probably couldn't have said that 10 years ago. Yes, that's right. But there's been enormous growth. And remember that that local solicitor will do a number of these over a year. He'll only deal with or she will only deal with your family once, but they'll deal with others who are looking at, you know, at the same operator and the same offer.

    [00:08:06] So they will be in a position to give you advice about what this means for you. I'd like to add, to compliment that this is an important time of life. We understand this is an important time of life for retirees. Decisions of maybe sell a home or to move into a village often has a trigger event attached to it. And having independent counsel to help you through the documents when some people might be under stress or forced conditions, or have that sort of thing going on in life, is a is a really useful spend of a few thousand dollars for professional advice. And, you know, at the end of the day, what's a few thousand dollars when you are potentially putting your X hundred thousand dollars worth of equity on the line for your next accommodation move? It's an important and serious investment and we're lucky to have legislation that makes it mandatory in contrast to some states of Australia where there have been some consumer mishaps that frankly seem to have happened because there wasn't legal advice on the front end. That slide also talks about how operators see unit titles. Sorry, the license to occupy sales, Maggie, just the perspective of the chain of sales from an operator's perspective.

    [00:09:17] Yes, well well, the operator is committed to sustaining that community for the long term, and they're in it forever. Once that community is established, it will be there forever. So it's in the operator's interest as much as the resident to ensure that that the residents kind of cycle through that facility and that once it's fully occupied, they will attract people, they will have waiting lists, they will be in touch with people who are interested. And they will use lots of ways and means to ensure that there's people interests that are backing up behind the current residents, and then they will have procedures which attract potential residents, and engage them while they're waiting, if they have to wait, and then ensure that they are actually pointed to the right property when one comes available in the estate, if you like, for the retirement village. So really, they see these retirement village businesses as a very long term kind of business. And for it to be sustainable long term, they need to have that approach to things. So it's not like a short term quick fix in and out. It's not like that at all. It's a commitment to a long term sustainable sort of retirement opportunity for that particular, you know, the people in that particular area.

    [00:10:51] And and that's why that second point on the slide you're seeing now, folks, is there because a number of residents that we've met in our engagement over the years seem to think that the money they pay gets held in some special trust account for them. So that's easily accessed by them when they choose to leave the village. But of course, that money would tend to go into the consolidated fund for the villages, the whole, your capital, along with all the other residents capital. And that's why yesterday we talked about the important role, say, of the statutory supervisor who independently looks at the audited financial statements and make sure that the operator is financially running the village and that the appropriately under the residents financial interests are adequately protected.

    [00:11:36] So just to recap, it is important to be upfront about what the risks in what you're looking at doing are. The investment generally is only returned if the operator can relicense your unit, so you will get your capital that you paid, unless the deferred management fee. And we're going to come back to the deferred management fee shortly, but you'll get that capital back to you. In most cases, only when the unit that you've been occupying has been relicensed to a fresh resident. Maggie talked about that, that continuity. So that's a key feature and it's a risk. Its a risk in the sense that perhaps you've got family members, if you pass away, who are expecting quick access to capital, or perhaps if you decide that you want to move on to another village or somewhere else back in the broader community that you want quick access to capital, there is an inherent risk that you may not get quick access to capital by this model. Which is point 2 there may be a delay in the return of your capital less the DMF, deferred management fee. In our legislation, there's no compulsory requirement on operators to buy back your unit to speed things up. Some operators do offer return of capital or buyback type arrangements sooner, but that's not the norm and it's a thing to check in the agreement and the proposition with your lawyer. Some some operators may make early release payments of a sum of capital, others don't. So there's there's a variety of capital release repayment mechanisms out there to look at if that's important to you.

    [00:13:18] Another argument, of course, is for a number of residents. It's the ideal way to terminate the occupational right agreement is is then the good old fashioned horizontal way you're in your coffin. And frankly, when you get your capital is no longer important to you, it's more a matter for your executors and your family. And that's the sobering reality of this type of arrangement. And perhaps the other risk, which is a very transparent one, is that if you've chosen, say, to go into a village paying half a million in 2020 and then come 2025, you decide what actually retirement village living wasn't what I wanted or I've decided that this is not really for me or I'm not the type of village person. If you want to re-enter the marketplace, you're five hundred thousand less deferred management fees, say, at 30 per cent. That's three hundred and fifty thousand is all you will have to re-enter the marketplace to buy something if that's what you want to do. And of course, in that five year time, there's a better than likely chance that the values of property have gone up, will stay at least stable, meaning that the choices of how you could re-enter the market will be limited unless, of course, you have other financial resources than the capital that you've invested through the licence to occupy model. So these are all risks and the law is very clear that says that a retirement village propositions are not without risk and it's part of the due diligence that you do and discuss with your lawyer before you make that decision.

    [00:14:54] So this licence to Occupy model, let's just return to that and let's make sure people understand that the deferred management fee and how it works, it's an interesting looking graph this, which to me shows the progression, increasing values over, you know, maybe 10, 15 years. How would you describe that, that license to occupy model than the deferred management fee?

    [00:15:20] So I think there's a couple of things to you. Firstly, what you're looking at there is set over quite a long period of time, like about 15 years or more, possibly depending on the length of stay at the residence. The other thing is that, you know, it is housing stock. So it will in some way follow the general real estate market. And so if you live in certain parts of the country, the kind of capital gain kind of aspect might be more than it might be if you live in other parts of the country. So some of that will follow kind of general real estate. The third point that I want to make is it's totally transparent to you as to what is retained and what is not retained, you know, and how much is actually given back to you. You will know that the first time you sit with somebody as an intending resident and they will tell you what it is year two, year five, year 10. And so I think the good news is you do know what it is. It's also important to realize that your operator needs to make a profit.

    [00:16:32] And because we talked earlier about that business being sustainable for, you know, 50 or 100 years. And so therefore, unless you have a business model, what can return something through the operator who's put all that capital in at the beginning and wait for their return over quite a long period of time. Then villages just wouldn't be here at all. And the first place and it's a residents interests that the operator has a sustainable business model going into the future. So this is attempting to demonstrate on the slide kind of how it works and how it works is there's an input price. There's a portion retained by the operator, and you would obviously inquire as to what that was. And there will also be in the key terms summary and then there's an amount that will be returned to you. So that's the kind of relatively straightforward way of talking about something that is in one way complex, but in another way completely transparent from the first serious meeting you have when you're looking at being what we would call an intending resident, which is a serious inquiry on behalf of yourself or a family member or relative.

    [00:17:54] So this is attempting to explain something where the numbers are quite big. Capital gain might not always be, you know, of of a type that we're showing on the graph, but there will be times when it will be like this. And I think we as an industry are trying to show our residents, you know, in a transparent way how this actually works so that you know and we know and we go forward together. That that DMF, deferred management fee rate tends to be between 20 to 30 per cent nowadays.

    [00:18:32] And what you'll find generally is that for the first three years of your occupation, say, if you were to terminate at the end of year one, there might be a five per cent DMF fixed deduction at the end of year two. The might be, say, a 10 or 15 per cent fixed deduction, but usually from year three on, if you were to terminate, then that fixed deduction percentage, 25 in the slide in front of you would be capped so that if you were to end up staying in the village for 10, 15, 20, whatever years, that would always be 25 per cent that the operator at the end from that original sum you paid. And that's how it works.

    [00:19:09] And there's like Maggie says, that's transparent. And Troy just to finish on that. I think how most residents handle this and manage this as they don't put all their capital into it in the first place. Yeah, they ring-fence that portion of capital for their home and that outcome, but they have another portion of capital that they can use to grow in other ways and, you know, through other investments.

    [00:19:34] So that's a way a strategy used to manage those to manage this model.

    [00:19:41] Look, that's that's that's really useful. And I can see some questions are coming in. So I'll actually take a few questions now before we just go through some of the terms of the LTO. Sure. One is if we have a family trust, can that be used to purchase the villa? So yesterday we talked about how. Yes, the Occupational Right Agreement has to be in the names of the people and the operator, but some clauses can be inserted easily with your lawyer's assistance to show that the financial transaction, money flowed in and money returned at the end will be to and from your trust.

    [00:20:16] In my case, it's the second time around marriage. My husband wants to purchase the villa in his name only. Can that be done as I would be living in the village, or should I also put money into the purchase. I'm incurring in case he dies before me?

    [00:20:27] And that would leave me. So can have a second spouse who lives the state off the license.

    [00:20:34] Yes. So basically what you would do is you would take that scenario to your preferred village and the person who has the license has the occupation right. Now, that person could have you as the guest and as a sort of like an additional resident. Absolutely fine. But what you need to understand is that if you don't hold the tenure jointly, then if your partner dies first, then you do not have a right of tenure. The way to secure you both having a right of tenure is for you both to put money in and both have your name on the license. That's right. But if in fact, like we've had some situations where one person said, well, once my husband dies, I, I will be returning somewhere else or doing something else. And so long as I've got their eyes open, that's fine, too.

    [00:21:32] Ok, and we should move quickly through this one says some villagers charge 20 percent, some charge 30. Why is such a big difference in deferred management fees.

    [00:21:41] Well, it's just the individual set up of the operator and all sorts of things behind the scenes regarding their resources. So, you know, this is this is a free market and it's just that some are set up in a way where they can afford it. They've got a lot of economies of scale. Maybe they can afford to have a lower DMF, but it's a free market. It's not regulated. And again, make the inquiries, but you might find that the larger DMF might have other advantages over, you know, for instance, size. A lot of the villages with a smaller DMF are really big villages. And some people might prefer some smaller entity. And that would be an example of making a choice.

    [00:22:30] Interesting. Yeah, this is an interesting one too. The agreement we're looking at has a separate charge as a site payment fee. Ten thousand dollars. It's not returned when the unit is relicensed. Is this a normal type of charge given there's no landownership?

    [00:22:45] So a site payment fee? Well, that's something that I don't really know what a site payment fee is, but you as a consumer should expect that a site payment fee is explained. Yes, it's explained in the DMF sorry. It's explained in the disclosure statement. And in the key to summary. And if it isn't explained, you and your lawyer should be inquiring further as to what that means.

    [00:23:12] And the final one here is if you enter a village and lived in it for five or however many years for that matter, it doesn't get relicensed for a long period of time. What happens?

    [00:23:22] Well, this is what Troy was talking about just earlier. And that the answer the short answer is you may have no absolute right to get repaid until someone else is living in your unit. But you certainly the operator would be trying to in some ways to help you with that, and that the thing to do would be to approach them early on and to say, well, what is your intention and what are my my rights and obligations?

    [00:23:54] Should this go on for a while? And of course, this is a very good reason why as Troy has stated. This sort of thing should be canvassed with your operator, before you actually purchase or so that, you know, what you know to expect. We'll push through.

    [00:24:10] Thanks for those questions, by the way, folks, keep them coming. As I say, we'll try to fit them in. But I'm looking at time and we're going to be tight today, I can tell. What are we buying? Cooling off quickly, Maggie, how would you describe cooling off?

    [00:24:22] So why don't you sign your your contract? You have fifteen working days to cancel without giving a reason and you will receive a full refund.

    [00:24:34] Either party can terminate?

    [00:24:35] Yes, they can, although it's extremely unusual for the operator to terminate. And with my thirty years experience, I have never done it. We have considered doing it a few times, but to me an operator would almost never do that, but certainly a resident can terminate at any time.

    [00:24:55] Yeah, and this is a quite common topic that people raise in seminar's, repair and replacement responsibility, who's responsible for chattel repair, maintenance of chattels, or things in the unit itself.

    [00:25:10] So the basic rule is if the operator owns it, the operator pays to repair and replace it. If the resident owns it, then they are responsible. We understand that this is a point of, you know, of of sometimes confusion to resident. Yeah. And so the vast majority of operators will set out really clearly and their documents as to how this actually works in practice. But short answer, if you own it, you're responsible to repair and replace it.

    [00:25:47] And that's, you know, on both sides. It's a really simple, nice easy, understandable way to deal with it. And yesterday we talked, remember, about transferring. But that question, again, which I see has risen on the side when people transfer whether its from an independent unit to serviced apartment or some other type of unit, whether it's an independent or independent for that matter, what's the story with the deferred management fee, is is there a double dip? Right. Short answer.

    [00:26:18] Generally, there isn't. So yesterday we saw quite a bit of our conversation was about transferring to care, but resident transferred from an independent unit to an independent unit too for various reasons. And the operator will try and take one deferred management fee across both dwellings. There could be quite a big difference in price, in value between perhaps the first one and then they go to a smaller one. So they could be a bit of divvying up of a total of one fee across both. But, and an operator will give you an estimate of what how it would work if you were interested in transferring. And for every transfer we do, we get another 10 or 15 per cent of queries from people that may not transfer but they're interested in knowing. So basically, most operators will attempt to only take one fee across two properties, but it's not necessarily the case. And they may actually charge, you know, somehow charge you twice. And again, that's about how does your operator of choice handle this? And lawyers are getting really good at answering, asking these questions at an early stage. And there are general terms in the contract about this. But the stated more generally than specifically because they are quite a lot of variations on the theme.

    [00:27:54] But they'll be handled individually by your village if you make the inquiry. Certainly transfer is a key topic to discuss with the lawyer and how the operators is proposing it, then the occupational right agreement that you're looking at. And finally, refurbishment, is the liability for refurbishment or not?

    [00:28:12] Yes. Generally speaking, that is on the operator. So you move out and if you're moving into a unit which has been occupied previously by another resident, you can expect that to be refurbished. And that could be carpet paint curtains or it could be a new kitchen, new bathroom, or it could even be structural changes. So on the whole, the operator is responsible for that. And what they're trying to do is make it attractive to the next purchaser and also sustainable into the future. So they need to watch the upkeep and the maintenance. But it is really important that you understand that should there be a major upgrade to do, it will take a little bit longer. And again, while you need to be practical and understand that the village has an obligation to move quickly with those procedures so that your your repayment isn't held up by unduly by refurbishment.

    [00:29:13] Absolutely. Certainly one of the things that a lot of retirees, especially those who are a little bit reliant on super will still thinking they might be, even if they do free up equity to move into a village.

    [00:29:24] One of the things that retirees like is a sense of certainty about their outgoings and weekly fees. Certainly fixed weekly fees become very popular in the industry. That slide shows that there seems to be an average now of around 141, up from that 120 when we last looked at three or four years ago for weekly fees around the country.

    [00:29:48] What about weekly fees? If the fixed, that's well and good. But in villages which don't offer fixed weekly fees, how can fees change?

    [00:29:58] So. Things can change because the operators responsibility to look forward and to budget and budget accurately. So what happens is there's a consultation process with the residents and the statutory supervisor. The supervisor will be really interested in looking at the financial position of the operator and the operating budget for the next year. And then there will be a consultation process with residents. And what most operators understand is actually the weekly fee is almost the most important part of life in the village, because once you've paid your capital, it's paid, and you understand that. But actually, you know, some residents are anxious about ongoing ability to afford to live there. Now, operators are very aware of that. There are a lot of economies of scale that can come about in villages where you can share costs.

    [00:30:58] And so there is a consultation process which does include the statutory supervisor. And of course, as Troy said, fixed fees are where they don't change once you arrive at the village are getting more popular, and more common. Another potential for shock we should just mention in passing is the ongoing liability for paying weekly fees after termination. Now some villages that? Yes some villages do have that. Now in our regulations if was to go on longer than six months, they have to half the fee. Again some will stop charging once the unit is vacated. Again, that will be disclosed in their documents up front at, but because it's a very diverse industry with a lot of little, medium, and big players not all operators will be able to afford to not charge you some ongoing costs after your exit. And again that will be disclosed in the occupational right agreement.

    [00:32:12] I did a desktop analysis of 30 different occupational right agreement's just a few weeks ago, and around 30 percent of the occupational right agreement I looked at had weekly fees that carried on until a later time. The other 60 plus odd percent, the weekly fees ended at the time that the unit was vacated. So there is variety out there, but that is another type of term that you want to look at in the occupational right agreement and decide if you're happy with it or not.

    [00:32:41] Knowing those costs when you leave the fixed deduction or deferred management fee, the ongoing outgoing potential that's all in the summary, the key terms summary document? Yes and again, this is where the key terms summary is powerful. And just to add to what we said yesterday about it there's no reason why you shouldn't take a blank copy of it to the village when you inquire, and you can follow through and make sure that you leave with all that pertinent information, absolutely.

    [00:33:10] And so it will help you jog your memory as to the important things that you
    need to be aware of and talk about two operator. Right and remember yesterday's webinar we showed you where to find that on the commission's website under the retirement village pages and Resources, which you can see the sequence there on your slide at the moment.

    [00:33:32] No Q&A is coming, but there might be some more coming in shortly so we will keep an eye out for, but I want to keep going and give Maggie a breather for
    second. Thanks Maggie wanted just talk about a case study example to move towards winding up.

    [00:33:47] This is based on a true story and put together by financial advisor and provided to the Retirement Villages Association some years ago. But we include this not
    in any way to be financial advice. More to be a prompt for you. The listener, but today just to think about your own unique situation, because there is look, there is absolutely no one size fits all to managing your financial situation and thinking about retirement village living. But this is quite a good example. I certainly see around the country and you can adopt the figures depending on whereabouts are you are in the country because obviously for somebody living in Levin, that's a different situation from  somebody living in Takapuna in Auckland. And in terms of the equity they may be getting from their home.

    [00:34:34] Nora is age 70. She's actually a Wellingtonian, and she lives in her family home and she's got 300,000 of life savings currently, and she's finding that she's drawing down at the moment 10,000 on that to supplement her super. A financial advisor would do something like this. Set out what her drawings are, her age she's got
    some upcoming capital expenditure in the form of house painting. She wants to replace the car new swift at this time of life always a great thing. She's in the very comfortable habit of going to Europe or the Pacific in alternative years an the effect of her total drawings against her current portfolio 300,000 there shows a column where there's diminishing growth. Now look this is not a depiction of financial advice from today's environment. It's merely an example of the sort of analysis that you could do with a financial advisor to give you an idea about how your current lifestyle might pan out. If you were in Nora’s case, you can see around the age of mid 80s. If she was to continue living in the home and living the lifestyle she's leading would look a little bit like this. She would run out of tin sometime in her mid 80s, more or less. And there are variables folks.

    [00:35:53] Of course, the rates that she's getting on her portfolio will oscillate, and of course, at the moment there's horrendously bad returns on investments for people who've got money in bank. But let's assume that she does live for next 20 years in pretty good health. Cause health we know is one of the things that can be most expensive as we age.

    [00:36:17] And health care. And she's not overly concerned to leave a large legacy to her family because she's looking at retirement village living as an option. And this, I think, is a really important thing for people to understand that this decision to let go of a capital asset that's currently worth what did we say 800,000 to move into a license arrangement assuming she she goes for a license to occupy arrangement means that she's going to forgo their lifelong sense of living in an asset that's likely to increase overtime.

    [00:36:51] And there's an opportunity cost type of situation that hits a lot of retirees that I've met. Are we prepared to forgo their and receive the intangible returns on investment that retirement village living is going to give? And that's really what it comes down to if you understand the legal framework and you understand the financial implications
    that go over license model and you like what retirement villages have to offer them, the opportunity cost that seems to be leftover is simply am I prepared to sell up potentially capital appreciating asset for a license to occupy, which transparently is not a financial investment in terms of returns on money.

    [00:37:34] You take your capital actually goes. So nora decides that, you want that intangible stuff on the right hand side there, that's actually at her age. What she's after she 70. She wants companionship, security somebody else to maintain his surroundings she doesn't want to stress about managing the home. I've met, and I've been privileged to meet a number of older people who are living in their family, homes, pets. They've lost a spouse. Things are starting to deteriorate and emotionally
    it starts weighing upon them. They can't maintain. Perhaps they need to make some sacrifices and their lifestyle.

    [00:38:09] And Nora is in a pretty good position it seems. I mean, she's going traveling
    she's drawing down, she's got 300 in the bank. She could make some lifestyle adjustments and stay in her home. No doubt about that. No doubt whatsoever, but
    she's 70 and maybe she's thinking, well, I've got a good 10, 20 odd years left in me. Do
    I want to keep living like this in my castle this way?

    [00:38:34] So she decides that for her she would prefer to pursue those intangible benefits of retirement village, and so she sends up selling a house which I believe
    was in Kelburn or somewhere, or Khandallah, I can't remember. But anyway she sells
    her house for 800,000 and she finds licensed occupy unit in a nearby village for 650 which means it after the usual real state agent costs etc etc. She frees up 117. Now everyone will have a different idea of how much equity they want to spend. I think it would be well advised for people to not throw the entire 800,000 that they net from selling their home, then to an $800,000 license to occupy. Part of the reason that retirement villages can be attractive is because you want to release equity to support your lifestyle once you're in the village and not be reliant on Super.

    [00:39:34] So if it were me, I might be looking for a cheaper license to occupy. Might even relocate. So cheaper part of the country, if that was the case. Cause I'd rather have, personally, more money to prop up my lifestyle the then the value of the unit that I'm occupied, but that's just me. So Nora moves to the village and she frees up that 117 which you can see in the top right hand side of the same graph, right?

    [00:40:02] And she still got the same capital expenditure needs 'cause he wants to sell, sell their home so she's going to give it a paint job anyway. And she still saying that she's going to replace her car. And she still saying she still wants to carry on traveling. Perhaps we've stopped her about this advisor had stopped traveling and her early 80s now. So perhaps the grandkids come and visit her for a change. Overall with the injection of that extra equity based on whatever investment portfolio financial advisor put together at this time, the pattern of her wellbeing looks like that.

    [00:40:41] So she's not necessarily going to run out of tin at night, and now I'm going to be deliberately conservative and counter intuitive to say, let, let's say that as the current conditions in the market, we all know about that, actually her returns fail miserably and she's only getting 0.5% for a number of years. So that through her 80s, that figure on the right hand side might be down is around 120 mark, not the 220 mark.

    [00:41:11] The question I have is. What's the opportunity cost of that? She's in her mid
    80s. She's let go the family home and appreciating capital asset Accepted. But she's possibly had a really at life in a village because it ticks all those other intangibles. Throughout that time. She could have stayed in a home, like a lot of bloody minded
    New Zealanders will do. They’ll stay in their home and they'll get to a position where perhaps only reverse equity mortgages can help them stay in the home. But that's what they want and she could hit the age of mid 80s with maybe only 100 and something 1000 left in her portfolio to supplement her income.

    [00:41:54] But if she was in the home, maybe the value of it has increased to 1.2. It was 800 great. So she's had her mid 80s and she's got an asset that's worth an extra 400,000. But has it been worth the 15 years of life that she's stuck it out in the home? And there's no answer to and we're not saying there needs to be an answer. The purpose of this case study is simply to prompt you to start thinking about that opportunity cost, because there is an inherent opportunity cost. So Nora could end up.
    getting through the age of 90 with probably at least 100,000, then remember it's not over there.

    [00:42:31] If she was needs assessed for care at her in her late 80s or around her, the age of 90 full time residential care, remember she doesn't just have whatever's left in her purse and this portfolio. She's also got the value of the equity she put under the
    under the license. So she paid 650, yeah? So she's got the 650 and if we were talking about a 30% license to occupy, that’ll mean she's going to have about 450,000 or 455,000 to extract out of the sale of that license, to the new incoming residence. So there's 455. Plus the, let's say, for easy maths. 100,000. She's got left at the age of 90. She's got 550,000 still at the age of 90. As she looks to transfer into care. She’s
    still financially OK. She's won't be eligible for a residential care subsidy for a few years
    because the threshold limit for that care subsidies around the 240, 000 mark.

    [00:43:36] So 550 - 240. 300,000 and the cost of care at about 80,000 a year. If it's good high quality care. Nora is the poster child for how things can work favorably for everybody – operator, herself. And the tax payer for that matter. For her and for everybody, it comes back to that decision, am I prepared to move on financially. Invest in this model. And am I the sort of person that it will fit that retirement village, way of life and get the benefit of those intangible returns on investment.

    [00:44:17] Now we’ve got some questions coming in on the side which is great. Just before we do, I mentioned reverse mortgages and other issues which we commission called decumulation. Or that process of figuring out a way to fund your retirement
    additional to super given that your life is usually been accumulating assets and things of that nature and then retirement you team to decumulate and find a way of living off that decumulated state of your affairs. Sorted is really good for finding out more about those
    decumulation options and that page there, just triggers you. Have a look at our sorted website and in particular there are lots of free tools and downloads and guides and checklists etc there to help you with broader financial planning.

    [00:45:06] So some of the questions that are coming in, I’ve heard sometimes that if you replace appliances, you can choose a type specifier. You have to choose a type= specifier that the operator, is that right? It might be the case that might be the case,
    and that will depend on maintenance responsibilities and maintenance contracts. Your repair and things like that, but at may not be as well, so check your agreement. Ask the question.


    [00:45:37] In relation to the site management fee question earlier. The glossary in the agreement says the site payment failed means an upfront fee per byte by the resident
    to the operator under clause 3.1, in this case. It says that's the fee representing the upfront payment fee, that's up to supplement the general funds of the operator, so it's just a sum of money they keep as part of the upfront cost. Again, I would be looking into that further. Yep, if it was me.

    [00:46:03] I've been living in independent living and a care suite, both the ORAs could be one DMF, so we touched on this yesterday. But yes, possibly not in that case. Yeah, due to the extra requirements of service and yeah, I'd say that if there is a chance
    that they could be 2 feet, it would be in that particular situation. Yeah, so remember yesterday we talked about independent units and serviced apartments, in which you could get full time care.

    [00:46:33] But there are some villages that would require to transfer into care suites, which is a different type of care proposition from a serviced apartment. So that is where as Maggie said, there might be a different ORA and different deferred management fee arrangement when you're transferring across in to the care suite. Again, exactly the sort of thing we want you to raise with your lawyer and ask the operator, up front.

    [00:46:59] Does the operator ever right to enter the unit? There's a code of practice and under the code of practice. There are some very, very carefully specified provisions about the right of an operator to enter the unit. And the short answer is only in the case of emergency or if the resident has prior notice of the need. Like for instance, urgent maintenance. Sure, so there isn't without dire need basically done. And the occupational rights agreements I've seen reflect that and the code of practice.

    [00:47:31] This is a good question, does every village have a copy of the summary sheet? Are we talking about? The key terms? So this is something that they are RVA is promoting heavily and will be following up, but I would say as of this moment probably most do, but some might not have. But I can undertake as the past president of RVA that we will be following up on anybody that doesn't have one and enabling that to happen. Vast majority but maybe not everybody because it's come in in relatively recent times. And the good thing is that part ofthe membership requirements for those RVA members now anyway, so there's a small portion around 8-10% of villages I think in the country that are non RVA members, but like we said yesterday, I think downloading a copy of this tool and using. It as part of your diligence for whatever village you're looking at is and Maggie said this again today. Really good idea.

    [00:48:35] The weekly fee. What does it cover? Power rates, water insurance etc.
    Yes, that covers basically the outgoings of the unit, it may not cover power, it will sometimes cover power but certainly rates, building insurance, lawns and gardens some contribution to staff costs. So the idea is a little bit like a body corp, via central running costs of that community.

    [00:49:01] My understanding of retirement village with villagers sold mine state that villager will not sold the benefit from capital gains. Not sure that reads correctly? So if the question if the assumption is that when you sell the unit you will benefit from capital gains that may or may not be the case, and in most cases it will not be the case. If you're talking about the resident benefiting from capital gain. In the Nora example we talked about Nora's not going to get her money until her unit is relicensed? Can she get a loan on that money that's due to her until it sells, or while it sells?

    [00:49:42] Is there a bridging arrangement? Not generally There are some financial
    mechanisms which will apply essentially reverse mortgage proceeds to the proceeds of the ORA, but that would be not the rule that would be the exception rather than the rule, and you shouldn't rely on that as a resident, 'cause it might not be possible.

    [00:50:13] And this also taps into something we touched on yesterday where you've
    got a couple situation. One needs to go into care and we talked about how the wonders remains fit then independent is still in the unit paying weekly fees. Can that one that still paying the weekly fee draw from the funding that they have invested? To help pay that weekly fee? I guess this is another way I think of asking what happens if I find the weekly fee hard pay?

    [00:50:38] Yes. So in a situation where the family or the couple of having to pay care home fees and someone still in the unit, so there's also a village weekly fee.
    Then apply to the operator and sometimes one of those fees can be suspended until
    the wash up of the proceeds of the occupation right agreement later. So short answer, if there is financial hardship or tension about paying ongoing fees at some part of the journey, speak to the operator who very very likely to find some way of assisting you with that, absolutely.

    [00:51:20] Quickly that the web page that we have on the CFFC has all of the resources and downloads that we've talked about over the last two days. There's a general advice line that we have, and our booklet, also downloadable or orderable if you prefer hardcopy through our Sorted website free resources. Just a quick reminder to that if you've joined us over last two days in about a week or two. We'd like to send an email out to you asking if you found these two webinars sessions helpful, so give you some time to reflect, maybe to put some of the insights into action to spark you on more discovery. But I just want to thank Maggie once again for all her expertise over last two days maybe. Thank you so much on behalf of the commission and thank you everybody who's tuned and that's been a pleasure and I'm sure we'll do this again sometime soon. Bye.