Concern Over Retirement Village Special Levy.

Retirement Village reform advocate Les Scobie has written to the responsible minister expressing concern over a lack of clarity in the legislation as to the capacity of a village operator to impose a special levy where there has been an over spend on the maintenance budget.

"The Hon. Marlene Kairouz,

Minister for Consumer Affairs,

Level 16, 121 Exhibition Street,

Melbourne. Vic. 3000.

Dear Minister,

Re:- Need for amendment to Section 38(1a) of the Retirement Villages Act 1986, lack of legislative protection for retirement village residents from a 'special levy' where a village operator fails to properly control the spending of the maintenance budget.

In Section 38.1 of the Retirement Villages Act 1986 a 'special levy' is defined as -

RETIREMENT VILLAGES ACT 1986 - SECT 38

Increases in maintenance charges
(1) In this section—
"special levy" means a payment which is made by a resident to the owner or manager and which is not—
(a) a maintenance charge;

Poor protection for residents comes from the lack of clarity in the words 'a maintenance charge' rather than say 'maintenance charges'.

Village operators can hide behind this lack of clarity in the Act to enable careless, undisciplined or deliberate over spending of the maintenance budget, they then have the capacity of using a 'special levy' to support this spending. Whether this budget overrun has come about by design or by circumstance, the use of a 'special levy' in this way brings an increased financial burden upon residents.

Operators claim the words 'a maintenance charge' means a special levy cannot be a category of a proposed maintenance budget as opposed to a special levy cannot be used for an overrun in maintenance charges. The legislation may in fact have been designed to produce this result but if so it contains a gross unfairness for financially vulnerable residents. It grants village operators a virtual 'blank cheque' spending environment despite the setting of a budget. Any legislative controls in Section 38 of the Act, Increases in Maintenance Charges beyond CPI, to protect residents are totally negated if the operator can come back at the end of the year and simply impose a 'special levy'.

In a modern retirement village contract operators insert the following example from an actual contract -

Clause 23.2 - If the total Maintenance Charges (for any one Financial Year) collected from all the residents of the Village is insufficient to cover the operating costs for that Financial Year (“shortfall”), the Manager may impose a special levy to cover the cost of the shortfall under Section 38.6 of the Act.

Section 38.6(b)(iii) then contains the following -

RETIREMENT VILLAGES ACT 1986 - SECT 38

Increases in maintenance charges
(1) In this section—
(6) Despite anything to the contrary in a residence contract, a management contract or the by-laws, a resident is not required to pay a special levy unless—
6(b)(iii) the residence contract, the management contract or the by-laws provided that the residents are responsible for the expenditure or the class of expenditure which the special levy is intended to cover.

There is no room here to discuss the complexity of the pressures upon each and every village resident to support the imposition of a special levy, in effect simply rewarding an operator for careless, undisciplined or deliberate over spending.

Consideration should be given to amending Section 38.1 to read -
Increases in maintenance charges
(1) In this section—
"special levy" means a payment which is made by a resident to the owner or manager and which is not—
(a) maintenance charges;

Clarity in the law is as important as clarity in the contract.

Please give serious consideration to amending Section 38.1 by the removal of the words 'a maintenance charge' to be replaced by the words 'maintenance charges'.

Thank you,

Les Scobie,"