It’s an interesting phrase “licence to occupy“. As one resident of a licence to occupy retirement home put it, “It takes away the sense of ownership, but in the end, do we really own anything?”
When people reach retirement age, one of the most significant decisions they have to make involves where to live. Many choose to downsize to licence to occupy (LTO) communities. According to Village News, “Licences to occupy are the most common way to live in a retirement village in New Zealand”.
But it’s a way of living that has generated a lot of controversy over the years. So, what makes people choose this lifestyle? Is what you gain from living in one of these communities greater than what you lose in capital gains?
We talk to couples who made this choice, offering insights for people thinking about doing the same.
You’re buying into a lifestyle
“You’re buying into a lifestyle”, explains Jim, a resident. “And all the facilities we’ve got here, like the bowling green, the gymnasium, the swimming pool, the sauna, the movie theatre, the library, the cafe….” It’s all here to be enjoyed, and it’s so easy.
“It’s like being in a hotel at Surfers. You walk in and go wow, ‘this is lovely’. It’s like living there”.
Maggie
Our community offers a range of activities, classes, and facilities at no additional costs, so you can pursue a vibrant lifestyle without worrying about financial constraints. Not only do you save on membership fees, but you also have the convenience of having them right at your doorstep.
As we age, it’s easy to fall into a rut and not participate in activities as much. This can impact cognitive and emotional well-being. Some seniors limit pursuits to just the basics because it’s easier than getting out. Budgetary concerns can also weigh heavily on their decision to pursue hobbies and activities.
Coming into a community like ours can help you regain your zest for life. It’s so much easier to stay active and pursue interests when they are literally on your doorstep. There are many activities each day – check them out here.
You’re part of a community that’s connected
Remember the time when you knew your neighbours? When you felt comfortable enough to pop over for a cup of sugar or to borrow a tool? Back in the day, neighbours felt like family. They looked out for one another, and connected on a level that’s hard to find these days.
Several residents spoke of a shift in their suburb over the past 20-30 years, a disconnectedness. In today’s world, it’s not uncommon to live amongst strangers. When you’re working and raising a family, that may not bother you, but as you get older, you may feel isolated and lonely.
Many of the residents we talked to missed the days when they could wave hello to someone on the street and know their name. Being familiar with people around you brings a sense of comfort. Retirement communities like Settlers provide that.
“You have a shared outlook on life, a shared vision, and camaraderie that you don’t get out in the suburbs. It’s the same sort of thing that you get by belonging to a club. You never get lonely. There’s so much to do”.
June
You have certainty around budgeting
One of the most significant upsides of licence to occupy is the certainty it brings around financial planning. The couples we spoke with noted that the terms, conditions, and charges were agreed upon at the onset, thus removing the uncertainty around financial planning. The fees are fixed for life, giving residents a clear understanding of how much they need to budget.
However, not all retirement villages provide fixed fees for life, so it’s really important to check this at the onset.
“We added up our rates, our water rates, insurance, tree trimming, gardening etc. and you don’t have to worry about it – worry about who is ripping you off. And you don’t have to worry about it [costs] going up”.
Dave
Many people are concerned about the cost of living, but for those who are no longer working it can be an even greater worry. Take rates for example. As part of a plan to plug a $325 million budget hole, Auckland Council increased rates by 7.7 percent earlier this year.
Next year, those rates could nearly double from a starting point of 13.75 percent, as the council seeks to balance its books. Source: RNZ, Possible rates hike for Auckland will make city even more unaffordable, residents say
“You don’t have to pay rates, water rates, gym memberships, maintenance – all of those costs keep going up, but our fee is fixed for life. That’s a huge relief when you’re on a fixed income”.
Jean“We are saving more money here than we were at home. Your rates aren’t going up. When something needs fixing you put a form in and it’s fixed within a day”.
Mary
As the costs of rates, water rates, gym memberships, and maintenance continue to rise, having fixed fees for life provides long-term stability and relief.
You can relax and let go of worries
Imagine a world where everything is taken care of for you. On-site nurses, gated security, maintenance services, and gardening assistance provide a worry-free living experience. You can get support with meals, housekeeping and even transport. Again this is all part of the lifestyle you are buying into. You can learn more about support with everyday living at Settlers by checking out this article.
There is peace of mind that comes from knowing your needs are being met without worrying about how much it will cost you. Residents report feeling free of undue pressure, and free to do more of what they want. Which brings me to the next point.
You can free up time
If you don’t have to worry about home maintenance and gardening, you can focus your energy on doing what you love.
“As you get older you have less energy but you now have more time. You can use the energy to do the things you want to do, rather than the things you have to do”.
“Four years ago my husband had a stroke. This is another thing that coming in here gives us – the opportunity for nursing, and you’ve got the alarms if anything happens”.
Mary“We have 5 call buttons in our apartment. I pushed one by mistake once and the nurse was up in seconds!”
June
You can free up cash
When you sell a home and buy into a LTO retirement home, depending on the value of the home you’re selling and the equity you have in it, it can often free up quite a bit of cash. This cash enables you to enjoy your retirement comfortably knowing that you have cash in the bank to fall back on, travel and so on.
“We could provide the children with an early inheritance and add another investment property to our portfolio”.
Jim
To sum up, there are many advantages to choosing the licence to occupy communities, as shared by couples who have made that decision. These include buying into a certain lifestyle, peace of mind, saving costs, accessing equity, and obtaining greater budgeting certainty.
However, it’s important to note that agreements can vary significantly, so it’s crucial to seek legal advice. Take for example fees. Not all retirement communities fix them, and that’s an important consideration.
Sadly, there are negative experiences with licence-to-occupy agreements in some villages. So, it’s crucial to have a full understanding of the legal agreement you are entering into before making any decision.
It’s important to understand that you’re not buying real estate but rather a form of licence to reside. By itself, that can be a difficult concept to grasp.
Yes, the loss of capital gains is a consideration, but for so many of the couples who have made the choice to forgo that, it was worth it for the lifestyle they’ve gained. Some even took their equity and invested in investment properties in order to maintain some form of capital gains, so they got the best of both worlds.
Disclaimer: Please note that we are not retirement law experts. The content of this blog is for informational purposes only and provides perspectives of a small sample of retirement village residents. You should consult a lawyer before making the decision to move to a licence to occupy village.
