Jim Thomas Lee
Solicitor
tel:+6472620423
mailto:jim.lee@hobec.co.nz
Qualifications
- LLB (First Class Hon), University of Waikato 2023
- Admitted to the Bar in New Zealand 2024
- Diploma in Health Services Management Level 7 (Top Scholar), National Tertiary Education Consortium 2016
- BSc Nursing, Ateneo de Zamboanga University, Philippines 2013
Contact
- DDI: +64 7 262 0423
- M: +64 21 849 487
- E: jim.lee@hobec.co.nz
Jim is a solicitor within Luke Stewart’s property and commercial team, in Holland Beckett’s Tauranga office.
Jim was born and raised in the Philippines where he completed his nursing degree and worked as a nurse. He moved to New Zealand in 2015. Here he completed his diploma in health services management and worked in various areas in the health care industry.
Having always wanted to study law, in 2020 Jim decided to pursue a Bachelor of Laws at the University of Waikato, which he completed with First Class Honours in 2023. He joined the Holland Beckett team shortly after having a special interest in commercial, property and trust law.
Outside work Jim enjoys reading, engaging in outdoor activities with his family and getting involved in his church community.
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Retirement Villages – Occupation Right Agreements FAQ’s
There are several things you need to have in place in order to move into a retirement village.
Residents need to have a valid Will and Enduring Powers of Attorney in relation to Property and Personal Care and Welfare.
Your solicitor will need to provide the village with copies of your Enduring Powers of Attorney prior to taking occupation of the unit.
Moving into a village will also involve signing an Occupation Right Agreement (ORA) or Licence to Occupy (LTO) with the retirement village. An ORA sets out the terms on which you can live in the village and the rights and obligations of both you and the village.
You will be required to pay an entry payment on settlement, being your purchase price to live in the Unit.
You will not own the unit like a freehold property, instead, you are given a right to occupy the unit and to use the village’s common areas.
Below we provide information to answer commonly asked questions around ORA’s.
What if my Trust is funding my entry payment?
Most villages don’t allow a Trust to be recorded as the licensee under the ORA.
If the entry payment is being funded by a Trust, there will need to be background documentation which records how those funds are being advanced, for example, by way of loan or by way of capital distribution.
If the Trust is advancing those funds by way of loan, Trustees need to consider the DMF and any additional charges that will be deducted by the operator on termination of the ORA and how that will be treated.
Most villages have a direction for payment on termination form that can be completed to record that on termination, the termination proceeds are to be paid to the Trust.
What if I change my mind?
Residents under every ORA have the benefit of a 15 working day cooling off period. Residents can terminate the ORA within 15 working days of signing it without having to give any reason. The DMF will not be charged where residents terminate under the cooling off period.
Some villages offer a 90-day money back guarantee. This guarantee allows residents to terminate the ORA within 90 days of the commencement date, if they are unhappy with their decision to move into the village or it does not meet their needs. The DMF will not be charged where residents terminate under the 90-day money back guarantee. Residents need to meet certain criteria to cancel under this right.
What is a deferred management fee (“DMF”)?
A DMF is the operators charge for managing and maintaining the village, your unit and the facilities.
The DMF is charged as a percentage of the entry payment up to a maximum 30%.
Some villages offer a choice in DMF at either 30% or 25% with the latter option having a higher entry price.
The DMF accrues over time, generally between the first 2 to 5 years of residency.
The DMF is charged on termination of the ORA, and is deducted from the monies owing to the outgoing resident.
What is a weekly village fee?
The weekly village fee is the resident’s share of the village outgoings which are payable by the operator.
Generally, the weekly village fee is charged monthly by direct debit.
Weekly village fees can be fixed, or subject to change. Generally, where a weekly village fee is subject to change, it is increased by the percentage change in CPI on 1 April in each year.
When the weekly village fee ceases to be payable differs between villages. Commonly, the weekly village fee ceases to be payable on the termination date of the ORA, provided the resident has vacated the unit and removed all of their possessions.
Will I incur any additional ongoing costs?
Separately to the weekly village fee, residents will be liable for all utility costs consumed in respect of the unit, such as electricity, gas, telephone, internet and in some cases water. Some villages purchase such utilities in bulk and build these costs into their weekly fees.
Where the unit is a serviced apartment, residents will also be liable for ongoing weekly service fees for services such as meals, laundry, cleaning etc.
Additional services charges for services such as hairdressing and podiatry, will be charged in addition to the regular fees.
What if I need a higher level of care?
Residents and their families should make enquiries as to what facilities or options are available for higher levels of care, such as serviced apartments, care suites and hospital/rest home facilities.
It is important to understand what terms apply to transfers within a village, for example, will you be charged a transfer fee and if so, how is this calculated.
Where a village offers care suites under an occupation right agreement, residents need to understand the DMF structure which will apply. Generally, where residents transfer from an independent living unit to a care suite, the DMF that has accrued under the independent living unit will not be applied to the care suite, and a second DMF will be charged on the care suite.
Often a DMF under a care suite will accrue at a faster rate, such as 12% in the first and second year of occupancy, and 6% in the third year. Some villages charge an initial % on the commencement date.
Can I terminate the agreement?
You can terminate an ORA at any time on giving the required notice and the ORA will terminate on your death or the death of the survivor of you (in the case of joint residents).
There are limited grounds on which the operator can terminate an ORA, such as where you can no longer live safely in the village, if you breach the terms of the ORA in a material way, if you cause any serious damage or distress to someone in the village, or you have permanently abandoned the unit.
When do I receive the money owing to me following termination?
Generally, residents will not receive the monies owing to them until the unit is re-licensed to a new resident, that resident has signed their ORA, the cooling off period has expired and they have settled their entry payment.
Some ORA’s provide that interest will be paid on the monies owing to a resident for the period from the date that is 6 months following the termination date until the date the resident is paid. Some ORA’s provide a village contribution rebate whereby the DMF starts accruing back/gets credited back if the unit hasn’t been re-licensed within 9 months.
If you are thinking of moving into a retirement home, contact Holland Beckett’s team for expert advice on ORA’s and planning for this phase of life.
Bright-line Tax Changes – What You Need To Know
It is a bright day for some property owners this July with the relaxing of the Bright-line Test requirement.
What is the Bright-line Test
The Bright-line test sets a out a timeframe where if a sale of a residential property occurs, the profit gained may count as income and therefore be taxable. However, some exceptions or rollover reliefs may apply that sidesteps the Bright-line rule.
The Bright-line Test Historically
From its inception in 2015, the Brightline test was set for a period of 2 years. A first amendment extended the period to 5 years if residential properties were purchased between 29 March 2018 and 26 March 2021. A further amendment was then made for residential properties purchased between 27 March 2021 and 30 June 2024 to have the Brightline period for 5 years for qualifying new builds or 10 years for other residential properties.
Bright-line Latest Changes
As of 1 July 2024, the Bright-line period is reduced back down to 2 years. So, residential properties sold on or after 1 July 2024 that is outside the 2-year period from when it was purchased will not be subject to the new Bright-line test. However, other tax obligations may still apply particularly to those who make a living out of buying and selling residential properties. Tax obligations may also apply if caught by the “intention test”, the idea being that if you buy a property with the intention of re-selling it to make a profit, you can be taxed.
Some Exceptions to the Bright-line Test
The Bright-line test does not apply if you are selling your main home. However, the main home must have been used “predominantly, for most of the time” during the period you own it.
The test also does not apply to residential properties transferred to the executors, administrators or beneficiaries of a deceased estate.
Rollover Relief
A rollover relief may also apply. This is when a transferee to whom the residential property is transferred is deemed to have acquired the residential property at the same time as when the transferor acquired the residential property.
Rollover reliefs may apply between transferors and transferees who are associated persons such as transfers between certain family members, some transfers of trust property, transfers of relationship property or transfers resulting from separations. However, the associated persons must have been associated for at least 2 years prior to the date of the transfer of residential property.
Conclusion
Only so much can be said in this article regarding the tax implications in selling a property. It is always prudent to seek legal and tax advice from a qualified professional when doing so. But at least the time frames for Bright-line which was resulting in profits from many rental property sales being taxed have been reduced from 1 July 2024. Please feel free to contact us for specific advice on your rental property sales.