Retirement villages are a great option for people who want a degree of independence in retirement but with the added benefits that come from communal living. There can be significant differences between retirement villages in terms of facilities and costs, so it pays to do your homework before signing an
agreement to avoid making costly mistakes.
Four basic legal titles are commonly used for retirement villages; licence to occupy, unit title, cross lease and lease for life. The type of title will largely determine how much it costs you to buy and live in your retirement unit.
There are three types of cost that you will need to consider; the initial cost of buying your unit, the costs of living in your unit and the costs involved with selling your unit.
In many cases, the initial amount you pay gives you the right to live in your unit, but does not buy the unit itself. While you are living in the village, you will need to make regular payments to cover such expenses as rates, gardening, maintenance and healthcare.
There are differences between villages as to what these ongoing fees cover. When you sell your unit, you may be required to pay for refurbishment of the unit to a certain standard, plus marketing and selling costs. In some cases, you may have no control over the sale process and when you sell you may not get the benefit of any capital gain on the unit.
Before you purchase, the retirement village must give you certain legal documents which set out your rights, benefits and costs, and you are required to get independent legal advice on these before signing an agreement. To find several useful checklists for buying a unit in a retirement village, go to www.sorted.org.nz
Liz Koh is a financial adviser. Her disclosure statement can be obtained free of charge by calling 0800 273 847. Author of Your Money Personality; Unlock the Secret to a Rich and Happy Life, Awa Press, March, 2008.
www.moneymax.co.nz
