Yesterday, the Government released the outcome of the legislative review of the Retirement Villages Act 2003 (RV Act), which began back in 2023.

Associate Minister of Housing Tama Potaka and Minister for Seniors Casey Costello announced a number of changes which could significantly impact on the retirement village sector. Although the detail will evolve through the legislative process, the direction of travel is now clear.

Key changes

The key changes are:

• Mandatory repayment of residents' net termination proceeds within 12 months.
• Early access to net termination proceeds in situations of financial need.
• Interest payable on a resident's net termination proceeds if the unit has not been relicensed after six months.
• Weekly fees and the calculation of the deferred management fee/DMF must stop immediately after the resident vacates their unit.
• Operators to pay costs of maintenance, repair and replacement of operator-owned chattels and fixtures.
• The introduction of a new independent complaints and dispute resolution scheme.

The Minute of Decision of the Cabinet Economic Policy Committee records the decisions made, and the Minister's Cabinet Paper gives some context to these changes and further detail which may be included in the Bill, at the Minister's discretion. We discuss the practical implications below.

Timing

There is no immediate requirement for operators to amend their ORAs or make any operational changes.

These proposed changes will still need to go through the usual parliamentary process before they become law. It is possible that some of these proposals may change or be modified, and many of the exact details of the proposed changes will not be known until the draft Bill is released.

Ministers Potaka and Costello have signalled that a draft Bill is expected by July 2026. That Bill will then need to go through the usual Select Committee and parliamentary process so, realistically, it could be up to two years before these changes become law.

Analysis of key changes

Mandatory repayment after 12 months

New requirement: Operators will be required to pay former residents or their estates their ORA net termination proceeds if their unit has not been relicensed within 12 months.

Are there any exceptions? The Minister's Cabinet Paper sets out some proposed exceptions including where:

• A village has less than 50 units.
• A resident receives 50% or more of the capital gain on resale.
• A resident is responsible for finding a new resident for the unit and setting the price.
• Repayment would cause the operator "undue hardship", in which case the operator could apply for a six-month extension to the repayment timeframe.

Will it be retrospective? No, this change will only apply to ORAs signed one year after the Bill receives Royal assent (note this may be earlier than the Bill becoming fully operative).

Interest after six months

New requirement: Operators will be required to pay interest on residents' net ORA termination proceeds where a unit has not been relicensed to a new resident within six months following termination.

Interest will be paid in one lump sum on the date the resident receives their termination proceeds and will be paid for the period from six months after the ORA termination to this payment date. The interest rate will be calculated in accordance with the Interest on Money Claims Act 2016 (currently around 5% per annum).

Are there any exceptions? There are no exceptions set out in the Minute of Decision or the Minister's Cabinet Paper, but it remains to be seen whether there will be any when the Bill is drafted.

Will it be retrospective? No, this change will only apply to ORAs signed one year after the law change comes into effect.

Early access to funds for residents in financial need

New requirement: If a resident needs access to all or some of their net termination proceeds to pay their aged residential care costs, alleviate "financial hardship" or access "suitable alternative accommodation" this scheme will enable residents to apply to a decision maker (the Minister's Cabinet Paper proposes that this be the village's statutory supervisor) for an early release of funds.

If the decision maker determines that the criteria for early repayment are met, the operator will be directed to release all or part of the termination proceeds.

Are there any exceptions? Yes, the same exemption criteria as set out above for mandatory repayments will also apply to this scheme. This scheme will only be available to residents themselves and not to their estates.

Will it be retrospective? No, this scheme will only apply to ORAs signed one year after the Bill receives Royal assent (note this may be earlier than the Bill becoming fully operative.  

Payment of weekly fees and calculation of DMF to stop on Vacation Date

New requirement: The resident's obligation to pay weekly fees, and the calculation of the DMF, will both immediately cease on vacation.

Are there any exceptions? The Minister's Cabinet Paper proposes an exception to the requirement to stop the weekly fee if the outgoing resident is responsible for finding a new resident for the unit and/or setting the price the unit is marketed for, but this is not specifically reflected in the Cabinet Minute. There is no suggestion of an exception for the DMF calculation to stop on vacation.

Will it be retrospective? Yes, it appears the intention is that this applies to existing ORAs, although the Cabinet Minute does not expressly state that.

Maintenance of operator-owned chattels and fixtures

New requirement: Operators are responsible for, and must meet the direct costs of all maintenance, repair and replacement of operator-owned chattels and fixtures. Operators must also provide a list of chattels for the unit.

'Fixtures' is generally understood to mean anything that is permanently attached to a property, which appears to indicate it applies to the entire interior of a unit.

Gifting of chattels to residents will be permitted, but only where the resident accepts the gift.

Are there any exceptions? The Minister's Cabinet Paper suggests that this requirement will only apply to licence to occupy villages. So title-based villages where residents own their unit may be able to continue to require residents to cover the cost of internal maintenance and repair.

There is also a proposed exception for villages where residents share in the capital gains, in which case residents can be required to pay for such interior maintenance in the same share (e.g. if a resident is entitled to 50% of the capital gain, they can be liable for 50% of the costs).

Will it be retrospective? Yes. This change will apply to all new ORAs entered into immediately after the bill receives Royal assent and to all existing ORAs after a 12-month transition period.

New dispute resolution scheme

New requirement: A new scheme for complaints and disputes will be established and run by a third-party dispute resolution scheme provider, who is yet to be selected.

Complaints will continue to be dealt with at village level initially with unresolved complaints to be referred to the scheme to assist in reaching a negotiated resolution.

Some key points to note about the proposed scheme are:

• The cost of the scheme will be met by operators.
• The scheme provider will be able to make a binding decision in cases where a negotiated resolution cannot be reached.
• The scheme provider will have the power to order a party to make an apology and to award a payment of up to $10,000 to a resident where they are found to have suffered undue distress or significant inconvenience from the dispute.
• Legal costs and expenses cannot be awarded against a resident, with the costs of the scheme to be met by operators

Other changes

Some of the other changes include:

• Residents can only be held liable for capital loss to the same extent as they are entitled to a share in the capital gains.
• Operators will be required to publish their disclosure statement on their websites.
• Partially standardised ORAs and disclosure statements, and the introduction of a list of prohibited terms.
• Focus on clear and upfront disclosures about promised future services and facilities.
• New powers for the Registrar of Retirement Villages to make "stop orders" if an advertisement or ORA is "false, misleading or inaccurate".
• Amending the Code of Residents' Rights to include the right to be free from harassment and intimidation, and a new resident obligation to respect the peace, comfort and privacy of other residents.

Where to from here? Next steps for retirement village operators

If you would like to know more about these proposed changes to the RV Act and how these changes may impact you and your village, please get in touch with our team of specialists.

There is no immediate requirement to make any changes to ORAs or village operations, but we expect that operators will be considering the impact of these changes on their offering, should they be introduced.

We will continue to keep you updated as the legislative process progresses.

For our clients/customers on Villageinfonet they can already receive automated email notifications alerting them if a terminated unit is coming up to six months without being repaid. We will be putting in place a similar notification prior to the 12-month point. We can also run reports identifying terminated ORAs that have not yet been repaid by such dates.