Age restrictions imposed by body corporates at residential villages are a human rights breach and could be illegal.
Developers, real estate agents and body corporate managers are enforcing the age restriction rule at unit title developments, a type of retirement village they say is strictly for the over-55s.
However, only registered retirement villages can place age restrictions on residents, with most unit title developments not registered.
The villages are springing up around the country at pace, allowing over-50s or over-55s to sell up and downsize to a unit, townhouse or apartment they own freehold.
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Unlike a retirement village, where residents don't own the property but buy an occupancy with specific services, unit title developments offer owners the chance to reap the capital gains should they ever sell their townhouse.
The villages are marketed as not a retirement or resthome - those are typically aimed at over-65s - but a home surrounded by "like-minded" neighbours where everyone is over a certain age.
One unit owner, who did not want to be named, discovered the age restriction contravenes age discrimination laws when she tried to sell her unit to an elderly man for his 40-year-old son.
The sale fell through when the man felt pressured by the body corporate manager over his son's age.
The body corporate was under the false impression it could impose the restriction legally, the unit owner said.
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In an email from the Ministry of Business, Innovation and Employment [MBIE] to the unit owner, it said: "The body corporate are not able to restrict the age as that would be deemed discrimination. This would be deemed unlawful under the Human Rights Act."
MBIE housing and tenancy services manager Jennifer Sykes told the Herald that under the Unit Titles Act, discrimination based on age was unlawful when it breached the Human Rights Act.
"This is because body corporate operational rules can't be inconsistent with any other enactment or rule of law, which includes the Human Rights Act."
The owner could complain to either the Human Rights Commission, or the Tenancy Tribunal, but not both.
She sought a legal opinion that was sent to the body corporate explaining the rule discriminated against people based on their age, which it had no right to do.
The owner also made her discovery known to the real estate agent marketing the unit and was dismayed to see the agency marketing another unit title in a different village as "restricted to those over 55 years".
A Human Rights Commission spokeswoman said age discrimination did not apply to retirement villages.
However, most unit title developments are not registered retirement villages.
One developer, who did not want to be named, said his company sought legal advice and wrote to the Human Rights Commission about their over-55s apartment complex.
The advice was that because the age restriction was part of the resource consent, it was legal, the developer claims.
"We have a letter back from the Human Rights Commission from 2013 that says 'although the development is not a retirement village it would still appear to fall within the exception as accommodation developed for persons of a particular age group'."
But there were no "blanket guarantees" and each case would have to be considered on its merits.
The developer said they had one situation where an owner was caring for her adult daughter when she died, leaving the 52-year-old daughter in the apartment.
"The body corp let her stay because she would be 55 in a few years but they would have been within their right to have her removed because it was outside the resource consent."
The villages are popular with over-55s because of the lifestyle, the developer said.
"I suppose one of the big drawbacks of living in a big apartment complex is you don't know who's going to be around you.
"We thought to create these little communities of people who are like-minded, very similar, they get on easy and we've proven that works.
"They're all looking for quiet enjoyment. They don't want parties until four in the morning, there's no kids screaming around."
But the unit owner said the developments were "getting away with" age-based discrimination.
"These developments put owners in legal jeopardy when they or their families come to sell them.
"If owners discriminate based on age, they could face a legal challenge based on them breaching the Human Rights Act."
Community Law Centres chief executive Sue Moroney said the situation was worrying.
"We're concerned there is clear human rights breaches in people being discriminated against on the basis of age.
"And we would encourage people to actually test the legalities of statements that insist the purchase of a property can be governed by age limits."
Troy Churton, who is in charge of retirement villages for the Commission for Financial Capability, said any body corporate that had rules applying to human rights such as age, sex, gender, and religion, exposed themselves to risk.