2278 NEW ZEALAND GAZETTE, No. 83 15 JULY 2010

The Accommodation Payment is offset against the Termination Payment at the termination of the Occupation Right Agreement.

The Village Expenses Payment is a yearly amount the Resident pays in monthly instalments to the Operator. This payment covers costs, expenses and fees associated with the operation of the Village, such as wages, taxes, rates, levies, water, gas, electricity and maintenance.

The Operator provides accommodation and associated services to the Resident.

4. Principle

(1) The Occupation Right Agreement has both financial arrangement and excepted financial arrangement components.

(2) When calculating income or expenditure in relation to the Occupation Right Agreement, it is first necessary to separate the two components (financial arrangement and excepted financial arrangement) of the Occupation Right Agreement.

(3) This determination specifies that the:

• Initial Fee and Termination Payments relate to the financial arrangement component; and

• Accommodation Payment and Village Expenses Payments relate to the lease component of the Occupation Right Agreement, which is an excepted financial arrangement and will be excluded from the application of the Financial Arrangements Rules when calculating income or expenditure for the Operator.

5. Interpretation

(1) In this determination, the following expressions (which have not been defined elsewhere within the determination) have the following meanings:

Initial Fee means the lump sum payable by the Resident to the Operator on entering into the Occupation Right Agreement.

Termination Payment means the lump sum payable by the Operator to the Resident on termination of the Occupation Right Agreement and the signing of a new Occupation Right Agreement with a new Resident who will occupy the villa that the departing Resident previously occupied.

Operator means operator of the Retirement Village.

Resident means a resident of the Retirement Village.

Accommodation Payment means the amount payable in consideration for the supply of accommodation to the Resident. The Accommodation Payment accrues daily, up to a maximum of 35 per cent of the Termination Payment, at 7 per cent per year.

Village Expenses Payment means the amount payable in consideration for the supply of accommodation to the Resident. It includes all costs, charges, expenses, wages, salaries, fees, and other outgoings paid or payable in relation to the management, supervision and operation of the Village.

6. Method

(1) In respect of income, gain or loss, or expenditure, and any other consideration receivable by the Operator or payable by the Resident, the amounts to be taken into account to calculate income or expenditure are the:

(a) Accommodation Payment; and

(b) Village Expenses Payment.

(2) In respect of income, gain or loss, or expenditure, and any other consideration receivable by the Operator or payable by the Resident, the amounts to be taken into account to calculate income or expenditure are the:

(a) Initial Fee; and

(b) Termination Payment.

7. Examples

Example A

(1) Example A illustrates the application of the method (set out in the determination) for determining the amounts attributable to both the financial arrangement and excepted financial arrangement components of the Occupation Right Agreement between the Resident and the Operator.

(2) Example A assumes the:

(a) Resident occupies a unit from 19 August 2009 until 13 March 2012;

(b) Initial Fee and Termination Payment are $300,000.00 each;

(c) Accommodation Payment is an amount equal to 7 per cent of the Initial Fee per year, accruing to a maximum of 35 per cent of the Initial Fee; and

(d) Village Expenses Payment is $1,200.00 per year payable in equal monthly instalments.

(3) On 5 August 2009, a Resident enters into an Occupation Right Agreement with the Operator. The Resident pays a deposit of $5,000.00 of the Initial Fee. The balance of $295,000.00 of the Initial Fee is paid to the Operator on the commencement date of the Occupation Right Agreement, 19 August 2009.

(4) The Resident leaves the Village on 13 March 2012, and the Occupation Right Agreement terminates on that date. The Operator locates a replacement Resident on 10 June 2012 and pays the Resident the Termination Payment of $300,000.00 on that date.

(5) The two amounts that are solely attributable to the excepted financial arrangement are as follows:

(a) The Accommodation Payment accrues daily from 19 August 2009 until 13 March 2012 at 7 per cent per year of the Initial Fee. There are two years from 19 August 2009 to 18 August 2011, and 206 days from 19 August 2011 to 13 March 2012. This is equal to 2.564 years. Therefore, the Accommodation Payment is equal to 17.948 per cent (7 per cent per year for 2.564 years) of $300,000.00:

Accommodation Payment = $53,844.00.

(b) The Village Outgoing Payment is a yearly charge of $1,200.00 payable in equal monthly instalments of $100.00. The Resident pays each instalment monthly from 19 August 2009 to 13 March 2012, for a total of 31 months. The total Village Outgoing Payment equals 31 times $100.00:

Village Outgoing Payment = $3,100.00.

(6) The aggregate amount attributable to the financial arrangement component of the Occupation Right Agreement, and therefore to be taken into account under the Financial Arrangements Rules, is $0.00 ($300,000.00 less $300,000.00), comprising the Initial Fee and Termination Payment. This amount constitutes aggregate income/expenditure under the Financial Arrangements Rules. All other amounts payable under the Occupation Right Agreement relate to the excepted financial arrangement component of the Occupation Right Agreement, so should not be taken into account when calculating income or expenditure.