$100m Fee Overcharging

 

The Retirement Village Overcharging $100 Million Dollar Question.

Were Victorian retirement village residents mislead and overcharged, did Consumer Affairs Victoria mislead them.

A statement on the Consumer Affairs Victoria (CAV) website tells retirement village residents that their maintenance charge can only rise by CPI each year, or by more if residents approve it at a special meeting. That statement omits a separate and more fundamental statutory limit — an omission that has enabled operators to obtain maintenance charges without the authority of the residents, to the tune of an estimated $100 million.

What the Consumer Affairs published statement says -

“A retirement village can only increase the amount of their maintenance charge annually in accordance with increases in the consumer price index (CPI), A bigger increase is only allowed if it is approved by a special resolution passed at a meeting of residents.”

What the Victorian Retirement Villages Act says -

Section 3C defines what residents pay; Section 38AA calculates a statutory ceiling on that amount; and Section 38(2) stops the first amount from exceeding the second amount, absent resident approval.

The issue turns on how the Retirement Villages Act 1986 (Vic) (“the Act”) uses two distinct terms: “maintenance charge” and “adjusted maintenance charge.” CAV’s website treats these as effectively the same thing. They are not.

Two different concepts

Section 3C defines “maintenance charge” as the recurring amount a resident actually pays under their village contract to contribute to running and maintaining the village.

Section 38AA, by contrast, is headed “Formula for calculation of adjusted maintenance charge.” It sets out a statutory formula for a different figure. Critically, under s 38AA(2)(i), an established village calculates this year’s adjusted maintenance charge by starting from last year’s adjusted maintenance charge — not last year’s actual charge, not the operator’s costs, and not what residents actually paid. Only for a brand-new village, in its second year, does s 38AA(2)(ii) start from the actual maintenance charge.

This distinction is not accidental. Parliament used two different terms in the same section, for different circumstances, and built a formula that only makes sense if the “adjusted maintenance charge” is a separate, self-perpetuating statutory figure — a ceiling — rather than just another name for whatever the operator charges.

Section 38 confirms this. Section 38(2) prohibits an operator from requiring a resident to pay a maintenance charge greater than the adjusted maintenance charge, subject to limited exceptions. Section 38(4) allows residents to approve, by special resolution, payment of a charge above that ceiling. Both provisions treat the maintenance charge and the adjusted maintenance charge as separate figures being compared — one regulating the other.

Why this matters in practice

CAV’s website reduces this to a single test — is the increase within CPI? That test is incomplete. Even a CPI-matching increase in the operator’s charge can exceed the separately calculated adjusted maintenance charge, triggering the Section 38(2) protection regardless of CPI. A worked example illustrates this:

Year	CPI	Section 3C - Maintenance Charge - (MC)	Section 38AA - Adjusted Maintenance Charge - (AMC)	Excess MC > AMC
1	–	$100,000	–	–
2	3%	$108,000 (+8%)	$103,000 (+3%)	$5,000
3	2%	$110,160 (+2%)	$105,060 (+2%)	$5,100

In Year 2, residents were asked to vote — but only because CAV's guidance flagged the increase as exceeding CPI, not because it exceeded the statutory ceiling.

In Year 3, the increase matched CPI exactly, so under CAV's guidance no vote would be offered — yet the charge still exceeded the Section 38AA ceiling by $5,100. Residents' rights under Section 38(2) and Section 38(4) denied, the practical consequence of collapsing two distinct legal concepts into one CPI test.

Anticipating the objection

A fellow consumer advocate and I gained the support of the Victorian opposition to amend the title ‘adjusted maintenance charge’ to ‘benchmark fee’, this to better reflect its true function. Opposition member Mr. David Davis advised the upper house, “This change is designed to clarify the confusing terminology around the actual maintenance charge residents pay and the charge adjusted for CPI. Given the adjusted maintenance charge is not a charge but a guideline or a benchmark, replacing ‘adjusted’ with ‘benchmark’ will improve clarity and make it easier for residents to understand”.

The motion to amend was defeated by the state Government and the Greens, the then Minister for Housing claiming “Mr Davis, the adjusted maintenance charge is not benchmark. It is an actual maintenance charge payable by residents, adjusted annually in line with CPI and other prescribed increases in the Retirement Villages Act. Residents are not required to pay any amount higher than the adjusted maintenance charge unless that is otherwise approved at a meeting of residents, and that framework has been in place since at least 1997. A departure from existing language may cause avoidable confusion among current residents rather than providing the clarity that underpins the principles and objectives of this act”.

The government statement doesn't resolve the question. The statutory text is primary, and Section 38AA(2)(i) still defines the calculation as starting from the previous adjusted maintenance charge — while Section 38(2) still prohibits charging residents more than that figure. The Minister's comment may describe circumstances where the two figures coincide; it does not make them legally identical. A proposal's rejection doesn't rewrite the operative text.

Purpose and conclusion

Section 1 of the Act states its purpose is to protect the rights of retirement village residents, and Section 35 of the Interpretation of Legislation Act 1984 (Vic) requires a construction that promotes that purpose. Reading the “adjusted maintenance charge” as a statutory ceiling — not a synonym for whatever the operator charges — gives that protective purpose real effect.

The correct sequence is: identify the maintenance charge under Section 3C; calculate the adjusted maintenance charge strictly under Section 38AA; then apply Section 38(2) to check whether the former exceeds the latter. An operator cannot simply relabel its preferred charge as the "adjusted" figure, and cannot avoid the statutory ceiling by pointing to CPI compliance alone.

Who pays, and who is accountable

The consequences extend beyond any one village. Every operator that has relied on CAV's CPI-only framing — rather than calculating the Section 38AA ceiling and comparing it to the actual charge under Section 38(2) — would have collected maintenance charges in excess of what the Act permits, without the resident approval Section 38(4) requires. Across the sector that overcharge is estimated to total in the order of $100 million.

That raises whether residents who paid the overcharge have a path to recovery — whether through the village's internal dispute process, VCAT, or a class remedy — and whether responsibility lies with CAV for the guidance itself, with operators for relying on it without independent legal advice, with the state government for failing to act once the issue was raised with them, or with all three.

For an average size village the overcharge can be substantial in a relatively short period of time. There are over 400 villages across the Victoria.

Retirement villages. The $100 million bureaucratic jumble

Potential gap between what retirement village operators charge residents and the actual cost could hit retirees for up to $138 million, retiree rights advocate writes.

Residents at retirement villages operating under Victoria’s Retirement Villages Act 1986 (RV Act) are being charged more for village maintenance and management — the service charge — than what the law requires.

This occurs where operators deny residents the statutory right to choose to pay a service charge from two separate values — the service charge as proposed by the operator, or an independently calculated benchmark value.

According to the legislation, residents are not required to pay a monthly service charge higher than this independently calculated, CPI-compounding benchmark value — unless the residents agree to do so (except for the first year. The service charge is based on the operator’s estimated operating costs for maintenance and management of the village for the new village year; the benchmark value compounds each year using the % change in the Australian Bureau of Statistics Table 9 Melbourne CPI index.

See the full story at the link below - 

Retirement villages. The $100 million bureaucratic jumble

Victorian Retirement Village Residents Exposed to Financial Exploitation

The Victorian State Labor Government began reviewing the Retirement Villages Act in 2017, after some 9 years they failed to fix one of the most serious of problems.

How the statement by Consumer Affairs Victoria leads to Victorian retirement village residents being exposed to financial exploitation by paying a maintenance charge greater than they have a statutory obligation to pay.

The statement by Consumer Affairs Victoria is from page 13 of their booklet A Guide to Living in a Retirement Village. It is contended that the statement misleads the entire Victorian industry when it comes to the methodology used to calculate the $ value of the maintenance charge. Whilst the statement may have been purposely simplistic given the nature of the publication, it has been adopted and practised by village operators statewide as law.

The misleading statement -

“The retirement village can only increase your maintenance charge in line with the annual Consumer Price Index (CPI) adjustment.

A bigger increase is only allowed if it is approved by a resolution of the residents’ committee or a resolution of a majority of the residents.”

The statement guarantees the payment of a ‘maintenance charge’ at a $ value greater than village residents have an obligation to pay under the act. It deprives residents of the statutory protections afforded them under Sections 38.1, 38AA, 38.2, and 38.4 of the Retirement Villages Act.

The page 13 CAV statement incorrectly prescribes that the primary question to be asked in each and every year of village operation is – is the increase in the maintenance charge to be greater than a cpi increase. Residents are afforded protection under Section 38.2 which mandates the primary question each year is - is the $ value of the proposed maintenance charge to be greater than the Section 38AA cpi index % increased adjusted maintenance charge.

The ‘adjusted maintenance charge’ is not the previous maintenance charge adjusted for cpi. The confusingly named adjusted maintenance charge is a Section 38AA cpi calculated, standalone, $ value. A value to which the proposed maintenance charge is compared (benchmarked) for the purposes of affording residents protection under Section 38.2 each year.

The page 13 statement incorrectly prescribes that a Section 38.4 vote of residents is only required in those village years where the increase in the maintenance charge is greater than a cpi increase. Section 38.4 mandates a vote of residents in each and every village year where the $ value of the maintenance charge is to be greater than the Section 38AA cpi calculated adjusted maintenance charge.

Table A and then Table B below establish that for a village of 90 units, with a maintenance charge in the first full year of $624.00 per month, residents are misled into paying $357,062.62 more in their maintenance charge than obligated to pay under the RV Act. Using the Consumer Affairs methodology in Table A - 

1. The operator sought and was granted authority by unsuspecting residents in years 2 and 6 under the invalid CAV methodology of - the increase in the maintenance charge was greater than a cpi increase.

2.The operator contended that resident authority was not required in years 3,4,5, 7 & 8 under the invalid CAV methodology of – the increase in the maintenance charge was not greater than a cpi increase.

                                                                              Table A

Under the methodology espoused by Consumer Affairs Victoria, the operator failed to calculate a $ value for the statutory ‘adjusted maintenance charge’ despite having an annual obligation to do so under Section 38AA of the RV Act.

Table B below uses the provisions of Section 38.1, Section 38AA, Section 38.2 and Section 38.4 of the Victorian Retirement Villages Act to calculate the maintenance charge. The outcome over years 3.4.5.7.& 8 of village operation is a payment by residents of $357,062.62 in their maintenance charge above their statutory obligation to pay.

                                                                             Table B

 
Table B above calculates the $ value of the maintenance charge using the statutory provisions of Section 38.1, Section 38AA, Section 38.2 and Section 38.4
of the Victorian Retirement Villages Act.

The fee overpayment stems from -

1. The village operator in calculating the maintenance charge used the invalid methodology espoused by CAV in Page 13 of their booklet A Guide to Living in a Retirement Village. The actions of the village operator breached the provisions of Section 38.1, Section 38AA, Section 38.2 and Section 38.4 of the RV Act.

2. The operator failed to calculate in each and every village year (excl 1st) a $ value for the poorly named, stand alone, Section 38AA cpi calculated adjusted maintenance charge. (One is shown in Table B to illustrate the magnitude of the financial exploitation problem)

38.1 - "adjusted maintenance charge" means the adjusted maintenance charge determined and indexed in accordance with section 38AA;

38AA(2) - For the purposes of subsection (1), the adjusted maintenance charge must be determined for each relevant financial year for the retirement village in accordance with the formula—

3. The operator failed to compare (benchmark) the value of the proposed maintenance charge to a $ value for the Section 38AA cpi calculated adjusted maintenance charge. This action denied residents the protection afforded them each year under Section 38.2 of the RV Act.

38(2) Despite anything to the contrary in a residence contract, a management contract or the bylaws a resident is not required to pay a maintenance charge to the extent to which it is greater than the adjusted maintenance charge.

4. The failure of the operator to compare (benchmark) the value of the proposed maintenance charge to a $ value for the Section 38AA cpi calculated adjusted maintenance charge also denied residents the protection afforded them under Section 38.4 of the RV Act. That in each and every year where the operator proposes a maintenance charge at a $ value greater than the Section 38AA cpi calculated adjusted maintenance charge, village residents are granted the statutory right to choose which of the two values they will pay.

38(4) Subsection (2) does not apply if the payment of a maintenance charge that is greater than the adjusted maintenance charge has been approved by resolution of a majority of the residents at a meeting of tthe residents or is approved by resolution of the residents committee.

Table B establishes that residents were misled into paying some $357,000 more in their maintenance charge than they were obligated to pay under the provisions of Section 38.1, 38AA, 38.2 and 38.4 of the Victorian Retirement Villages Act.

This example is for an industry average size village of 90 units and paying an industry average size $624 per month toward village operating costs. There are some 450 villages in Victoria, housing some 36,000 Victorian retirees, operating under the provisions of the Retirement Villages Act. A frightening $160 million dollars in unauthorised charges over the period.

Retirement Village Residents Fight Back

 Housing for the Aged Action Group posted the following details - 

Not just unfair, unlawful: VCAT rules against village charging Deferred Management Fees

Housing for the Aged Action Group welcomes a decision from VCAT President Justice Woodward which found that the Residential Tenancies Act prevented a land lease village from charging Deferred Management Fees (DMFs). DMFs are a common kind of exit fee charged across several types of retirement housing, often costing departing residents or their families tens of thousands of dollars or more.

“We have long said that these DMFs are unfair and, in some cases, unlawful,” said Shane McGrath, HAAG’s Senior Tenancy and Retirement Worker. “This decision confirms that some of the most common models for DMFs in land lease communities are prohibited under Victorian law.”

Click here for the full story - https://www.oldertenants.org.au/publications/not-just-unfair-unlawful-vcat-rules-against-village-charging-deferred-management-fees

Are Retirement Villages A Rip-Off

 The Jacinta Allan Labor government 2025 Victorian Retirement Villages Act perpetuates the rip-off of charging a purchase price without gaining ownership, only occupancy in a retirement village. VOTE NO.

Retirement Village repayment period now 12 months

 Currently Victorian retirement village residents wait 6 months for repayment of their refundable amount on leaving a village. The Jacinta Allan Labor government has pushed that out to 12. Why? Only 1 winner the operators pockets. Elderly Victorians lose, what do they live on, how do they go forward.

Retirement Villages What is Wrong

The critical importance of retirement village resident submissions to Victorian state government inquiries is that they are actually living the experience not simply 'working in the field'. They know what is wrong because they have experienced it, suffered from it.

Victorian retirement village residents find that there is almost zero protection when something goes wrong, or the system to obtain that protection is so cumbersome, so demanding on them, that surrender is ultimately the chosen option. And village operators know that and use it to their own financial advantage.

All this from a Victorian Labor government that fails to enforce the law as it is currently written, let alone to improve it to protect the very people it was originally written to protect.

"The law was clearly on the side of the village residents. It was a lack of access to affordable, quick, decisive enforcement of the law that failed them most". - Retvilldotnet

Retirement villages, the process of for-profit operators seeking financial reward from this commercial activity under the guise of the provision of benevolent housing for older Victorians. Sadly and particularly in Victoria the commercial risks to operators are dampened by statute whilst at the same time the commercial rewards are enhanced by statute. 

For Victorian retirees who make that fateful decision to enter a retirement village it is the complete opposite. The payment of the capital value of the village unit, not for ownership simply occupancy. The payment of all the costs of property ownership with none of the rewards.

"Families need to be aware that what we are talking about here is the transfer of intergenerational wealth, not to families but into the pockets of corporations. Shame about the elderly not having enough money for aged care."

So what is wrong with Victorian Retirement villages, the answer is -

1. Bureaucrats who don't really know or fully understand the product they are producing legislation for.
2. Legislators who don't really know or fully understand the product they are enacting legislation for.
3. State Governments who are far too easily seduced by slick marketing from the industry.
4. A failure of all of the three parties above to listen to the one group of people who really do know and fully understand the product, the village residents and their families. 

Village residents understand because they suffer financially from the legislative inequities produced by Bureaucrats, Legislators, State Governments.

Transfer of Intergenerational Wealth

Retirees don't deserve the financial disaster that comes from downsizing from the family home into a retirement village. @SffpVictoria @ademsomyurek @_davidlimbrick @georgievpurcell @rachelpaynemp @dettershankMP @BradBattinMP @DavidDavisMLC @NStaikos #springst @AivGoesGreen pic.twitter.com/zSxfvEk82u

— Les Scobie (@retvilldotnet) February 4, 2025

Capital Wealth Lost

Retirement village analysis shows the dominant financial model for retirement villages the loan lease model is causing a demonstrative transfer of capital from residents and their families to operator corporations. https://t.co/4zW6TvuCXF @MichaelWestBiz @consumervic #springst

— Les Scobie (@retvilldotnet) February 3, 2025

Vic Labor Tramples Retirment Village Residents

@VictorianLabor has trampled some 36,000 retirees in retirement villages by making them wait 12 months to get their money back on leaving a village. Insulting them by saying probate takes longer than six months. @NStaikos @JaclynSymes @TimMcCurdyMP @consumervic @abc730 #SpringSt pic.twitter.com/GtDQ1xOOPF

— Les Scobie (@retvilldotnet) February 2, 2025