On 18 December 2017, the ACT Civil & Administrative
Tribunal handed down its decision in relation to part of the dispute between
The Pines Retirement Village and its residents.
There were two issues in dispute. The first is the budget for the 2017/2018 financial year. The second is the amount of recurrent charges to be paid by the residence for that year. ACAT made a determination about the budget issue and is due to hear additional evidence regarding the recurrent charges issue in mid-January 2018.
There are some bigger lessons for operators to learn from The Pines decision. First and foremost, operators need to prepare their budgets based on evidence and provide any evidence the residents request to support the proposed expenditure. ACAT was extremely clear in its decision that residents are entitled to information, including copies of tax invoices or quotes.
The Pines decision took a requested budget the operator sought to be approved of nearly $189,000 and reduced it to just over $99,000. This is extremely significant given the previous year's budget was $155,673.
Key determinations made in this decision regarding particular line items were:
Finally, ACAT made it very clear how it interpreted the provisions of section 166 of the Retirement Villages Act 2012 . Section 166 states the operator commits an offence if it spends money received for recurrent charges and doesn't spend that money in accordance with the approved annual budget (or an approved annual budget as amended under section 167). While ACAT acknowledged that there is an exception in section 166 which states that the offence provision does not apply if the spending is a change in spending between items in the approved annual budget and does not reduce the level of services the retirement village provides and does not cause a total spending provided for by the approved annual budget to be exceeded. When items in a budget are allocated for particular things, for example cleaning, Presidential Member McCarthy expressed the view that it's difficult to see how the exemption in section 166 (3) could apply without reducing the level of cleaning services. In the Presidential Member's view, the nature of the budget providing "buckets" of money for different expenditure is such that there is unlikely to be many circumstances where the exemption would apply.
This decision brings home that an operator is not free to set whatever budget it likes. Residents have significant power to refuse to agree to a budget and to expect the operator to provide sufficient information regarding the anticipated expenditure, based on evidence, to enable the residents to make a fully informed decision. There are many good operators in Canberra who provide the appropriate levels of transparency to their residents. For those who do not, this decision should put the operator on notice that they need to start doing so. Importantly, just because an operator does not get their budget approved, does not mean that they can reduce the services provided to the residents. With the legislation requiring the operator to meet any shortfall in the budget against actual expenditure (with some limited exemptions), the outcome of The Pines decision is at those operators could find themselves forced into a position of having to provide the evidence, seeking a formal amendment to the budget or foot the bill themselves.
Ground floor
10 Corinna Street
Woden
ACT, Australia 2606