Government plan to cut retirement village payout wait to nine months
A leaked document obtained by RNZ shows the Government plans to cut the maximum repayment wait for former retirement village residents from 12 months to nine months. RNZ
Operators must now repay residents or their families within 12 months of the resident leaving. The paper proposes a new backstop of nine months. A backstop means the longest wait allowed by law.
It also proposes an early part-payment. Operators would have to pay 10 percent of a former resident's net termination proceeds within four weeks of vacation. Net termination proceeds are the capital sum owed after exit fees and other fixed deductions. The document describes this as a cashflow measure, not full settlement.
Associate Housing Minister Tama Potaka is quoted in the document saying older New Zealanders had told the Government 12 months was still too long.
The paper sets rules for the resale period in between. Operators must market the empty unit promptly and seek the best price possible. They must give regular updates to the former occupant or their estate. If the unit has not been relicensed after six months, they must obtain a formal valuation.
Legislation would follow next term. The document points to the repayment changes being made next Parliamentary term, rather than in the rest of this term. In plain terms, that means after the election, not in the sitting period before it.
How the proposal fits the wider reform
The wider package covers three stages of village life: moving-in, living-in and moving out. Repayment sits in the moving-out stage. That is when capital sums stay tied up while a Licence to Occupy unit is resold and relicensed. A Licence to Occupy is not ownership. It is the right to live in the unit, which is then sold on to the next person.
That structure is already visible in the proposed Retirement Villages Code. The Code is the detailed rule book that sits under the Retirement Villages Act 2003. It places duties on operators at three, six and nine months. The nine-month point matters. If a unit remained unsold after nine months, the former resident would have the right to have the matter referred to a specially constituted disputes panel.
The Act has been under review through the Ministry of Housing and Urban Development (HUD). Consultation papers show the starting positions were far apart. In feedback on the review, Retirement Villages Aotearoa (RVR) supported repayment of capital sums after 28 days, according to a HUD summary of public consultation published in September 2024. The Residents' Council supported a repayment timeframe of 9-12 months with interest after 3-6 months. HUD
HUD reporting also records what usually happens. According to the Retirement Villages Association, the average time for repayment of capital sums is four months. Most Licence to Occupy units are relicensed within nine months, though some residents wait much longer after vacating. In feedback on the review, almost all operators supported interest payments on outstanding capital sums from nine months.
Why three months was ruled out
The paper considered a three-month repayment deadline and rejected it. The reason given was financial risk.
Official modelling found a three-month deadline could require the sector to hold or access between $3.2 billion and $4.1 billion to meet the liability. The document states that if all costs were passed on to residents, a three-month rule could add up to $118,000 to the cost of entering a retirement village.
Labour is campaigning on a three-month repayment period. The Government previously backed a one-year window before opting for a nine-month timeframe, as reported on 17 September. The Post
The broader context here is familiar to anyone who has followed a regulatory review before an election. Ministers face pressure in two directions. Residents and families want capital released quickly, particularly where funds are needed for aged care or to settle an estate. Operators carry inventory risk if they must pay out before a new licence is sold. Officials have warned that a hard early deadline would be added to entry prices.
In practical terms, the nine-month plan looks like an attempt to split that difference. That modelling is central to the choice of nine months. Nine months lines up with when most units have already been relicensed, and with when operators had said they would pay interest. The early payment gives executors and families cash to work with. The six-month valuation creates a paper trail for the disputes panel. The nine-month referral right gives residents leverage without forcing an automatic buy-back. For operators, the liability stays tied to resale for most of the period, which limits the need for standby borrowing.
On timing, the picture is straightforward. A next-term commitment keeps the proposal alive without asking the House to deal with it under urgency or just before the election. It also leaves the detail to be settled in drafting, including the interest regime, the form of regular updates, and the make-up of the disputes panel. Those are the points select committee scrutiny would normally test, and where submitters on both sides will focus.
