Are you or one of your loved ones looking at moving into a Retirement Village? Contact us for expert advice.

A licence to occupy,  often referred to as an occupation right agreement (or ORA), gives a person the right to occupy a unit in a retirement village in New Zealand.

A licence to occupy is the contractual right to occupy the property, but you have no legal ownership of the property itself or the land.

A Retirement Village disclosure statement contains important information, including the following:

• The village’s ownership and management structure
• Statutory supervision arrangements
• Charges/fees associated with living in the village
• An estimate of what you would receive if you left the village after two, five or ten years
• The village’s community facilities and services, including what provision is made for maintenance at the village

The disclosure statement should also outline any plans for the development of the village, including the building of new units (and the effect of this on existing residents), as well as any conditions and restrictions on the sale of units, and the time it has taken to sell vacant units over the past 12 months.

Depending on the circumstances in which you leave the property, you will likely have to pay an exit fee. 

This exit fee could include the following potential leaving costs:

• The deferred management fee. If you leave the village, the deferred management fee will be deducted from the capital sum you receive when the operator re-licenses your unit. If you transfer to another property in the village, it’s important to ask the sales manager how your deferred management fee will be treated.
• Ongoing weekly or periodic fees. Your occupation right agreement will set out whether weekly fees cease when you provide vacant possession or continue until your unit is re-licensed. If the fees continue, the operator must reduce them by at least 50% by the later of either: The date you stop living in the unit (and remove all your possessions) or
  six months after the date your licence to occupy terminates.

Under a licence to occupy, it’s common for a retirement village operator to retain between 20-30% of your initial capital sum; this is usually referred to as a deferred management fee.

A good way to think of the deferred management fee is that it covers the long-term costs of residing at the village, such as maintenance of facilities and communal areas, and the re-licensing and refurbishment of your property after the licence ends.