What happens to your money when you leave a retirement village?
Your ORA should set out how the amount due to you when the agreement ends will be calculated.
Depending on your agreement, deductions may include:
The amount you receive back may therefore be significantly different from the amount you originally paid to enter the village.
Do you receive the capital gain when you leave?
Not necessarily.
Many retirement village ORAs don't entitle the resident to receive the increase in value when their unit is relicensed to a new resident.
Some villages offer capital gain-sharing arrangements.
Some agreements may also make residents responsible for part or all of a capital loss.
The arrangement varies between villages, so don't assume leaving a retirement village works in the same way as selling a home you own.
How long does it take to get your money back from a retirement village?
This is one of the most important questions to ask
before entering a retirement village.
Some ORAs provide for repayment within a specified timeframe.
Others link repayment to the unit being
relicensed or occupied by another resident.
That distinction can have significant practical consequences if you need the money to pay for another home, move to a different retirement village or fund higher-level care.
Before signing, understand:
- whether there's a specified repayment timeframe
- whether the unit needs to be relicensed first
- what happens if relicensing takes longer than expected
- is interest payable after a certain period
- when your ongoing village fees stop
- what deductions will be made before you're repaid.
Who pays for refurbishment when you leave?
Your agreement should explain what happens to the unit when your ORA ends.
Depending on its terms, you may be responsible for some refurbishment or reinstatement costs.
This can also be relevant if you've made alterations to your unit while living there.
Before signing, understand what work you could be responsible for and what amounts can be deducted from your repayment.
What happens if you move to another unit in the same retirement village?
Your circumstances may change and you might decide to move to another unit or require a higher level of care.
In many villages, transferring involves ending your existing ORA and entering into a
new ORA for the replacement accommodation.
A further Deferred Management Fee may apply.
The amount repaid under your existing agreement is often applied towards your new accommodation, but whether it covers the cost will depend on the village's pricing structure and the terms of the agreements.
Think about leaving before you move in
It might feel strange to ask about leaving a retirement village when you're only just considering moving in.
But your exit arrangements can have significant implications for your future finances.
Understanding how much you'll receive, what can be deducted and when you'll actually get your money back is an important part of comparing retirement villages.
Free checklist: questions to ask before choosing a retirement village
Our
free Practical Guide to Occupation Right Agreements in New Zealand includes a two-page checklist of questions to ask before signing an ORA, along with a worksheet you can use to compare different retirement villages.
