Government presses ahead with retirement village rule changes

Changes planned for the Retirement Villages Act should help to reduce the amount of time that some people have to wait for their money back when they leave a retirement village.

Changes to the Act have been long-signalled, and a long time coming, since a review into the law more than two years ago.

Around 100 residents came to Parliament last month to advocate for changes.

Among their key concerns were that there needed to be a buyback timeframe, as there was currently no deadline for operators to repay residents, or their families, once they had left the village.

Some residents and their families have complained of long waits before a unit is resold.

Associate Housing Minister Tama Potaka said the changes, which will go through a full legislative process, would strengthen protections, including requiring operators to be upfront about what they offer, and to set clear responsibilities for the chattels they own.

"There'll be a very clear delineation between who owns what chattels, so there's no confusion if something breaks, who's responsible for paying it," Potaka said.

Villages will have to repay funds no later than 12 months after a unit is vacated.

Residents will also be able to apply for early access to funds in situations of specific need, interest will accrue after six months if a unit has not been resold, and weekly fees will stop immediately when a resident leaves.

The changes also include:

• A process for former residents to apply for early access to funds in situations of specific need
• Interest being paid after six months if a unit remains unlicensed
• Repayment of funds no later than 12 months after a unit is vacated
• Weekly fees and deductions stopping immediately when a resident vacates

Around 63,000 New Zealanders currently live in retirement villages, with two thirds of those villages also providing aged care facilities.

Potaka said for too long, residents had faced uncertainty, especially when moving out or waiting for money to be repaid.

"These changes put people first by setting clear expectations and making the whole system more transparent," he said.

The changes to payments will not be retrospective, meaning they will only apply to new contracts signed after the legislation's implementation.

"There is a sanctity of contract element to it. So people have entered into their residence agreements and contractual arrangements with all the legal advice that they've had, and very, very, transparently," Potaka said.

"So to retrospectively change payment and interest arrangements not only goes against the sanctity of contract, but it also puts serious and significant pressure on the retirement operators, and that's probably a step too far for us. But for new residents, absolutely that's what we're going to do."

He said a "significant portion" of the industry already had interest repayment arrangements in place.

"What we've done though is heard the real, genuine concerns of those people who are moving out of their villas, often to aged care scenarios, but they can't get access to the funding or the funds that they've put into that villa.

"They've moved out and they're waiting, but they still have to carry on with their lives. And so we've heard that, and that's one of the reasons why we said, okay, 12 months is about the right time for mandatory buyback. Of course, there are some exemptions for smaller villages because we don't want to crush the industry."

A review conducted by the Ministry of Housing and Urban Development began under the previous government and attracted more than 11,000 submissions during consultation in 2023.

Progressing the review was part of National and New Zealand First's coalition agreement.

The legislation will be introduced to Parliament by mid-2026.

'A long-needed review'

Retirement Commissioner Jane Wrightson said the proposed legislation struck a careful balance between the needs of residents and operators, and provided clarity and consistency.

"The legislation is over 20 years old. It's a long-needed review," she said.

Wrightson said there were areas where the two parties would continue to argue, and that would likely continue once the bill reached select committee, but she said largely speaking it addressed the key issues the commission had identified.

"Particularly if we get a robust complaints and dispute system, then a large chunk of the niggles that turn up and then progress into full blown disputes should go away," she said.

"The really tricky areas, like compulsory buyback or the rest of it, I'm really pleased to see the 12- month period set down. Some people will want less. The operators, I'm sure, don't want it at all, but I think it's important that the legislation sets down a goal post."

The Retirement Villages' Residents' Council also welcomed the changes.

"These changes are a welcome step in the right direction. They strike a better balance, being fairer for residents and village operators alike," spokesperson Carol Shepherd said.

"As representatives of residents of villages across New Zealand, we would have liked the repayment of capital to have been six months, not 12 months.

"We also acknowledge that some residents who are in villages today will be upset that the new regime will not apply to their contracts.

"However, overall, these reforms strengthen protections for residents, particularly future residents, and their families without undermining the ability of operators, large or small, to invest, maintain quality, and provide a range of accommodation options for older Kiwis."

She said the introduction of an independent complaints resolution scheme was also a good step.

"It's important that residents and their families who make such a significant investment in their twilight years can access a low cost, independent process to resolve issues - this will reduce stress and speed resolution."

Moira-Clare Donovan, a resident at Bupa's Crofton Downs retirement village where Potaka made the announcement, said it was a "marvellous" announcement.

"Everything the minister announced were things that we've been working on, were asking for. Because throughout New Zealand there's been a lot of unfairness in the retirement villages."

Donovan said she was lucky as Bupa was doing things "extremely well" but she wanted it to be fair throughout the country for residents of all villages.

"There are people who have left their apartment through death and the families are still waiting months, years, for the payout. It hasn't been fair at all."

Operators annoyed

But the Retirement Villages Association, which represents village operators, was not pleased.

It said the changes were flawed and would put pressure on small-to-medium operators, as well as disincentivise new develop.

"Introducing both interest after six months and a 12-month mandatory buy-back period for village operators will create a double financial hit and have a chilling effect on the development of retirement villages and care beds," said RVA executive director Michelle Palmer.

"These proposals won't just burden operators - they risk derailing the government's ambition to build more homes and care beds for older New Zealanders. They will slow development when we urgently need to accelerate it.

"Requiring interest at six months effectively brings the buy-back burden forward - with costs starting to mount at six months and then crystallising at 12 months, compounding the financial pressure.

"We support operators paying interest if repayments take too long, rather than a fixed mandatory repayment period.

"As it currently stands, the mandatory repayment period will, for some operators, push up costs for residents, slow down new development and the delivery of new care beds, and may force the closure of smaller regional and charitable villages.

"That's because the way the retirement village model works means funds are committed to debt repayment, infrastructure and services, not sitting idle."

She said reselling units would require refurbishment, marketing and settlement.

"Operators are already strongly incentivised to resell independent living units quickly because they only generate payment once a new resident moves in.

Adding interest after six months would create even more incentive, but if the operator also has to pay out six months later, it's a double whammy."

Labour's seniors spokesperson Ingrid Leary said giving retirement villages up to 12 months to repay was too long.

She currrently has a Member's Bill in the ballot to legislate for a three-month repayment timeframe.

"No one should be waiting a year to get their own money back. This is not just inconvenient, it causes real hardship for seniors and their families trying to move on with their lives," Leary said.

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