Retirement Village Covenants
Entering a retirement village involves executing an Occupation Rights Agreement (ORA). Rather than buying land, you are purchasing a personal license to occupy. We provide the mandatory independent legal explanation to safeguard your rights and family estate.
Request an ORA ReviewCompulsory Legal Advice
Under Section 77 of the Retirement Villages Act 2003, all prospective residents must receive independent legal advice from a qualified solicitor before signing the ORA.
Key Financial Covenants in an ORA
1. License to Occupy
You purchase a personal right to live in the unit, but do not own the property structure or land. The license cannot be mortgaged to a bank, rented to sub-tenants, or sold on the open market.
2. Deferred Management Fee (DMF)
Also known as the "exit fee," the operator retains a percentage of your entry price (typically 20% to 30% capped over 3 to 5 years) to cover village operations and upgrades when you depart.
3. Weekly Outgoings Fees
Residents pay weekly fees to cover communal rates, insurance, security, and staff. We check if weekly fees are fixed for life, CPI-linked, and if they stop immediately upon exit.
Standard Property Purchase vs. License to Occupy
| Legal Feature | Standard Property (Freehold/Unit Title) | Retirement Village (License to Occupy) |
|---|---|---|
| Ownership Status | Full land/building registered title | Personal contractual license only |
| Capital Gains | 100% of price growth belongs to owner | 0% share (growth retained by village operator) |
| Exit Deduction Fees | None (only agent commissions/legal fees) | DMF deductions (usually 20% to 30% of entry price) |
| Resale Control | Owner lists, markets, and sells privately | Operator holds sole right to market and re-license |
| Mortgage Ability | Can secure bank mortgages against title | Generally cannot borrow against the license |
| Cooling-off Rights | No statutory window (unless custom clause) | Statutory 15-working-day cancellation right |
Deferred Management Fee (DMF) Calculation
This mathematical simulation demonstrates how a 30% DMF capped over 3 years (accruing at 10% per annum) affects the refund returned to the resident's estate after exit, based on an entry price of $600,000:
| Length of Stay | Deferred Management Fee (DMF) % | Cash Refund to Estate (Excl. refurbishments) |
|---|---|---|
|
1 Year |
10% ($60,000 deducted) |
$540,000.00 |
|
2 Years |
20% ($120,000 deducted) |
$480,000.00 |
|
3 Years (Capped peak) |
30% ($180,000 deducted) |
$420,000.00 |
|
10 Years (Capped peak) |
30% ($180,000 deducted) |
$420,000.00 |
Cooling-Off Rights & Resale Covenants
The 15-Working-Day Cooling-Off Period
Moving into a retirement village represents a major lifestyle transition. Under New Zealand law, all ORAs contain a statutory 15 working days cooling-off period beginning from the day you sign the agreement.
During this window, you have a unilateral right to change your mind, cancel the contract, and receive your entire deposit back without paying any fees or explaining your decision.
We ensure that your initial deposit is held securely in a solicitor or trustee trust account until the cooling-off window closes.
Repayment Delay Risks
When you exit a retirement village unit, the operator is not contractually required to refund your money immediately. In most ORAs, the refund is only paid once the operator finds a new resident to buy the license to your unit.
The Delay Trap: Re-licensing a unit can take anywhere from 3 to 12 months. During this vacancy delay, your capital is locked up. Some older ORA agreements continue charging weekly service fees during the vacancy delay.
We review the ORA rules and advocate for clauses that cease weekly service fees either immediately or within a maximum of 6 months after exit, protecting your estate.
Schedule Your Retirement Village ORA Review
Ensure your ORA, weekly outgoings fees, and DMF exit liabilities are vetted by experienced property lawyers under the Retirement Villages Act 2003. We host consultations at our Orakei Road office or via secure video link.
Contact a SolicitorFrequently Asked Questions
It depends on the village ORA. Under New Zealand's Retirement Villages Code of Practice, operators must reduce weekly fees by 50% after a resident exits, and cease charging weekly fees entirely if the unit is not re-licensed within 6 months. Some premium Auckland villages stop charging weekly outgoings immediately upon vacant possession. We check this exact clause in your agreement.
ORAs allow guests to stay for short periods (typically up to 2 or 3 weeks consecutively, with a maximum of 4-6 weeks total per calendar year). However, family members cannot reside in the unit permanently. The license is personal to the registered occupants specified in the ORA certificate.
If your care needs increase, you can transfer to a serviced apartment or care suite within the same village (subject to care unit availability). This transfer requires terminating your current independent living ORA and signing a new ORA for the care suite. The refund from your independent unit is credited against the price of the care suite, though DMF fees will apply to the transfer.
Discuss Your Commercial Transaction
If you have an urgent contract review, an upcoming auction, or require advice on wills and trusts, contact our Remuera office. You will speak with a solicitor, not a call centre, and we will tell you honestly how we can help.