retirement.org.nz

The Act introduces new responsibilities for retirement village operators and replaces the existing obligations under the Securities Act 1978 that covered many villages.

The new Act, and the regulations and Code of Practice that accompany it, are intended to provide a clear and easily understandable legal framework to protect the interests of residents and intending residents. It specifically aims to promote understanding of the financial and occupancy interests of residents and intending residents, and to provide an environment in which residents have security and their rights are protected.

The Act has specific requirements so that intending residents have a clear understanding of what they're buying into and residents get what they were promised or are entitled to. To help ensure this happens and to help resolve any problems, the Act includes a range of mechanisms for oversight of villages, as well as complaints and disputes procedures and sanctions.

When does the new Act come into force?

Part 4 of the Act, covering dispute resolution, enforcement and penalties, came into force on 1 October 2006. The remaining provisions came into force on 1 May 2007. The Code of Practice 2008 will come into force on 2 October 2009, unless an operator elects to be bound by it earlier.

Who does the Act cover?

The Act protects or places obligations on the following groups of people:

• it protects intending, existing and former residents (or their estates).
• it places obligations on retirement village operators, directors, trustees, managers and staff, and also on people who provide services to retirement villages.
• it places obligations on promoters and others who market retirement villages.
• it requires a 'statutory supervisor' to be appointed for each retirement village (unless a village is exempt), giving them a significant role in monitoring the village.
• it gives specific responsibilities to lawyers who are advising residents or intending residents.
• it includes provisions applying to auditors, banks and others who lend to or invest in retirement villages.

The Act also introduces important roles for:

• the Registrar of Retirement Villages (currently the Registrar of Companies in the Ministry of Economic Development)
• the Retirement Commissioner
• the Registrar-General of Lands
• the Minister responsible for the Act, and
• the Department of Building and Housing, which administers the Act.

What is a 'retirement village'?

There is a wide range of retirement villages in New Zealand. Some provide only a few basic services, with no shared facilities. Others provide a full range of residential units, services and facilities, from self-care villas to rest-home and hospital facilities.

Retirement village operators also vary - for example, they may be companies, local bodies, non-profit organisations, trusts or individuals.

The Retirement Villages Act defines a 'retirement village' very broadly. All residents are protected regardless of the particular legal form of their right to live in their unit is (such as a licence to occupy, unit title, lease or freehold).

A 'retirement village' is any place that has all of the following features:

• Multiple units. The place has two or more residential units. A residential unit might be a villa, an apartment, a studio unit, a kaumatua flat, a room in a rest home, or any other place that was built as, or is now used mainly as, a unit of accommodation.
• Accommodation and services or facilities. The place provides residential accommodation, together with services or shared facilities, or both.
• For retirement. The place is mainly for people in their retirement (including their spouses or partners).
• Capital sum. The residents pay a capital sum in return for their right to live in the place. As well as a lump sum, a 'capital sum' can also mean periodical payments, if the payments are substantially more than would be paid to cover rent and services or facilities for the relevant period.

If the place has all four of those features, it is covered by the Retirement Villages Act - it makes no difference what the village calls itself.

A 'retirement village' does not include:

• owner-occupied unit-title units or owner-occupied cross-lease units, if the services or facilities they provide are no more than those commonly provided by similar units that are not intended for retired people or than those commonly provided by rental residential units
• a rest home or hospital care facility (unless it comes within the definition of a retirement village above)
• boarding houses, guest houses, hostels or halls of residence associated with educational institutions.

Regulations may declare that a particular property or building is, or is not, a retirement village for the purposes of the Act. This can only happen if there is a scheme to avoid the Act, or in cases of doubt.

Key changes made by the Retirement Villages Act

A new retirement villages register

• All retirement villages must be registered with the Registrar of Retirement Villages.
• To become registered, the village operator must prepare and register key documents, including the standard document they use to give information to intending residents (the 'disclosure statement') and the contract they enter into with each resident (the 'occupation right agreement').
• Each year the operator must provide an annual return and audited financial statements for the Register.
• All these documents will be publicly available.

Statutory supervisors

• Each village must have a 'statutory supervisor' (unless the village is exempt). This is an independent organisation or person that monitors the village's financial position and operation. Each operator is required to enter into a 'deed of supervision' with its statutory supervisor. 
• Statutory supervisors are also one of the people residents can go to about breaches of the Code of Residents' Rights.

Protections for intending residents

• Villages that are not registered will not be allowed to advertise or take in new residents.
• All advertising must be accurate.
• Before an intending resident enters into an occupation right agreement, the village operator must give them a copy of:
  • the agreement
  • the disclosure statement
  • the Code of Practice
  • the Code of Residents' Rights.
• Before the intending resident signs the agreement they must get independent legal advice.
• Once they sign, they have a 'cooling-off' period of 15 working days in which they can change their mind.
• When the village or unit isn't yet completed, a buyer can cancel the agreement for delay if the unit isn't completed within six months after the proposed completion date.

Protections for residents

• The Act specifies minimum protections that must be included in all occupation right agreements.
• Residents can avoid (cancel) their agreement if certain requirements were breached before they signed it.
• The Act also requires operators and managers to keep residents informed and to consult with them about proposed changes and other matters that affect them.
• The Act sets up complaints and disputes procedures.
• The Act also protects residents if the village is sold or gets into financial difficulty.

Protections for departing residents

• The Act also covers when a resident leaves.
• The Code of Practice sets out: when an operator may require a resident to leave the village; the re-sale process; what payments or deductions can be charged; and when the resident gets paid what they're due.

Code of Residents' Rights and Code of Practice

• The Code of Residents' Rights summarises the basic rights of residents under the Act.
• The Code of Practice sets out minimum requirements relating to the village's operation that must be in each occupation right agreement (although a village may be exempt from a provision). This covers topics ranging from staffing, safety and security, and maintenance, to residents' involvement in decision-making, communication with residents, and complaints.
• The Code of Practice prevails if there is a less favourable term in an occupation right agreement.

Oversight and sanctions

A range of oversight mechanisms and sanctions helps make sure intending residents and residents are protected:

• The Retirement Commissioner monitors the effects of the Act, the regulations and the Code of Practice.
• The Registrar of Retirement Villages and the village statutory supervisor have significant responsibilities and powers. Residents can also complain to either of them about breaches of the Code of Residents' Rights.
• Residents, statutory supervisors and the Registrar of Retirement Villages can take court action for breaches of the Act. The court can make orders such as fines, injunctions, corrective advertising, changes to agreements, refunds and payments to residents, and awards of costs and interest.

How will the Act affect people already living in retirement villages?

Most of the Act's provisions will apply to residents living in retirement villages.

All residents who are living in retirement villages on that date must be given a disclosure statement by 1 May 2008.

No matter when they signed their agreement, all residents are:

• able to access the Act's complaints and disputes provisions from 1 October 2006
• protected by the Code of Residents' Rights from 1 May 2007
• protected by the Code of Practice from 25 September 2007 (which must be incorporated in their

Until residents have those protections, both residents and operators will be bound by the terms of the agreements they signed when the residents entered the village.

Some of the Act's key protections apply only to residents who sign an agreement after 1 May 2007 - for example, the right to a 'cooling-off' period and to end an agreement for certain breaches. However, existing residents may be able to rely on other laws, such as those relating to contracts, promises and representations (for example the Fair Trading Act 1986), and the quality of goods and services (for example the Consumer Guarantees Act 1993).

How will the Act affect former residents?

From 1 October 2006, former residents (or their estates) can use the complaints and disputes procedures in Part 4 of the Act if they were residents of a retirement village on or after 1 February 2004.