Fishhooks of moving from retirement village unit to rest home care

Wednesday, 3 April 2019

Buying into a retirement village and later transferring into a rest home can pose financial fishhooks which buyers should get full disclosure about, warns the watchdog on retirement villages.

Buyers should get this information including terms of transfer for short and long-term rest home care before buying an independent unit in a retirement village,Troy Churton, national manager, retirement villages, for the Commission for Financial Capability, an arm of the Retirement Commissioner, told a public seminar in Christchurch.

'And ask your lawyer to go through the terms of transfer under the occupation right agreement with you as well.'

As the number of people over 75 was set to more than double in 30 years, more and more were likely to transfer into rest home care after living in an independent village unit.

**READ MORE:

* Five things to know about living in a retirement unit

* Lotto-like windfall for retirees cashing up and moving to villages

* Massive growth for retirement villages, but they're not for everyone**

About 40,000 people live in retirement villages at present, which is 12.6 per cent of people over 75.

Churton said almost 70 per cent of retirement villages had co-located rest home care and many villages were marketing this 'continuum of care' with the boundaries between the two blurred.

The legislation and regulations governing retirement villages was different from those for rest home care, he said.

Some retirement villages with a rest home offered 'pay as you go' in the rest home.

That could mean transferring into a 'premium' care room where there were additional daily charges greater than the rest home subsidy a rest home resident might be eligible for. He knew a village in Auckland charging $70 a day for a premium care room, about $25,000 extra year.

Another model, and one corporate rest home operator was following this, was that a resident who was assessed as needing rest home care would have their occupation right agreement for the unit terminated and a new agreement drawn up for the care suite using the capital owed from the unit. The deferred management fee would be deducted at the end of care.

Some villages with rest home care charged a capital sum upfront for a rest home room and some had weekly fees and others did not, all issues retirees buying into villages should get answers to.

Another scenario might be one of the partners in a relationship becoming quite unwell and needing residential care. It was likely that the superannuation of the unwell partner would be directed to the rest home care while the well partner was left covering the weekly costs that came with the independent village unit.

'Bottom line is, depending on your financial circumstances, a transfer into care could make people who are reliant on superannuation for most of their income slightly vulnerable,' Churton said.

Churton said the agreement for residential care offered a choice between a standard or premium care room. But some villages only had premium rooms.

The resident who wanted a less expensive standard room had the right to choose that and the operator had to find it which could be somewhere else within 10 kilometres. 

There was a possibility spouses or partners could be separated, which many did not like.

A very knowledgeable service about these issues was Seniorline, paid for by district health boards and staffed by very experienced and independent people, he said.

A member of the seminar audience said finding a rest home bed was difficult.

The eldernet website has an update on the availability of care beds. A spokesperson told the seminar there was no regional shortage in Canterbury and 100 beds were available but they might not be where people wanted to go.

Retirement Villages Association executive director John Collyns said there was no guarantee a village resident could have a bed in a co-located care facility but generally the resident had first call on it.

Collyns said the Ministry of Social Development offered a loan service to people moving into a rest home to secure the room while their home was sold.

The association was discussing with that ministry and the Ministry of Health extending that loan service to residents in a retirement village unit moving into a rest home run by a different operator. The loan would be used to secure a care room while the village unit was resold.

When a village resident was transferring into a care room owned by the same operator the capital sum owed to that person on termination of their licence to occupy the unit was transferred with them into the care room and a new agreement drawn up, Collyns said.

The 'deferred management fee' was collected by the operator when the care ended.

Churton said the disclosure requirements under the retirement villages regulations required an operator to disclose the terms of transfer into a care facility.

'But it's not a very extensive regulation so there has been a variety of disclosure practices across the retirement village sector and with the spotlight that my commission has put on this interface more operators are putting more information now into that whole transfer into care process.'

His annual monitoring report would 'put the magnifying glass on' how well village operators were disclosing terms of transfer to rest home care.

'But one outcome I expect from our monitoring report is that there will be a recommendation to improve the disclosure requirements that operators of villages have to give about any care facility co-located on their site and what happens in that transfer across into a different regime.'

The report was due with the Minister of Housing and Urban Development, Phil Twyford, in July.