A Retirement Villages Residents Association survey found that 10 percent were paying variable fees. File photo. Photo: 123RF
Some retirement village residents are facing increases in weekly fees that are putting them under financial pressure - but it could be financially ruinous for them to move, the association representing them says.
Residents of one village contacted RNZ about a planned increase in their weekly fee of 21 percent. They said it was tough to cover, particularly when the increase was much larger than the lift in NZ Super and many were facing falling interest rates for any money they had in the bank.
Residents of retirement villages usually pay for a licence to occupy a property, and then an ongoing weekly fee. When they move out, they generally get most of that initial licence fee back, minus 20 percent or 30 percent as a "deferred management fee".
The Retirement Villages Residents Association (RVRA) conducted a survey of 1500 of its members that found that 10 percent were paying variable fees. Another 29 percent were paying fees that were linked to rises in the consumer price index or superannuation.
It found 18 percent were worried about increases and being able to afford their living costs in the future.
RVRA chief executive Nigel Matthews said some people were still paying the fixed fees they signed up to years ago, which could be less than $100 a week, while others were being charged more than $300.
"Sometimes with variable fees there's no increase for two or three years and then 'oops we miscalculated and we have to put it up 40 percent'… variable fees are one of the things that cause the most concern… especially if they can see now things are starting to get tight and they look and think 'what's going to happen in a year's time or two years' time?' This is that population that doesn't normally like to ask for help that often, it's a stiff upper lip generation. They grin and bear it and just don't put on the heating."
He said sometimes village operators were open to negotiation on fees but residents who faced real trouble, and for whom there was no solution, could not easily move.
If it was not a village that shared capital gains, they could end up getting back significantly less than they paid to move in, even if the market had increased a lot in that time. "It can be extremely difficult to get back into the real estate market."
Matthews said moving would also often rely on the money being returned in a timely fashion, which was another issue of concern for many residents, who said it was not uncommon to wait a year or more for a unit to be resold and the money paid out. "It can be impossible to move for some, for others it comes at quite a cost, they've lost their nest egg sand have to sacrifice by moving in with family or downsizing even further. Some do move out, but it leaves a scar."
He said removing variable fees or having them fixed or limited in comparison to CPI or superannuation increases would help. There should also be more limits on how quickly people had to be paid out, he said, so that residents had more options to move if they needed to.
Retirement Villages Association executive director Michelle Palmer said the weekly fee was to cover rates, insurance, staffing, maintenance of grounds and other costs.
"We estimate approximately 85 per cent of the sector charges a weekly fee that is either fixed for life, or can only increase by the CPI, which is the same increase that applies to national superannuation. This is in line with the RVA's best practise guidelines. As a result, we see very few residents experiencing issues with weekly fees.
"If a village operator does not offer a fixed fee/CPI fee on entering the village, then villages generally consult with residents as to why the weekly charge is increasing. This consultation usually also includes the Statutory Supervisor, a licensed professional appointed by the operator to monitor the financial position of the village and the security of residents' interests."
Consumer NZ chief executive Jon Duffy said fees prompted complaints to his organisation.
"It's out of the control of the residents. There is a code of conduct that says villages need to consult residents but they don't need to pay any attention to that consultation. There's no requirement to do what residents want and that's really galling for people. It's a cost that's completely out of their control. There's no requirement to link price increases to the reasonable cost of operating a business."
Retirement Commission retirement village specialist Tristan Fleurty said it was important that people moving into a retirement village understood what was involved, what fees might be charged and what the rules were around the charges. "We recommend people go to their lawyer early on before they've chosen a village to say 'what are the things we need to look out for'…. people think all they have to do is buy the unit and they're sorted but there are other expenses in the future."
The Ministry of Housing and Urban Development said it had had an increase in people contacting it about weekly fee increases in the past year.
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