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Government Review of the Retirement Villages Act 2003

Government Review of the Retirement Villages Act 2003

Government Review of the Retirement Villages Act 2003

Wednesday 23 August, 2023

On Wednesday, 2 August, the Ministry of Housing and Urban Development unveiled the much-anticipated discussion paper titled "The Retirement Villages Act 2003: Options for Change." This significant move marks a continuation of the regulatory review, which commenced in December 2022.

The Discussion Paper delves deep into potential changes to the Retirement Villages Act 2003, encompassing both associated regulations and codes. For a detailed overview, you can access the Discussion Paper, summary, and cost-benefit analysis here.

Observations on Legal Documents

A highlight from the paper includes proposed amendments to disclosure statements and occupation right agreements (ORAs):

  • Disclosure Statements: The ambition is to simplify these statements, making them more concise and transparent. Importantly, there's a drive to hold operators accountable for their disclosure statements, ensuring they remain accurate and are regularly updated. This responsibility extends to verbal representations as well, implying that operators must be vigilant about their communications.
  • ORAs: The notion of standardising ORAs is complex. It aims to achieve uniformity without sacrificing flexibility or overlooking potential challenges. The Te Ara Ahunga Ora Retirement Commission Investigative Report 2021-22 offers an in-depth exploration of this topic.

Initiatives driven by RVA/Industry

The Retirement Villages Association (RVA) has proactively addressed numerous proposals presented in the Discussion Paper. Among the solutions recently ratified at the RVA’s July Annual General Meeting are the obligation for operators to upkeep and substitute operator-owned chattels, enhancing transparency about transitions to care, and adhering to healthy home standards.

Dealing with Fees

The Discussion Paper suggests several changes regarding fees:

  • Termination of ORAs: Upon termination and vacation of an ORA, the suggestion is to immediately cease charging outgoings and accumulating fixed deductions.
  • Vacant Units: If a unit remains unoccupied beyond a certain duration, operators could be mandated to pay interest on capital sums.
  • Repayment Period: The possibility of mandating repayment of a resident’s capital sum within a predefined period post-ORA termination (e.g., 6 or 12 months) is on the table. Concerns about guaranteed buybacks, previously discussed in a White Paper, are likely to re-emerge during this consultation.

Progressive Proposals

A shift in the insurance environment is visible with the paper advocating for operators to transition from full replacement cover to sum-insured and collective policies. Another applaudable suggestion is legislating the requirement for statutory supervisors to hold security, mirroring current industry practices.

Areas Warranting Closer Scrutiny

There's a need to delve deeper into some proposals. This includes potentially replacing the existing complaints and disputes scheme with an independent entity, clarifying the roles of government agencies in the retirement village system, and emphasizing fiduciary duties during the sale and transfer of villages.

Next Steps

This release heralds a public consultation period ending on Monday, 20 November 2023. It's anticipated that post-consultation, a draft bill will be presented to Parliament to amend the Retirement Villages Act. Should this pass, a transition period will be established, granting the sector adequate time for adjustments.

Our view:

The Discussion Paper offers a comprehensive look into reshaping the retirement village sector to better support and provide fairness to residents. Our team are available to discuss and help clients frame their response and next steps in anticipation of legislative change.