The following example shows how the Deferred Management Fee (DMF) is worked out in New Zealand, and how it affects the final payment to you or your estate when you leave a retirement village.
Example – Mr C
Mr C chose a unit in a village close to his old home. Before committing, he took sensible steps to understand his options, including:
- Using Eldernet's retirement village checklist
- Visiting several villages
- Talking with residents and village staff
- Reading and understanding the paperwork provided by the various villages on his shortlist
- Visiting a lawyer experienced in retirement villages to have all the essential legal components and financial implications explained (e.g., ORA, legal title, Deferred Management Fee [DMF], weekly fees, etc.)
The financial arrangement
- Mr C paid $500,000 for the right to occupy his unit under an ORA.
- The weekly fees are $150 per week and fixed for life
- The DMF accrues at 5% per year, and is capped at a total of 20%
- Mr C does not share in any capital gain or loss
Mr C enjoyed six years in the village and continued to pay the weekly fee of $150 per week.
When Mr C passed away
The DMF is deducted from the amount returned to Mr C's estate. Since Mr C had reached the maximum DMF after four years, no further deductions were applied from year five onwards.
| Duration | DMF applied | Amount retained by village | Amount returned to estate (not including other potential fees) |
| After 1 year | 5% | $25,000 | $475,000 |
| After 2 years | 10% | $50,000 | $450,000 |
| After 3 years | 15% | $75,000 | $425,000 |
| After 4 years (and thereafter) | 20% (max reached) | $100,000 | $400,000 |
Since Mr C lived in the village for six years, the maximum DMF applied, meaning his estate received $400,000.
Updated: 1 Dec 2025