Budget time for recurrent charges is fast approaching for most
For the 2011-2012 financial year, operators in New South
Wales will only need the consent of residents in one circumstance,
that is if:
village contracts provide for recurrent charges to be
varied otherwise than in accordance with a fixed formula; and
the proposed increase in the level of recurrent charges
exceeds the CPI.
In all other cases, operators do not require the residents'
consent to expenditure or to increase recurrent charges.
Formerly, an operator had to obtain the consent of residents for
any variation to any budget, irrespective of whether recurrent
charges are varied by fixed formula or otherwise.
The change in approach is an instance of streamlining processes
under the Retirement Villages Amendment Act 2008 (NSW)
(RV Amendment Act). Though the RV Amendment
Act commenced on 1 March 2010, transitional provisions
postponed the full effect of the above changes until the
2011-2012 financial year.
There is also an exemption for residents' consent where the
total annual budget does not exceed $50,000 and residents vote
by way of a special resolution to dispense with the need for
The changes do not however stop operators from having to provide
a copy of the budget for expenditure for the 2011 – 2012
year. That is, you still need to give notice of the
expenditure in the usual way.
Methods of Variation of Recurrent Charges
The typical method of variation where there is no fixed formula
is by reference to the budgeted costs.
This can be contrasted with variations by way of fixed formula
such as according to a nominated percentage of the age
pension, which is a common example.
The method of variation will be found in the village
contract and that is what must be applied. It is unusual, but some
villages have different methods in different contracts. A
contract may have alternative methods, but the Retirement
Villages Act 1999 (NSW) (Act) says that in
this case the method producing the lower increase for the
particular resident will prevail.
A recent decision of the Consumer Trader & Tenancy Tribunal
confirmed the terms of the village contract need to be clear as to
how variations to recurrent charges operate.
The relevant CPI figures are the Consumer Price Index (All
Groups) for Sydney published by the Australian Statistician.
Specifically, the relevant CPI figures are those published most
recently before the last variation was made and when the
current proposed notice of variation is given.
Proposed Annual Budget
The traditional 60 days' notice of the proposed annual
budget to all residents still applies, regardless of the method by
which recurrent charges are to be varied.
Notice of Variation of Recurrent Charges
If an operator intends to increase recurrent charges beyond CPI,
the 60 days' notice applies not only to the budget but
also to the notice of variation. As previously, the
operator must obtain the residents' vote of consent to the
budget and the notice or, failing that, a Tribunal order approving
Otherwise, the notice of the variation needs to be given on
14 days' notice, but there is no longer any
requirement for the operator to get the consent of residents
to either the notice or the budget. This has always been the case
for a variation in accordance with a fixed formula but now
also applies to a variation otherwise than in accordance with a
fixed formula where the increase does not exceed CPI.
If you would like any advice about your method of variation in
your upcoming retirement village budget, please contact
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