Retirement: Cashmere Capital v. Carroll

Christchurch retirement village residents found their rights of occupation were worthless when the owner failed to properly bring them under the new consumer protection regime in the Retirement Villages Act 2003.

Concerns about the level of understanding enjoyed by elderly people buying into retirement villages and the complexity of legal arrangements on offer led to government intervention with the 2003 Act. The new Act imposes statutory obligations on village owners for residents’ health and welfare. To protect residents’ legal position, an independent statutory supervisor is appointed.

Importantly, mortgagees enforcing their security over a registered retirement village must still honour the rights of village residents. But this was to prove of no benefit to residents of an unregistered retirement village in Curlett’s Road, Christchurch, because the owner had failed carry out registration with the Registrar of Retirement Villages.

The court was told that part of a motel complex in Christchurch had been converted into a retirement home. Occupiers made a one-off unsecured loan to the owner in return for what was described as a lifetime occupation licence. Their interests as licenced occupier were not recorded against the land register title.

Subsequently, the owner mortgaged the property to Cashmere Capital Ltd, receiving loan advances totalling $940,000. Cashmere said they were told the occupiers were tenants.

Two years later, Cashmere sought to enforce its security. Only then, it said, did it become aware that the tenants were not in fact tenants, but claimed rights of occupation for life.

To protect their position, the occupiers claimed Cashmere had become an “operator” under the 2003 Act, and as an operator was legally obliged to register their interests with the Registrar of Retirement Villages. If done, this would stop Cashmere from evicting them in advance of a mortgagee sale.

The Supreme Court ruled that the mere fact a creditor took steps to enforce its mortgage does not make it an “operator” of a retirement village. Further steps are required, which indicate that the creditor is assuming control and management of the property.

The case was sent back to the High Court for further evidence on this point.

Cashmere Capital v. Carroll – Supreme Court (4.12.09)

12.09.006