What is a DMF in a retirement village?

DMF stands for Deferred Management Fee. It is a fee charged by many retirement villages when an Occupation Right Agreement ends. It may also be described as a Membership Fee or Amenities Fee.

How much is a Deferred Management Fee in New Zealand?

A DMF commonly represents around 20% to 30% of the original entry payment and generally accrues over several years. However, the calculation differs between villages and your particular ORA should be checked.

Do retirement village fees increase?

They can. Whether fees can increase and how increases are calculated depends on the terms of the particular ORA and the village's arrangements.

Do you get capital gains when you leave a retirement village?

Not necessarily. Many ORAs don't give residents the benefit of increases in the value of their unit. Some villages offer capital gain-sharing arrangements, while some agreements may also make residents responsible for part or all of a capital loss.

Retirement Village fees explained: DMFs, Exit Costs and Capital Gains

How much does it really cost to live in a retirement village?

The amount you pay when you move in is only one part of the financial picture.

Your Occupation Right Agreement (ORA) may include ongoing village fees, a Deferred Management Fee (DMF) and costs that are deducted when you leave. You also need to understand whether you'll benefit if your unit increases in value and what happens if its value falls.

Before entering into an ORA, it's important to understand the full financial arrangement, not simply the entry payment.

What fees do you pay in a retirement village?

Most retirement villages charge regular fees or outgoings towards the operation and maintenance of the village and its facilities.

Depending on the village, you may also pay separately for:

electricity, gas, telephone and internet
cleaning
meals
home support
medical care
hairdressing
other user-pays services
administration fees.

What's included and what's charged separately varies between villages.

What is a Deferred Management Fee?

A Deferred Management Fee, commonly known as a DMF, is a fee charged by many retirement villages when an ORA ends.

It may also be called a Membership Fee or Amenities Fee.

A DMF commonly represents around 20% to 30% of the original entry payment and generally accrues over a period of several years.

If you leave before the accrual period is complete, the full fee may not yet have accrued. Once the specified period has passed, the maximum DMF will often apply.

The calculation varies between villages, so it's important to understand the particular formula in your agreement.

What should you ask about a DMF?

Don't just ask, "What percentage is the DMF?"

Also check:

what amount the percentage is calculated on
how quickly it accrues
when it reaches its maximum
what happens if you leave earlier
whether another DMF could apply if you transfer to another unit.

These differences can have a significant impact on the amount eventually repaid to you.

Can retirement village fees increase?

Often, yes.

Whether particular fees are fixed or can increase and how any increases are calculated will depend on the terms of your ORA and the village's operating structure.

Before signing, check which fees can increase, how increases occur, how increases are calculated, whether increases are limited and what consultation rights residents have.

This can be particularly important when you're budgeting for retirement village living over many years.

Do retirement village residents receive capital gains?

Not necessarily.

Many ORAs don't give residents the benefit of an increase in the value of their unit when it is eventually relicensed.

Some villages do offer capital gain-sharing arrangements, but this varies between operators.

It's also important to check the other side of the equation.

Some agreements may provide that the resident bears part or all of any capital loss.

Before signing, get clear answers to two questions:

If the value goes up, who receives the gain?
If the value goes down, who carries the loss?

What costs might apply when you leave?

When your ORA ends, your repayment may be reduced by amounts provided for in your agreement.

These can include a Deferred Management Fee, exit fees, refurbishment or reinstatement costs and other permitted deductions.

This means the amount you originally paid to enter the village may be quite different from the amount eventually repaid to you.

How should you compare the costs of different retirement villages?

Don't compare retirement villages based on the entry payment alone.

Look at the complete financial picture:

Entry payment + ongoing costs + DMF + capital gain/loss arrangements + exit costs + repayment provisions.

A village with a lower entry price won't necessarily produce the better long-term financial outcome.

Free retirement village costs checklist and comparison guide

If you're comparing retirement villages, our free Practical Guide to Occupation Right Agreements in New Zealand includes a comparison worksheet to help you record the financial arrangements of different villages, plus a checklist of questions to ask before signing.

What is a DMF in a retirement village?
DMF stands for Deferred Management Fee. It is a fee charged by many retirement villages when an Occupation Right Agreement ends. It may also be described as a Membership Fee or Amenities Fee.
How much is a Deferred Management Fee in New Zealand?
A DMF commonly represents around 20% to 30% of the original entry payment and generally accrues over several years. However, the calculation differs between villages and your particular ORA should be checked.
Do retirement village fees increase?
They can. Whether fees can increase and how increases are calculated depends on the terms of the particular ORA and the village's arrangements.
Do you get capital gains when you leave a retirement village?
Not necessarily. Many ORAs don't give residents the benefit of increases in the value of their unit. Some villages offer capital gain-sharing arrangements, while some agreements may also make residents responsible for part or all of a capital loss.
What costs can be deducted when you leave a retirement village?
Depending on your ORA, deductions may include the Deferred Management Fee, exit fees, refurbishment or reinstatement costs and other permitted deductions.

Important information

This article provides general information only and does not constitute legal advice. Every situation is different, and you should obtain legal advice specific to your circumstances before making any decisions or taking action based on this information.

In accordance with our obligations under the Lawyers and Conveyancers Act 2006, Smith and Partners cannot provide legal advice until you have become a client and received our Terms & Conditions of Engagement and Information for Clients.

Please note that we require a retainer to be paid before your first meeting and cannot assist with legal aid matters.