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Is a Retirement Village really a Retirement Village?

Aug. 2019

For those purchasing a unit in a retirement village (usually an Occupation License), the below situation is something to be wary of.

Recently we advised an elderly couple who had purchased an Occupation License for a unit (villa) within a reasonably small retirement village (we did not act on the initial purchase). The retirement village operator made a decision after the elderly couple had purchased the Occupation License to not keep all the units in the retirement village occupied by retirees. When the retirees who occupied the units either passed away or moved out, the operator was leasing the units to tenants who were over 65 but not necessarily retired.

The couple were disappointed, even quite angry because the environment no longer felt like a retirement village! This couple wanted to spend their retirement period in a community with other retirees and they believed that's what their Occupation License guaranteed them.

Unfortunately, the Occupation License Agreement they signed did not actually guarantee them such a right i.e. that the entire village would remain occupied by retired people. In this case, the silence in the Agreement about this situation worked in favor of the Village Operator but against the unit owners.

If you want to end your Occupation License Agreement, this creates a financial problem because a percentage of the purchase price is kept by the Retirement Village Operator upon termination. For a person wanting to purchase an Occupation License in a retirement village (particularly a smaller village) to protect themselves, they would need a clause in the Agreement that guaranteed that the entire Retirement Village remained occupied by retirees.

Written by Blair Franklin, Partner.

Email: b.franklin@holmdenhorrocks.co.nz