What your lawyer is checking when advising on an Occupation Right Agreement

Once you have found a retirement village and a unit you like, the Occupation Right Agreement becomes one of the main documents in the process.

This is the document that gives you the right to live in the unit and sets out the terms of that right. The Companies Office (which holds a record of all registered Retirement Villages) describes an Occupation Right Agreement as a written agreement that gives a person the right to occupy a unit in a retirement village and sets out the relevant terms and conditions. The agreement must be clear and unambiguous, and it may consist of more than one document.

Most people know they need to see a lawyer to get independent legal advice before they sign. What is not always clear is what the lawyer is actually looking at and advising on.

The legal advice is not just a signing appointment. The Retirement Villages Act requires an intending resident to receive independent legal advice before signing an Occupation Right Agreement. That requirement exists because the arrangement is significant. You are usually committing a large amount of money, but you are not buying the unit in the same way you would buy a normal house.

The ORA itself

The ORA sets out your right to occupy the unit, your obligations, the village’s obligations, the fees you will pay, what happens if you leave, what happens if you die, and how the arrangement can come to an end.

Your lawyer will go through the agreement with you and explain the main terms. That includes the entry payment, the weekly fees, the deferred management fee, village rules, maintenance obligations, insurance, repairs, transfer to care, termination, and repayment.

Some ORAs are easier to follow than others. Some have schedules, addenda, village-specific terms, disclosure documents and other material that need to be read together. It is worth taking the time to understand the whole set of documents, not just the pages where you sign.

The disclosure documents

Before an intending resident signs an ORA, the operator must provide a compliant disclosure statement. All operators must issue compliant disclosure statements to intending residents before those residents can sign occupation right agreements.

The disclosure statement gives information about the village and how it operates. It should help you understand matters such as the type of occupation right being offered, the village facilities, fees and charges, the operator, the statutory supervisor, complaints processes, financial information and other matters that may affect your decision.

This is why your lawyer should not be looking at the ORA in isolation. The disclosure statement, village rules and other documents can all be relevant to the advice.

The financial information

One of the things people often want to know is whether the village is financially sound and what the financial position looks like. Your lawyer is not your financial adviser or accountant (and are not qualified to give advice on such matters), but the disclosure information and financial statements still matter.

The statutory supervisor has duties that include monitoring the financial position of the retirement village and reporting annually to the Registrar and residents on the performance of its duties. Your lawyer can help you understand what documents have been provided, what information is available, and whether there are questions that should be asked before you sign.

This is not about turning every intending resident into a financial analyst. It is about not treating the financial information as background paperwork that no one reads.

What you pay, what is deducted, and what comes back

The money side of the ORA needs careful explanation.

You need to understand what you are paying to enter the village, what weekly fees will be payable, what happens if those fees increase, and what deductions may be made when you leave. This usually includes the deferred management fee, and may also include refurbishment, reinstatement, sale or administration costs depending on the agreement.

You also need to understand when money is repaid after you leave or die, and what your estate or the people who inherit from you may receive.

This is often the part adult children are most interested in, even if they are not the ones signing the ORA. They may assume that most of the entry payment comes back quickly. That is not always how it works.

The detail is in the documents. Your lawyer should help you understand what is deducted, when repayment is due, and what may happen if the unit takes time to be re-licensed.

What happens if your needs change

A good ORA discussion should also cover what happens if your circumstances change.

What happens if you need more care?

Can you transfer to another unit or care facility?

Is there priority access to care, or only the ability to apply?

What happens if one spouse or partner needs care and the other does not?

What happens if you lose capacity?

What happens if you die?

These are not the easiest topics to think about, but they are part of the reason the agreement needs proper advice.

If an attorney is signing

Sometimes the resident signs the ORA personally. Sometimes an attorney signs under an Enduring Power of Attorney.

If an attorney is signing, the lawyer needs to check that the attorney has authority to sign and that the process is being handled properly. The resident should still be involved and consulted where appropriate and where possible. That can often be done by audio visual link if the resident, attorney or family members are in different places.

This is where the legal process needs to be practical, but still careful. It is not enough to say “the family is dealing with it” if the person moving into the village is still able to be involved in the decision.

The wider picture

The ORA is often only one part of the move.

There may be a family home to sell. There may be Wills and Enduring Powers of Attorney to update. There may be a family trust involved. There may be adult children helping from different places. The village move may also change how assets are held and what your estate looks like later.

That is why ORA advice works best when the lawyer understands the full situation. The document needs to be explained, but the advice should also fit the move you are actually making.

It is also worth knowing that everyone does not need to be in the same room for this process to work well. We regularly work with residents, attorneys and adult children across New Zealand and overseas, using secure systems for meetings, documents and signing. That can be helpful where someone is moving to a new town or city, or where family members are helping from a distance.

Getting advice before you sign

The legal advice appointment is your chance to slow the process down enough to understand what you are signing.

It is worth asking questions about the entry payment, ongoing fees, exit deductions, repayment timing, what happens if you need care, and what your estate may receive later.

The aim is to make sure you understand the ORA, the disclosure information, the financial commitments, and how the agreement fits with the rest of your move.

Next, I’ll look more closely at the money side of moving into a retirement village, including what you, or your estate, may get back and when.