$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.