Case studies - Retirement villages

The following case studies reflect decisions made by the former Consumer, Trader and Tenancy Tribunal, which became the Consumer and Commercial Division of NCAT from 1 January 2014.

These case studies should not be viewed as precedents.  They are provided as a general guide only and should not be treated as legal advice or relied upon as such.  All Tribunal matters are determined on the merits of the individual case and the supporting evidence.

Capital maintenance and repairs 

Case study 1

The Retirement Villages Act 1999 sets out who should pay to repair or replace what are called ‘items of capital’.  An item of capital is broadly defined to include most items found in a village such as buildings, equipment, fixtures and fittings.  Section 97 says that operator cannot fund any costs of depreciation or capital replacement from recurrent charges payable by a resident.

A resident of a retirement village claimed that he had been overcharged for recurrent charges on items which he considered to be depreciation and expenditure on replacement of fixed items of capital.  These included repainting the outside of the village and all expenditure associated with the bore pump and sprinkler systems used in the landscaping, electrical and plumbing repairs and the replacement of items such as doors, patios, driveways, fences, roof tiles, clothes lines and guttering.

The Tribunal Member had to consider whether the items charged to the resident were capital costs or not.  The Member drew on definitions in the Act, previous Tribunal decisions, and dictionary definitions to draw the distinction between 'capital replacement' and maintaining items in a state of reasonable repair.  This distinction was then applied to each of the items raised by the resident.

The Member found that repainting the villas simply maintained the villas – a fixed capital item – in a state of good repair and could be recouped by the operators through recurrent costs.  The Member found that the replacement of fixed items of capital such as sprinkler heads and sprays, plumbing and electrical appliances, doors, driveways etc were capital replacement costs and should be borne by the operator.  However the cost of maintaining capital items in reasonable repair was not depreciation or replacement and expenditure such as repairs could be funded from recurrent charges.

The Tribunal Member ordered the village operators to refund to the resident those charges which constituted depreciation and capital replacement.

Case study 2

Under the Retirement Villages Act 1999 it is the responsibility of the village operator to allocate a sufficient amount for capital maintenance when preparing a proposed annual budget, which may be paid from the recurrent charges or the village’s capital works fund. However, the Act also states that the operator must bear the cost of replacement for ‘items of capital’, including fixtures, fittings, furnishings, whitegoods and furniture, from its own funds.

A retirement village operator lodged an application to the Tribunal to resolve a dispute with the residents about the proposed annual budget. The residents disputed several items in the proposed annual budget, in particular the inclusion of a new line item called ‘Capital maintenance fund’ valued at $40,000. The residents alleged that there were items of capital included in the proposed capital maintenance fund that should not be there.

At the hearing, the residents committee was represented by one of their members and the operator was represented by a solicitor. The solicitor provided a quantity surveyor’s report upon which the operator based its estimated capital maintenance charges. The report included a section titled ‘Loose items’, to the value of $18,000, setting out various items at the village that needed replacement such as a clothes dryer, entertainment equipment, outdoor settings and venetian blinds.

The Tribunal Member considered that the ‘Loose items’, described in the capital maintenance item of the proposed budget clearly fell within the categories of ‘items of capital” as defined in the Retirement Villages Act 1999, and that the inclusion of this item within the capital works fund budget was clearly in contravention of the Act.

The Tribunal made orders that the line item ‘Capital maintenance fund’ be reduced by $18,000, reflective of the inclusion of non–claimable capital replacement charges.

Proposed annual budget 

The Retirement Villages Act 1999 requires each operator to prepare a proposed annual budget for each village prior to each financial year, itemising the ways in which the operator proposes to spend residents’ recurrent charges during the coming year.  The residents must vote on the proposed annual budget within 30 days of receiving it, and 50% must agree with the budget for it to be approved.

Residents of a retirement village had concerns regarding the proposed annual budget for the following year detailing a 10% increase over the previous year.  The operating costs were to be funded by way of recurrent charges paid monthly.  As a group the residents wrote to the village operators about their concerns.

When negotiations broke down between the manager and the residents, the resident lodged an application to the Tribunal.  The matter was listed for a directions hearing at the local community hall to allow for the village residents to attend.  A number of residents attended the hearing and were represented by the chairperson of the Residents Committee.  The manager of the village attended on behalf of the operator.

Both parties produced evidence to support their claim regarding the proposed budget for the village.  The Tribunal Member discovered that the evidence had not been examined by the other party before the hearing, and therefore directed a timetable for the exchange of documents to occur.  The matter was then adjourned for a full-day hearing.

At the next hearing, the village manager and a number of residents appeared.  Extensive cross-questioning by both parties on the evidence was allowed.  The Tribunal Member then reserved the decision in order to review the evidence and relevant case law.

The reserved decision was handed down five weeks later and determined that the proposed annual budget should not exceed the standard CPI increase of 3%.

Recurrent charges 

Case study 1

Section 152 of the Retirement Villages Act 1999 contains very specific conditions under which a resident’s liability to pay recurrent charges in respect of general services can cease.

After moving from a retirement village into a nursing home, a former occupant had been paying the general service charges on the retirement village unit which had still not sold.  He applied to the Tribunal for a refund of the general service charges based on the final wording of section 152 – that a resident is liable “… unless the contract between the former occupant and the operator provides for an earlier cessation of that liability”.

At the hearing, the village operator claimed that under the residence contract, there was a provision which say that the resident was liable to continue paying the recurrent general charges after permanently vacating the premises until six months after the resident 'delivered up vacant possession of the residential premises'.  A representative for the elderly man argued that when he permanently moved from the retirement village to a nursing home, this equated to the resident giving 'vacant possession'.

The Tribunal Member stated that the Retirement Villages Act 1999 clearly distinguishes between vacant possession and having permanently vacated the premises, and makes it clear that a person can permanently vacate the premises and not grant vacant possession.

The Tribunal Member found that the elderly man still retained ownership and had not granted vacant possession.  Therefore the application was dismissed and recurrent charges for general services should continue until the unit was sold.

Case study 2

A variation of the recurrent charge amount may only be made in accordance with the provisions of the Retirement Villages Act 1999.  Residents of the retirement village may apply to the Tribunal to claim a refund if they can show an overpayment of recurrent charges.

A retirement village was experiencing an increase vacancy rate and a decline in business.  As a result the village operator sought to increase the recurrent charges payable by the residents to account for a shortfall in the village budget.  The operator sent all residents a proposed annual budget which put forward an increase of $10 per fortnight in the recurrent charges.

The residents held a meeting to vote on the proposed increase and it was accepted by a majority, albeit with some protest and disappointment.  Some residents claimed the vacancy rate was the village operator’s responsibility.  They subsequently made an application to the Tribunal seeking an order that an overpayment of recurrent charges be refunded on the basis that the operator did not have the authority to amend the recurring payments.

At the Tribunal hearing the village operator gave evidence that they had complied with proper procedure for the variation of recurrent charges as set out in the Retirement Villages Act 1999.  The operator stated they had given sufficient notice of the proposed variation to the residents, sent out a proposed annual budget detailing the amount and the reasons for the increase, and had sought and received the residents’ consent to the variation.

The Tribunal Member found that the village operator had complied with the required procedures for variation of the recurrent charges.  Accordingly, orders were made dismissing the residents’ application as they did not show there were any grounds that there had been an overpayment.

Resident or tenant? 

Jurisdiction, or the power to hear and determine applications, is conferred on the Tribunal by a number of Acts. The Tribunal must be satisfied that it has jurisdiction in any application that comes before it.

Since 1958, a charitable organisation (‘the Society’) had owned a residential complex that was made up 24 self-contained units. The occupants had always generally been older persons who required financial assistance for their housing needs. The complex had a shared laundry and other common areas to which occupants had access.

Around the time when the Retirement Villages Act 1999 came into effect the Society adopted a policy to enter into standard residential tenancy agreements, thereby utilising section 5(3)(h) to exclude the effects of the retirement villages legislation. When the Society lodged an application to the Tribunal to terminate a residential tenancy agreement of one of its occupants under the Tribunal’s Tenancy Division, the occupant lodged a cross–application under the Retirement Villages Division, seeking orders that the Retirement Villages Act applied to his agreement.

During the Tribunal hearing, the occupant presented his residential tenancy agreement which contained a special handwritten clause stating “The terms of the Residential Tenancies Act do not apply to this Agreement”. He also provided a Local Council brochure which referred to the complex as a “retirement village”. The Society claimed that the special clause on the agreement was a mistake. They claimed that their complex was not a retirement village, and lacked the “trappings” usually associated with a retirement village. Other occupants were called upon as witnesses who gave evidence in support of the Society.

The Tribunal Member accepted that the special condition was a mistake and not what the parties had intended. However the question remained whether the agreement was caught by the Retirement Villages Act. There was no evidence that the complex had any of the features normally associated with a retirement village, such as a “residents committee”, “village contracts”, “disclosure statements” or “village rules”. There were also no “recurring charges” or “departure fees” payable, and there was no paid caretaker or staff.

The Tribunal Member held that the occupant had not proved that he had entered into a contract controlled by the Retirement Villages Act 1999. As a consequence, the occupant’s application was dismissed.

Sale of premises 

Where a village resident is the owner of their residential premises, the Retirement Villages Act 1999 provides that a village operator who holds an option to purchase any residential premises from a village resident must decide whether or not to exercise the option, and must give the resident written notification of that decision, no later than 28 days after the resident permanently vacates the premises.  If the operator does not give the notification required within the time allowed, the option lapses.

An elderly woman, a retirement village unit resident for 20 years, was hospitalised and relocated to a nursing home for her recovery.  While in the nursing home she continued to own the unit and pay levies, with her goods remaining in the unit.  The woman had let her niece know that she intended to return to her unit, and this information was passed on to the village operator.  However, sadly just over a year later the woman died at the nursing home.

Upon learning of the woman’s death, the retirement village operator sought to exercise a term within the agreement between the deceased and the village which provided them with the option of buying back the village unit.  The executor of the deceased’s estate then applied to the Tribunal seeking an order that the buy-back option timeframe had elapsed and was therefore void.

At the hearing the executor claimed that in order to properly exercise the buy-back agreement, a notification stating the village operator’s intention must be sent to the village resident within 28 days of moving out.  The executor argued that the deceased had in fact moved out a year beforehand and accordingly the buy-back option had elapsed.  In response, the village owners argued that the deceased had not in fact moved out as her belongings remained in the unit and she had expressed her intention to move back.

The Tribunal Member found that the woman had moved out of the unit, regardless of what her intentions or wishes were about moving back to the premises, on the basis that the statement given to the village that the deceased might return was uncertain and sufficiently vague that it could not be relied upon.  Under these circumstances, the Tribunal Member determined the village operator had failed to make the notification within the prescribed time and that the buy-back option was therefore inoperative.

Termination of residence contract 

Case study 1

Operators and residents can apply for termination and vacant possession ending the residence contract on the ground of unsuitability of the resident’s physical or mental capacity.

A village resident began leaving the premises during the night and was found wandering around the neighbouring streets on a number of occasions by local residents.

The operator liaised with the family members who claimed that these were isolated incidents as the resident was upset due to the recent passing of a close friend within the village.  The resident and the family declined to find alternative accommodation despite the operator’s recommendation.

The operator lodged an application to the Tribunal for termination and possession ending the residence contract.  The operator claimed that the village accommodation was no longer suitable due to the resident’s declining health.

At the hearing, the resident was represented by her family.  Evidence was presented by both parties including a medical report from the resident’s family doctor indicating that the resident was suffering from dementia and that her condition was unlikely to improve.  The family then accepted that their mother required a higher level of supported accommodation.

The parties reached a consent agreement terminating the residence contract and allowing sufficient time to find alternative suitable accommodation in a nearby nursing home.

Case study 2

The Tribunal has power to order the termination of a residence contract following a breach of the village contract or rules under section 134 of the Retirement Villages Act 1999. In considering such an application, the Tribunal must be satisfied that the breach justifies the termination of the contract.

A retirement village operator applied to the Tribunal for an order terminating the residence contract with a village resident on the grounds that the resident was verbally abusive and that his behaviour was unacceptable to the operator and other residents.

At the Tribunal, the parties attempted to conciliate the dispute but they were unable to reach an agreement. When the matter proceeded to hearing, the village manager explained that she had received numerous complaints about the resident’s behaviour and that she herself had been verbally abused by the resident. She tendered a number of letters from other residents and a transcript of a message left on her answering machine in support of the claim.

The manager explained that most of the village residents were in their 80’s or 90’s and the behaviour of the respondent resident, who was younger, caused many of the older residents much distress. The resident had been offered alternative premises in a nearby village but he rejected this offer, so the operator felt compelled to issue a notice to terminate the residence contract.

The respondent replied that there had not been any problems reported recently and that his past behaviour was due to a particularly stressful period. He presented a written statement from a neighbouring resident supporting his claim. He also explained that the alternative village premises offered were not near a train station and that two additional bus trips would be needed to visit family and friends.

After hearing the evidence of the parties, the Tribunal Member reserved the decision and a final decision was handed down three weeks later. Based on the evidence presented, the Tribunal Member found that although the resident’s behaviour had caused interference with the peace, comfort and privacy of other residents in the past, he had demonstrated restraint recently. The Member did not consider that the past breaches justified terminating the residence contract.

Orders were made for the resident to comply with the terms and conditions of his residence contract not to cause or permit any nuisance and to respect the rights of the other village residents, with a right to relist the matter for a further Tribunal hearing in the event that the resident did not comply with those orders.

Village in a strata complex 

Both the Retirement Villages Act 1999 and the Strata Schemes Management Act 1996 apply to strata retirement villages. The Acts operate side by side with neither one taking priority over the other. In strata retirement villages, the owners corporation is responsible for the maintenance of the common property, and individual residents are responsible for the capital items they own in their unit. In non-strata villages, the operator maintains the capital items that do not belong to residents.

The residents of a strata title retirement village consisting of 40 ‘assisted living’ units and 120 ‘independent living’ units, lodged an application to the Tribunal disputing the increased amount of payroll tax and other expenses in the village budget. The matter was initially listed for mediation, during which a revised budget was presented to the residents. However, the revised budget was rejected.

At the Tribunal hearing, the residents claimed that they should only pay payroll tax as a recurrent charge on the aggregate costs of wages for the whole village that is in excess of the threshold amount, and not the full amount of wages as claimed by the operator. The Tribunal Member found that the ordinary meaning of the Retirement Villages Regulation clause 26(d)(i) did not limit the payroll tax which may be financed by way of recurrent charges, as long as the wages were above the threshold limit. The Member dismissed that part of the residents’ application.

The residents then argued that the full costs of photocopying should not be included as a recurrent charge. They tendered a letter from the former Operations Manager to the owners corporation confirming that the operator was “responsible for the maintenance and upkeep of the equipment”. The Tribunal Member found that the financing of the full cost of maintaining and operating the photocopier cannot be done by way of recurrent charges, and that only the cost of consumables such as paper and toner should be financed in this manner. The Member made orders that the line item for photocopying be reduced by $3,200.

The residents also disputed the validity of the meetings to consider the proposed budget, and the additional budget and budget notices relevant to higher charges for the assisted living unit residents. The Tribunal found that the operator had the power to call a meeting of the assisted living unit residents only, as it enabled the operator to explain aspects of the budget that were relevant to them only. The Tribunal also found that the assisted living unit residents had consented to the budget.

Orders were made amending the photocopying line item of the budget. The remainder of the application was dismissed.

Village rules 

Village rules relate to the use, enjoyment and management of the village.  A breach of the village rules can cause disruption to the harmony of village.  Under the Retirement Villages Act 1999 the Tribunal may make orders restraining any action in breach of any village contract or village rule.

A village operator applied to the Tribunal seeking an order that a resident was in breach of a village rule by parking his motor home in the parking space opposite the resident’s home.

The village rule stated that the parking of ‘caravans and trailers’ is permitted only 48 hours prior to and after a trip, for the purpose of packing and unpacking the vehicle. The operator claimed that the resident’s motor home had been parked in the parking space for several weeks, much longer than the 48 hours permitted.

At the Tribunal hearing the village operator provided photographic evidence in support of its claim, showing that the motor home was substantially larger than a standard motor vehicle for which the parking space was provided.

The resident did not appear in person at the hearing, but instead provided a written submission. In his submission, the resident agreed that his motor home is permanently parked in his allocated parking space, but argued that a motor home is technically not a ‘caravan’ because it could not be towed, and therefore he was not in breach of the village rule. 

The Tribunal considered the evidence of both the operator and the resident, and did not accept the respondent’s submission that his motor home is not a ‘caravan’ as intended by village rules. Orders were made for the resident to not park a caravan or a motor home in the parking space which is in breach of the village rules.