What do you need to consider when retirement village shopping?

For those who go down the path of a retirement village, it’s likely the last major move they will make upping the stakes of their choice.

Data indicates that between approximately 40,000 and just under 55,000 New Zealanders live in a retirement village, where residents typically live independently in a community with shared facilities, such as pools and bowling greens. Often, these communities will have aged care facilities (also known as rest or nursing homes) that cater to those with higher needs, like dementia patients. It’s a small slice of the 600,000 plus people who are 70 years or older, yet our aging population means that this number will likely increase with demand outmatching supply.

Those in retirement villages are overwhelmingly white with a 2020 study of Auckland residents putting that figure at 97 percent European New Zealanders. Some cultural populations, such as South East Asian tend to care for their elderly within the family, although some cultures are softening to the idea of retirement villages or care homes. For Māori, the tendency is to care for kaumātua within family or through iwi-led housing programs, with a 2021 report highlighting a lack of culturally safe options.

The aged care sector in New Zealand, including retirement villages, is worth about $3 billion. The area of the sector that requires more care such as for dementia or assisted living, is often framed as being in crisis due to staff shortages.

The typical setup for a retirement village is vastly different from buying a home, so it can be difficult to navigate, according to Carmel McLaughlin, an independent advisor who walks clients and their families through the retirement village decision process.

"There's a whole lot of things to understand, and there's terms and conditions, weekly fees, entrance and exit conditions, what is provided so there's a whole realm of things to understand, over and above 'First off, does this village suit me?'"

When you buy a home, you own the house and the land that it is on. When you buy into a retirement village, you enter an occupation rights agreement that entitles you to live in the villa or apartment, says McLaughlin. However, you don’t technically own it.

Typically, there are weekly fees (fixed or not, it depends) and a deferred management fee that can eat up to 30 percent of the buy-in price. That agreement can come with various rules, such as restrictions on pets and, in some cases, whether you must move to a single-occupancy unit if your partner dies or moves to higher care.

There’s a lot to consider when making the decision, says McLaughlin - the size of the village, location, facilities, what the pet policy is, the ongoing costs, and whether it has a continuum of care facilities such as a rest home or hospital-level care.

“You start to think, ‘Gee, there’s a lot in this.”

Here’s what to consider and what red flags to look out for when retirement village shopping.

It might seem trivial, but pets are high up on Kristy Rusher’s list when she helps clients through the retirement village process. Rusher is a Nelson-based lawyer who works on senior issues like estate planning and contracts with retirement villages or rest homes.

“Pets are part of the family, and so if moving to a retirement village means that they lose their pet, then sometimes they will choose somewhere else.”

Some retirement villages don’t allow pets. Others only allow specific sizes, types, and amounts.

A major sore point for pet owners is that if a pet dies, it will likely be up to the discretion of the retirement village’s management on whether you can get another pet. Your pet’s behaviour must also be civil.

“...there are clauses in the contract that say if the animal is causing a nuisance, then it will have to be rehomed,” Rusher added.

With the help of McLaughlin, Sue Moody, a retired journalist, moved her husband into an Auckland care facility.

“There’s a huge amount of emotion because you feel guilty because you can no longer go on caring for your partner, and that happens even before you make the decision about care.”

Because Moody’s husband has dementia, they ended up opting for a rest home within a retirement village. She gave herself a six-month timeline to find the best option, rather than wait for circumstances pushing her into a rushed decision.

“The common knowledge really is that when you become involved in full-time care, it is the carer that takes all the stress and often it is the carer whose health breaks down first rather than the person being cared for.”

Many retirement villages have a care home so residents who need it can transfer to the facility and remain on the same property, says Paula Bishop from Village Guide, an online resource of New Zealand's retirement villages and aged care facilities.

“[With a couple] if one is aging quicker than the other, knowing that they might go to that care home sooner, just making sure you understand what levels of care they offer.”

Levels of care might mean smaller units where meals and laundry services are provided, to hospital-level care, and secure dementia care.

If there isn’t onsite care, it can be difficult for couples to maintain their connection if one is at another facility, even if it's within the same area, says Rusher.

What are the consequences of care for your partner when they are based a 45-minute drive away, which, when you're not driving yourself, can be quite a barrier to keeping that relationship and that connection alive.”​

Typically, retirement villages will have a deferred management fee of about 30 percent of what it costs you to occupy your home. When you die or move on to higher care and the home is sold, the retirement village will take the agreed deferred management fee plus any capital gain.

​This fee also applies if you simply don’t like the village and want to leave (some larger multisite retirement villages companies might waive this fee if you move to a location owned by the company).

​Rusher recently had a client who didn’t enjoy her chosen retirement village and opted to move out after five months. The fee was $60,000.

​“It can be a really significant loss if you transfer out to a different village.”