A vision for simplified retirement village living
This document was prepared by Julie Van Dort as a pro-bono service to RRVV. The views expressed
in this document are not intended to be legal advice.
The purpose of this document is to identify opportunities to simplify the legal framework related to
retirement village living and facilitate discussion.
WHY A SIMPLIFIED REGULATORY FRAME WORK FOR RETIREMENT
VILLAGES IS NEEDED
Introduction
There is no dispute that retirement village contracts are complicated and need to be simplified.
As stated in the recent Consumer Affairs Victoria (CAV) discussion paper: Retirement villages:
Contract and information disclosure options: (Discussion Paper)
“Retirement village contracts are often long and complicated, making it difficult for
prospective residents to identify the critical information they need to assess the suitability of a
village, to compare villages and to know their rights and obligations after becoming a
resident.”
What also needs to be recognised is that retirement villages are regulated by multiple,
overlapping and conflicting pieces of legislation. Therefore it is the entire retirement village
legal framework (legislation and contracts) that is complicated which is causing disputes and
significant costs.
Why urgent action is needed to simplify the regulatory framework
Victorians are living longer than ever before. The availability and confidence in living in
affordable, supported and financially sustainable community or ‘retirement village’ housing
options should be a priority for Government as our community ages.
28 March 2012
The current diverse models of retirement villages have evolved over the last 40 years and there
are now over 400 retirement villages with more than 30,000 residents (Discussion Paper and
CAV website). The continued interest and investment in the retirement village industry is critical if
retirement villages are to be developed and available as a healthy and sustainable housing
option in the future. To achieve this end, the regulatory framework for retirement villages needs
to be simplified to enable:
 Financial sustainability — the design of regulatory arrangements should not undermine the
financial viability of operators or villages nor distort signals for new investment in the
longer term. It is also important that the industry is able to operate in a dynamic and
competitive environment.
 Social sustainability — the design of regulatory arrangements should maintain and
promote the social harmony within the retirement village community. Senior Victorians
need to be confident that they will get a “fair deal” when moving into, living in, and
exiting, a retirement village.
There is now a need to do a “stock take” to ensure that the regulatory framework adequately
protects the interests of individual residents, and the residents collectively, and facilitates the
effective and sustainable operation of retirement villages.
There are at least three outcomes that will result from a simplified regulatory framework for
Retirement Villages which are:
 Reduced red tape
 Reduced disputes
 Reduced costs
PROBLEM 1:
THE NEED TO REDUCE RED TAPE
Retirement villages are regulated by multiple, overlapping pieces of legislation. Over the last
40 years, numerous new Acts have been introduced to address one or more specific problems
resulting in the biggest problem now being ‘regulatory creep’. Regulatory creep creates
confusion and limits the ability of residents to identify and defend their rights, creates disputes
and imposes costs.
The need to reduce ted tape has also been recognised by the Retirement Villages Association
(RVA). In its submission to the Productivity Commission Enquiry – Caring for Older Australians,
dated August 2010, the RVA stated:
“Although the regulatory burden experienced within the aged care industry is well
publicised, the retirement village industry too, is struggling under the weight of regulatory
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28 March 2012
burden that exists on a state-by-state basis. Given the changing profile of the sector, in
which some operators span multiple states and have to adapt to multiple legislative
requirements, the lack of operation efficiencies is set to underpin the issues associated
with delivering cost effective outcomes for residents into the future. Many operators are
faced with the management of complicated business models that increase administrative
and compliance costs.”
Table 1 below provides a summary of some of the legislation now affecting Retirement Villages.
Please note that additional Commonwealth legislation relating to taxation and workplace
awards also applies. For further information about taxation and workplace law please see the
Australian Taxation Office and Fair Work Australia websites.
Table 1: Overview of the development of the regulatory framework affecting Retirement
Villages
Legislation
Company
share
schemes
1945
The
Transfer of
Land
(Stratum
Estates) Act
1960
Associations
Incorporation
Act 1981
Strata Titles
Act 1967
Retirement
Villages Act
Description
Company share schemes to enable the common
ownership of buildings began in approximately
1945. A company built or purchased a building
containing a number of apartments. A resident
would buy shares in the company which would
entitle that person to live in one of the apartments.
The company is governed by a Board of Directors
whose powers and duties are set out in a
Memorandum and Articles of Association.
Company share schemes are regulated by
Corporations Law.
This Act enabled the subdivision of land (and
buildings) into residential land and residual land
(common property).
The common property is owned by a service
company that allowed residents to use the common
property in return for defined payments.
The rights and responsibilities relating to the
common property are contained in complex
service agreements.
Created a legal entity enabling the collective
members to open bank accounts, enter into
contracts and obtain legal advice for not for
profit purposes
Created a legal entity “body corporate” to
enable the ongoing shared ownership of land. The
legislation allows the committee to be delegated
powers of the body corporate for not for profit
purposes and to manage the common property.
Created a regulatory framework to protect the
rights of persons, who live in, or wish to live in,
1981
May
apply
1990
May
apply
2000
May
apply
2012
May
apply
May
apply
May
apply
May
apply
May
apply
May
apply
May
apply
May
apply
May
apply
May
apply
No
longer
applies
No
longer
applies
No
longer
applies
Yes
Yes
Did not Yes
apply
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28 March 2012
1986
Subdivision
Act 1988
Planning
and
Environment
Act 1987
Building Act
1993
Fair Trading
(Amendment
) Act 1999
Occupational
Health
&
Safety
Act
2004
Owners
Corporation
s Act 2006
Fair Trade
Amendment
(Australian
Consumer
Law)
Act
2010
retirement villages.
Created a legal entity “body corporate” to
enable the ongoing shared ownership of land. The
legislation allows the committee to be delegated
the powers of the body corporate for not for
profit purposes and to manage the common
property.
Requires the owner of land to conserve, maintain
and protect certain environmental, heritage and
cultural features of land (e.g. a section 173
Agreement to protect heritage, environment,
cultural significant land, bushfire survival plans
flood management plans, protection of growling
grass frog native habitat plans etc)
Requires the owner of private buildings to
maintain essential safety measures in private
buildings.
Disputes between residents and managers of
retirement villages previously required (prior to 5
April 2005) to be resolved by arbitration now
may be determined by the VCAT (s.40 Retirement
Villages Act 1986 (Vic)).
Employer must provide a safe and healthy
workplace for workers and contractors. Duties
include to monitor and consult with workers and
occupiers
This Act replaced the Subdivision (Body
Corporate) Regulations and created a legal entity
“owners corporation” to enable the ongoing
shared ownership of land. The legislation allows
the committee to be delegated powers of the
owners corporation for not for profit purposes and
to manage the common property.
The national consumer law was introduced into
Victoria on 1 July 2010 and applies to standard
form consumer contracts entered into, varied or
renewed on or after 1 July 2010. This Act was
intended to be transitional and applies to
consumer contracts entered into or renewed
between 1 July 2010 and 31 December 2010.
Did not May
apply
apply
May
apply
May
apply
Did not Did not Did not Yes
apply
apply
apply
Did not Did not Yes
apply
apply
Yes
Did not Did not Did not Yes
apply
apply
apply
Did not Did not Did not Yes
apply
apply
apply
Did not Did not Did not May
apply
apply
apply
apply
Did not Did not Did not Yes
apply
apply
apply
Red tape or regulatory creep is a significant concern to both residents and the retirement village
industry. In its recent submission to the CAV’s Discussion Paper, the RVA was concerned about the
unnecessary dual regulation where a retirement village is regulated by both the Retirement
Villages Act and the Owners Corporations Act and stated:
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28 March 2012
”It is the RVA’s position that consideration should be given to exempting retirement villages
from the operation of the Owners Corporations Act.”
The problems created by regulatory creep include:





Multiple responsibilities for managers (e.g. operator, developer, delegated manager and
office manager)
Numerous committees (e.g. residents committee, residents association committee and
owners corporation committee) for similar purposes with different powers and obligations
Numerous overlapping rules (e.g. village rules, association rules and owners corporation
rules)
Significant administration and compliance obligations and costs
Increased disputes over rights and obligations.
Regulatory creep is a problem that has been identified by Commonwealth and the Victorian
Government. The Productivity Commission Report December 2011 Identifying and Evaluating
Regulations Reforms reported:
“Regulation is needed to meet a range of social, environmental and economic goals.
However, in practice, much regulation does not do this cost-effectively, and some regulation
does not even adequately achieve the ends for which it was designed.
Sources of ‘unnecessary’ regulatory burdens
Rethinking Regulation identified five features of regulations that contribute to burdens on
business not justified by the intent of the regulation being:

Excessive coverage, including ‘regulatory creep’ — regulations that appear to
influence more activity than originally intended or warranted, or where the reach of
regulation impacting on business, including smaller businesses, has become more
extensive over time.

Regulation that is redundant — some regulations could have become ineffective or
unnecessary as circumstances have changed over time. Other poorly designed
regulations might give rise to unintended or perverse outcomes.

Excessive reporting or recording requirements — companies face excessive or
unnecessary demands for information from different arms of government. These are
rarely coordinated and often duplicative.

Variation in definitions and reporting requirements — this can generate confusion and
extra work for businesses than would otherwise be the case.

Inconsistent and overlapping regulatory requirements — regulatory requirements that
are inconsistently applied, or overlap with other requirements, either within
governments, or across jurisdictions. These sources of burden particularly affect
businesses that operate across jurisdictional boundaries.”
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28 March 2012
The Victorian Government’s response to the Victorian Competition and Efficiency Commission’s
Final Report March 2012 also recognised the existence of regulatory creep and stated:
“The Government’s framework of Ministerial regulatory governance involves all Ministers
being responsible for achieving the red tape reduction program and ensuring that the
regulation they administer achieves regulatory objectives with the lowest possible burden
being imposed on businesses, the not-for-profit sector and the community.”
Opportunities to reduce red tape:
1. Review the Retirement Villages Act 1986. The review should:

identify the current and future objectives of the Act

identify what provisions of the Act are effective, could be improved, are
duplicated or are now redundant

consider amending the Retirement Villages Act to become an umbrella
legislation setting out minimal rights and obligations for retirement villages and
residents and providing default provisions to enable the appropriate legal
framework to continue to avoid duplication of administrative and compliance
costs.
2. Each village (possibly with the assistance of the RRVV, RVA and CAV) should create a
folder of documents setting out the history of the village for the purposes of
understanding the relevant legislation and obligations under that legislation. The
folder should include:

A copy of all Planning Permits

A copy of Building Permit

A copy of the plan of subdivision

A copy of the search of the common property on the plan of subdivision

A copy of any section 173 agreements

Copies of residential contracts and service agreements affecting the village
3. Each village, or the villages collectively through the RRVV (with assistance and input
from the RVA and CAV) should identify and set out the current legal structures and
obligations within the retirement village and then develop a check list for that village
and/or fact sheets for retirement village models, to simplify administrative processes
and reduce costs. (See also opportunities to reduce costs).
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28 March 2012
PROBLEM 2:
THE NEED TO REDUCE DISPUTES
Disputes are caused by overly complicated legal and financial arrangements
It is currently almost impossible for a resident or a residents committee to understand their rights
and obligations under the legislation and residence documents. This makes residents both legally
and financially vulnerable which is the cause of most disputes.
Submissions to the recent Discussion Paper confirmed that there are numerous legal and financial
arrangements for retirement villages with one village having over 20 different service
agreements. In addition, the Council of the Aging (COTA) in its submission to the CAV Discussion
Paper stated:
“While it is understood that these proposals will apply to future residents, COTA argues that
there is need to consider the contract terms and arrangements that existing residents may be
under. We hold concerns that some contract terms are a violation of the rights of many older
people currently living in retirement villages,…… This current initiative should not preclude
action to review and address such terms and arrangements that disadvantage and undermine
the rights of residents.”
It is argued that the combination of regulatory creep and overly complicated legal and financial
arrangements is the cause of most disputes and this must be addressed urgently to ensure the
financial viability of the retirement village industry.
Overly complicated legal arrangements
In addition to the multiple layers of legislation impacting retirement villages set out above, most
retirement villages in Victoria require additional legal arrangements to enable the village to
operate. It is noted that the Law Institute of Victoria in its submission to the Discussion Paper
stated:
“The LIV submits that current legislation makes it difficult for prospective residents to access
important information. The structures of retirement villages and retirement village contracts
are often complicated and vary between villages. The mandatory information that must
currently be provided to prospective residents does not enable them to readily and easily
compare information about villages and to understand their potential rights and obligations.”
While disclosure of key legal and financial obligations of potential residents may assist, the
proposed reforms set out in the Discussion Paper do not appear to address the fundamental
problem of clarifying and simplifying legal and financial arrangements within the various
retirement village models.
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28 March 2012
The various legal arrangements have different implications and raise different issues in terms of
the applicable legislation, agreements or residence documents. For example, in many villages
the residence documents makes the residents association responsible for providing services and
all legal obligations of the manager under the Retirement Villages Act and other law. However,
sometimes the residents association does not have the capacity to do so because:

the operator has the controlling votes

the capacity is in conflict with other obligations in the residence documents

carrying out the obligations in the residence documents would require the residents
association to commit an offence and be at risk of paying significant penalties, or

the operator has a power of attorney for the residents association.
These residence documents creating these obligations may include:

Lease Agreement

Licence Agreement (e.g. occupancy, tenancy or car park)

Loan Agreement

Contract of Sale

Services Agreement

Village Rules

Association Rules

Owners Corporations Rules

Appointment of Manager

Manager’s Lease

Instrument of Delegation

Plan of subdivision

Building permit conditions including essential safety measures.

Planning permit conditions and Section 173 Agreement pursuant to the Planning and
Environment Act 1987 which may include a heritage, cultural, flood, fire or an
environmental management plan e.g. to “retain and manage wetlands for the Growling
Grass Frogs in perpetuity”).

Powers of Attorney from the resident, residents association and/or the owners corporation
to the operator
The various legal arrangements created by the residence documents as set out above makes it
problematic to develop a standard contract for the services agreements without having
consideration of the applicable legislation and other agreements that make up the legal and
financial arrangements for a village.
For example, the residence documents may create confusion as to who is the manager and the
committee, for the purposes of the Retirement Villages Act 1986 and this is the cause of many
disputes. For example the “manager” could be any or all of the following:

The developer,
Page 8
28 March 2012





The operator
The owner
The owners corporation and an owners corporation committee
The residents association and a committee of management
The office manager.
If the operator appoints the residents association as the manager of the village (in the service
agreement or other residence document), and the residents are all members of the residents
association, then a number of issues arise including legal capacity, multiple and conflicting
obligations and questions as to the relevance of the Retirement Villages Act 1986. Some of the
issues arising, relating to powers of the residents to act collectively to manage a village, are set
out in the table below.
Table 2: Summary of enabling powers for residents to act collectively under relevant legislation
Capacity to
operate a
bank account
Capacity to
provide
management
&
maintenance
services
Capacity to
employ staff
Capacity to
provide sales
& marketing
services
Capacity to
make
decision on
behalf of the
residents
Requirement
to have a
complaint
process
Retirement Villages
Act 1986
Owners Corporations
Act 2006
Associations
Incorporation Act
1981
No
Yes
Yes
General provisions
relating to
committees where a
Residents
Association is
required in the
residence documents
No
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
No
No (operations are
required to be not for
profit)
No (operations are
required to be not for
profit)
Yes
Residents capacity is
limited to special
levies and outings
Yes
Yes
Yes in part because
control is retained by
the operator
Yes. Although no
clear process set out
to take disputes to
VCAT
Yes Clear process set
out to take disputes to
VCAT
Yes Clear process set
out to take disputes to
Magistrates Court
No. Agreements may
require the residents
association committee
to have a complaints
process or act as the
manager for the
village.
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28 March 2012
In addition to issues relating to who is the ‘manager’ there are also issues as to the multiple
committees that may be required to be established by legislation as set out below:

Residents committee (Retirement Village Act 1986)

Residents Association committee (Association Incorporation Act 1981)

Owners Corporation committee (Owners Corporations Act 2006)
Each Act also sets out the legal capacity of the committees and how the committees should
operate and provides different obligations making volunteering to be on the ‘committee’ by
retired residents very problematic. Especially when significant penalties for breaches of the
relevant legislation may apply! Some of the differences in the regulatory obligations for
committees are set out in the table below:
Table 3: Summary of legislative obligations for committees that may exist in Retirement
Villages
Retirement Villages
Act 1986 (RVA)
Committee
Not required
Status
Not a legal entity and
therefore cannot open
bank account or sign
documents
Purpose
Approve a
maintenance charge
that is greater than
the
adjusted maintenance
charge;
be a mediator for
disputes between
residents but not
between manager
and resident
Not stated
Notice for
committee
meetings
Owners Corporations
Act 2006 (OCA)
Must have committee
if there are 13 or
more units
Delegate of the
Owners Corporation
and can act as a legal
entity
Manages the common
property (but not lots)
for not for profit
purposes
3 days
Associations
Incorporation Act
1981 (AIA)
Must have a
committee
General provisions
relating to
committees where a
Residents
Association is
required in the
residence documents
May have a
committee
Controls and manages
the association for not
for profit purposes.
Can act as a legal
entity for not for profit
purposes
Controls and manages
the association for not
for profit purposes
Is a legal entity and
can act on behalf of
the residents
association for the
village
2 days
Not stated
Controls and manages
the village units and
communal facilities
(and arguably for not
for profit purposes)
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28 March 2012
Composition
of committee
All resident members
Up to 12 members
who must be lot
owners
At least 6.
Quorum for
committee
Not stated
50 % of the members
of the committee
4
Usually limited 3 to 10
members
Up to 3 must be
representatives of the
operator (non
residents)
Up to 7 can be
resident members
3 (one must be a
permanent member)
Opportunities to reduce disputes over legal obligations
4. Each village (or with assistance from the RRVV) creates a checklist of obligations for each
of the parties e.g.

Manager

Office manager

Committee (or hierarchy of duties if multiple committees)

Resident.
5. The RRVV, RVA and CAV (other relevant bodies) should work together to identify the key
attributes in agreements within existing retirement villages or retirement village models
and work towards simplifying these agreements/retirement village models. While it is
understood that significant work has been done to develop standard contracts for future
residents, additional work needs to be undertaken to deal with existing problems. This
activity should be done at the village level with independent administrative support
provided by the RRVV (and funded collectively by the RRVV, RVA and CAV). Each village
needs to identify legal obligations and agree as to the process to be followed to comply
with those obligations. Please see above for the list of documents that are needed to be
examined to understand the legal obligations of the village. The process can be set out in
checklists or fact sheets and that knowledge can be shared between villages. This work
will reduce disputes and costs and provide the necessary information to make
recommendations to Government to make appropriate regulatory amendments. This
strategy would avoid possible future expensive litigation to determine the rights and
obligations of the parties.
Overly complicated financial arrangements
In addition to the multiple layers of legislation impacting retirement villages set out above, most
retirement villages in Victoria require additional financial arrangements to enable the village to
operate. Some early retirement village structures (prior to 1990) had fairly basic financial
arrangements. The fees and charges were in general terms as follows:
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28 March 2012






Ingoing contribution fee for the right to occupy the premises which usually reflected the
market price for building the unit.
Service or monthly maintenance fees which represented the costs of general village
maintenance.
A special levy which provided a capacity to charge a fee to cover unexpected or
unbudgeted expenses.
Personal service fees to recover extra services to some residents.
Renovation and refurbishment fees to be paid to renovate the unit on departure and to
prepare the unit for resale.
Departure fees which was a percentage retained by the village operator from the resale
of the unit. The percentage rate of the resale of the unit usually reflected a contribution to
the capital replacement of the village (including communal facilities, buildings, roads etc).
In 2012, the financial arrangements are made much more complicated by legislative creep and
complex residence documents. For example the range of financial obligations may include:







The upfront fee, in going contribution, entry fee or purchase price usually represents the
market value of the unit or secures the right of the resident to occupy their new home.
Sometimes the upfront fee is in the form of a loan and will be refunded upon departure,
although part of this ‘upfront fee’ may be retained by the operator as an outgoing
contribution or deferred management fee.
Maintenance fees, recurrent charges or resident levies which are a contribution to the cost
of running the retirement village. Such as staff salaries, community facilities, gardening
maintenance, emergency call systems, some rates and taxes and the provision of services
to all residents.
The service agreement may provide that the operator of the village is an owners
corporation and the residents association is delegated the obligations of the owners
corporation including the responsibility to have a maintenance plan and create a
maintenance plan or sinking fund.
Personal service fees which are charged for additional services such as meals, cleaning,
laundry and personal care provided to a resident. These services are usually not
provided by the village itself but provided by contractors and the fees are based on user
pays at market rates.
Refurbishment fees, sales and marketing costs and legal fees for the resale of the unit on
departure.
If an owners corporation is created by legislation then that owners corporation has to
have a maintenance plan and a maintenance fund. The maintenance fund has to be in the
name of the owners corporation and contributions to the maintenance fund are made by
members of the owners corporation.
Outgoing contribution/deferred management fee/departure fee which refers to the
amount payable to the retirement village operator on the departure of a resident from
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28 March 2012
the village. The outgoing contribution amount can depend on a number of variables, such
as percentage of the ingoing contribution, or outgoing contribution, multiplied by the
number of years the resident lives in the village. The percentage rate of the resale
amount of the unit may also reflect a contribution to the capital repairs/capital
replacement/upgrades of the village (including communal facilities, buildings, roads etc).
There is a complex relationship between the upfront fees, maintenance and service fees and
outgoing fees. Table 4 below shows the regulatory provisions relating to the financial
arrangement for retirement villages.
Table 4: Summary of sources of financial obligations in retirement villages
Retirement
Villages Act
1986
Owners
corporations
Act 2006
Associations
Incorporatio
n Act 1981
Ingoing contribution
Maintenance charge
Yes
Yes
No
Yes
Special levies
Yes
Personal services
Minor
provision
No
No
Capital replacement
Sales, marketing &
legal fees
Outgoing contributions No
No
Yes
Lease,
Licence or
Contract of
sale
Yes
Possibly
Service
Agreement
and/or other
agreements
No
Yes
Yes
No
Possibly
Yes
Capacity
No
Possibly
Yes
Yes
No
No
No
Possibly
Possibly
Yes
Yes
No
No
Yes
Yes
The outgoing contributions are a major cause of disputes because:
 The outgoing contributions are much higher than what was represented when the resident
entered the village or was expected




There is a complex relationship between the ingoing contribution and the outgoing
contribution. The residence documents enable the operator to retain the ingoing
contribution or resale amount for 8 years preventing the outgoing resident having access
to critical funds to access alternative accommodation or a higher level of care without
significant financial disadvantage.
The deferred management fee is expected to be paid by the departing resident whether
or not the operator has provided the management services
The residents or residents association is not clear whether the residents or the operator is
responsible for the capital repairs/replacement/upgrades costs
Where there is a residents association that has raised funds from the residents for
maintenance of the village and has placed those funds in a bank account in the name of
Page 13
28 March 2012

the residents association, and (and if) the Owners Corporations Act now applies, is the
residents association in breach of the Owners Corporations Act 2006?
The resident was told (or is stated in the agreement/residence documents) that the
outgoing contribution percentage rate in the agreement is a “contribution to the capital
repairs/replacement/upgrades to the village” and the resident is now told that they have
to pay additional fees to a maintenance or sinking fund because of the Owners
Corporations Act 2006.
A complaint over the outgoing contribution is not an appropriate matter to be directed to an
internal dispute resolution process, because the complaint will usually arise when the resident is in
a very vulnerable position. Some common circumstances where a resident is in a vulnerable
position and is not able to negotiate a fair outcome includes:




the resident has died
the resident must move to alternative accommodation because of their advancing age, or
illness, results in a need for a higher level of care
the resident has chosen to leave because they have lost a partner and may wish to live
with family
the outgoing resident is no longer a resident.
Opportunities to reduce disputes over financial arrangements
6. What can be done to simplify these fees?
Simplify the reporting to provide transparency to residents and potential residents. Each
village (or with assistance from the RRVV, RVA and CAV) should work together to create a
set of model financial accounts from budget to audited accounts for presentation at the
Budget meeting and the Annual General Meeting. This set of accounts should be simple,
clear and transparent, with a fact sheet on how to set out and present to minimise disputes,
what should be provided and how to handle questions they may arise. This would allow
potential residents to compare apples with apples when making the decision on what
village to move into, especially if they are on fixed incomes.
7. Each village (with assistance from the RRVV, RVA and CAV) should work together to
identify the purpose of the ingoing, ongoing and outgoing contributions. Each village then
should clarify the responsibility for those costs, fees and charges relating to those
contributions for existing and future residents. e.g.

Ingoing contribution and whether it represents the market price of the unit or finance
for the development of the village

Ongoing contributions and what is included in the village operating costs

Outgoing contributions and what it actually represents. For example whether the
amount represents an ingoing contribution discount, capital replacement/upgrades to
the village or profit
Page 14
28 March 2012

Refurbishment and resale costs.
8. Each village, or the villages collectively through the RRVV (with assistance and input from
the RVA and CAV) should identify and set out the financial obligations within current
retirement villages and then develop a check list for that village and/or fact sheets for
retirement village models. This work would help identify what items may be set out in
standard contracts to reduce the complexity of residence documents, reduce disputes and
provide the necessary information to make appropriate regulatory amendments. This
process would avoid expensive litigation which may put in jeopardy, the financial viability
of the village, and the retirement village industry in general.
The focus on “alternative dispute resolution” within retirement villages is flawed.
The concept of an internal dispute resolution is a flawed concept within a retirement village (or at
least the current complex regulatory framework) because a complaint process, both avoids and
inhibits communication and turns healthy debate into formal disputes.
The amendments in 2006 to the Retirement Villages Act 1986 required the manager to set out in
writing, a process or an internal dispute resolution process to address management complaints
and disputes between residents. These amendments have resulted in some unintended
consequences including:




Diverting resources from improving communication and services within the village, to
imposing office-based compliance tasks to record and report complaints
Enabling operators to contract out of these obligations, by requiring the residents
association committee to carryout the duties of the manager
Preventing residents obtaining a decision on the matter at a general meeting
Further embedding a culture of bullying and stand over tactics.
For example, a resident is concerned that processes under the Association Incorporation Act for
meetings was not followed and has made a complaint to the office manager. The resident
believes the office manager is the ‘manager’ or the responsible person. However, the committee
of management for residents association (acting as the manager) followed the processes set out
in the services agreement. Consequently there is now technically, a formal complaint about a
manager and a dispute between residents. At the next annual general meeting the complaint is
reported.
It has been observed that when an issue becomes a formal complaint, the formalising of the
complaint causes others to become involved and to take sides resulting in gossip and rumour, noncooperation between residents and an uncomfortable living environment. Incidents escalate and
Page 15
28 March 2012
tension rises. The residents, committee members and village staff are increasingly non-productive
as all of their energy is directed towards the complaint.
Direct access to external dispute resolution is also problematic if a complaint about day to day
operations or financial reporting becomes a formal dispute and is immediately directed to VCAT
without a discussion at a general meeting.
The RVA, in its submission to CAV’s Discussion Paper, was also of the view that there should be a
broader process for informal independent consideration of disputes without the parties
proceeding directly VCAT.
It is argued therefore, that in the first instance, a resident’s concern or complaint should be raised
at a general meeting or at a general meeting chaired by an independent facilitator.
Opportunities to reduce disputes
9. The focus should be on improved communication and transparency at general meetings. A
retirement village community is a community and the appropriate way to promote that
community is to improve communication and the appropriate structure to do that is at ‘a
general meeting’.
10. The RRVV, RVA and CAV (other relevant bodies) should work together to develop fact
sheets for meetings to improve communication and transparency. This would reduce
disputes and provide the necessary information to make appropriate regulatory
amendments and avoid expensive litigation to determine the rights and obligations of the
parties.
11. The RRVV (with assistance from other relevant bodies such as CAV, RVA) should employ
two full time workers to provide administrative support and independent facilitation at
general meetings, or alternatively appoint a Retirement Village Commissioner. See also
opportunities to reduce costs.
Consideration of Human Rights
The Charter of Human Rights and Responsibilities is Victorian law that sets out the basic rights,
freedoms and responsibilities of all people in Victoria, including older Victorians. It requires that
Government considers human rights when it makes laws, develops policies, or provides services.
The Charter protects a number of rights that are directly relevant to retirement village residents
including:

Recognition and equality before the law, including the right to equal and effective
protection against discrimination
Page 16
28 March 2012


Freedom of movement. A person can move around freely within Victoria and choose
where they live
Right to a fair hearing. A person has a right to a fair hearing and that civil proceedings
decided by a competent, independent and impartial court or tribunal after a fair and
public hearing.
In addition, the objects of the Equal Opportunity Act 2010 include the identification of systemic
causes of discrimination to address social and economic disadvantage and facilitate the
progressive realisation of equality. Under this Act, public authorities (including CAV) are
required to take reasonable and proportionate measures to eliminate discrimination as far as
possible (“a positive duty”).1
Where there is a complaint or a dispute within a retirement village, the parties will not be on an
equal footing. Residents will be disadvantaged due to limited financial resources, limited
capacity to understand their rights (as set out above), advancing age and possibly, significant
incapacity due to illness. Further, if that resident has already had difficult dealings with the
party, for example they felt bullied or were harassed, they will feel intimidated when placed in
a situation that requires them to further deal with that party, particularly during a grievance
procedure that isolates them from other residents. The power imbalances between parties within
retirement villages appear not to have been recognised and processes are not in place to
counter-act the influence of those power imbalances.
The need for an effective external decision maker
It is a concern for elderly residents and resident committees that there is no clear process or
information available to explain the process to obtain a binding decision on a dispute relating to
retirement villages.
It is noted that the Owners Corporations Act 2006 provides a clear process to obtain a binding
decision in relation to disputes whereas the Retirement Villages Act 1986 is silent on the capacity
and process to obtain a binding decision for residents, a residents committee or the residents
association for a dispute involving a retirement village. However, prior to 2005, the Retirement
Villages Act 1986 enabled an arbitrator to be appointed by the parties to make a binding
decision;
1
Equal Opportunity Act 2010 (Vic) s 15.
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28 March 2012
Table 5: Summary of processes and powers for residents to obtain a hearing and a decision
under relevant legislation
Retirement Villages
Act 1986
Owners Corporations
Act 2006
Associations
Incorporation Act
1981
Requirement
to have a
complaint
process
Yes. No clear process
set out to take
disputes to VCAT
Yes
Yes
Jurisdiction
No process for a
resident to take a
dispute to VCAT for a
decision.
S41 states that only
the Director can
commence
proceedings for an
offence against this
Act or the
regulations
Clear process set out
to take disputes to
VCAT
Clear process is set
out to take disputes to
the Magistrates Court
General provisions
relating to
committees where a
Residents
Association is
required in the
residence documents
No. Agreements may
require the residents
association committee
to have a complaints
process or act as the
manager for the
village.
The lack of clarity as to the jurisdiction and processes imposes significant legal costs, delay and
uncertainty for residents resulting in loss of rights to a fair and impartial hearing. While internal
grievance/complaint/disputes processes provide a number of alternatives to litigation for
Government’s policyholders, these processes do little to protect the human rights of elderly
village residents. Therefore unfortunately, the lack of provisions within the Retirement Villages
Act 1986 to obtain a binding decision creates barriers to justice and is discriminatory against
elderly residents of retirement villages.
The existing legal and financial framework with in villages is no longer workable.
The existing framework is no longer workable because, as stated in the COTA submission:
“We hold concerns that some contract terms are a violation of the rights of many older people
currently living in retirement villages,……” and the arrangements are so complicated that both
members of the legal profession and officers of CAV fail to understand the arrangements.
From 1 July 2010, the Fair Trade Amendment (Australian Consumer Law) Act 2010 made
amendments to:
Page 18
28 March 2012





enable disputes in relation to a residence right re an in-going contribution (s18(3)) to be
resolved in VCAT for standard form contracts entered into, varied or renewed on or after
1 July 2010, replace most of FTA Part 2B (Unfair Terms in Consumer Contracts)
define "consumer contract" (s.32(Y)(5)) as a contract for goods or services acquired wholly
or predominantly for personal, domestic or household use or consumption
define a contact which is "unfair”(s.32W) to include a contract which contains significant
imbalance in the parties' rights and obligations and lacks transparency
assist the Tribunal to determine whether a contract is a "standard form contract" by
specifying in section 32ZDA(2) the matters to be taken into account, including whether one
party prepared the contract without prior discussion as to terms and the contract was
presented on a "take it or leave it" basis
provide that a term is not unfair if it defines the main subject matter of the contract or the
upfront price payable (s.32V).2
As stated in the COTA submission “We hold concerns that some contract terms are a violation of
the rights of many” and therefore there is a real risk that existing contracts will be tested in VCAT
and existing villages will become unworkable and financially unviable.
Opportunities to clarify obligations and reduce disputes
12. Each village (or with assistance from the RRVV) creates a folder of residence
documents. See above solution to reduce the red tape.
13. The RRVV, RVA and CAV (other relevant bodies) should work together to identify the
key attributes of the specific agreements to simplify and make fair, the legal and
financial arrangements. This work should be able to identify an appropriate legal
and financial framework for the village that is compliant with the new law. While it is
acknowledged that this may change existing obligations and entitlements, it may be
the most cost effective option to avoid litigation, and ensure that villages remain
financially sustainable.
14. Villages collectively (possibly with the assistance of the RRVV, RVA and CAV) should
engage administrative support to provide independent facilitation at general
meetings. See solutions to reduce costs below.
15. The Retirement Village Act is amended to set out a process for residents to take
disputes to VCAT or alternatively, the appointment of a Retirement Villages
Commissioner.
2
Information taken from the Fitzroy Legal Handbook Online on 17 March 2012:
http://www.lawhandbook.org.au/handbook/ch12s04s06.php
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28 March 2012
PROBLEM 3:
THE NEED TO REDUCE COSTS
The need to reduce costs for residents has been recognised by the Retirement Villages
Association (RVA). In its submission to the Productivity Commission Enquiry – Caring for Older
Australians, dated August 2010, on page 18, the RVA stated:
“A high proportion of seniors living in retirement villages (our members indicate upwards
of 80% in some locations) draw a part or full pension. This highlights the ongoing
challenges people face as they predominantly use their equity to come into a village and
then have to budget for weekly expenses in a planned manner to ensure lifestyle and care
needs are met.”
And on page 25 of that submission, the RVA further stated:
“The constant changes and up-scaling of various aspects of regulation only serves to increase
consumer uncertainty and adds cost to the industry. The net result is often the requirement to
raise service charges, which impacts the resident and does not promote affordability.”
Residents of retirement villages recognise that access to an external dispute resolution process
without addressing the problems set out above will consume available financial resources of
individual residents and villages.
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28 March 2012
Opportunities to reduce costs
Opportunities to reduce costs include:

Reducing red tape. See above solutions to reduce the red tape.

Reducing disputes. See above solutions to reduce disputes.
16. An opportunity to reduce costs for all villages is for the RRVV (or alternately, the RRVV,
RVA and CAV collectively) to engage independent administrative support to assist
villages. The administrative support, possibly two people, would provide the professional
skills and independence to assist villages with preparing and facilitating general meetings.
The administrative support could then develop processes and fact sheets to be made
available for all villages. The knowledge and information gained by the administrative
support will be very valuable for CAV in identifying appropriate legislative amendments.
Professional skills required for the administrative support (two people) should include:

A high level of knowledge of the retirement village operation

Legal skills

Knowledge of office processes

Organizational abilities and strong attention to detail

Facilitation skills

Capacity to handle stress and have a common sense approach

Strong communication skills including writing and report writing
Having professional administrative support will provide the much needed skills to ensure
meetings are more effective, views are heard, decision making will be transparent, actions
are identified and recorded. The independent facilitation provided by the administrative
support will assist in resolving existing disputes, prevent future disputes and reduce costs.
The professional administrative support will enable committees, managements, and
residents to focus on the details and finding solutions. The administrative support must be:




seen by the parties as neutral in relation to the content
impartial in their handling of participants
accountable to the whole village
responsible only for processes.
Having independent professional administrative support has a number of benefits:




it increases the chance that all voices will be heard
it reduces the likelihood of manipulation or stand over tactics
all parties will be able to identify the costs and benefits of alternatives and the
many interests that have to be considered
it makes it more likely that the outcome will be acceptable to all, and that the
Page 21
28 March 2012
decisions reached will be implemented.
The administrative support providing independent meeting facilitation services will also be
particularly useful and cost effective for villages that must make major changes to multiple
legal or financial arrangements in contracts to be compliant with law.
This model of sharing resources to reduce costs reflects a model in the US and Canada,
where individuals and organisations pooled resources to establish an organisation called
Naturally Occurring Retirement Communities (NORC) to provide support for communities
which are ageing, whether as independent houses, apartments or larger communities.
There are also other models such as the RVA and RACV where membership fees and
sponsorship is sufficient to cover paid professional support that is provided to members.
There are particular benefits if the funding of the administration support to villages is
shared. The benefits include commitment to making it work and shared outcomes. The
possible funding options to set up administrative support for villages could include:





RRVV applies for funding from the Victorian Property Fund.
The RRVV receives donations from CAV, RVA and other sponsors.
CAV to introduce fees for registration of the village based on the numbers of
residents.
The RRVV provide administrative support at meetings at a fee for service to reduce
overuse of services or ‘free rider’ issues.
The RRVV to increase membership fees to members or villages collectively.
Page 22
Table 6: Analysis of options for administrative support for retirement villages
Who
CAV
Funding options

Registration
fees

Grants from
the Victorian
Property Fund
RRVV



Membership
fees
Grants from
the Victorian
Property Fund
Donations and
sponsorship
Purpose of organisation
CAV purposes include:

Review legislation

Advise and educate
consumers

Conciliate disputes

Enforce consumer laws
Benefits
CAV has an premises and capacity







RVA
Membership fees
from the
Costs

Employment of new staff is not
consistent with sustainable
Government Initiative

Not consistent with Reducing Red
Tape Initiative.

CAV administers 40 acts and has
competing priorities

CAV would need to make
regulations and prepare a RIS
adding significant costs (even more
then the cost of the total annual
salaries of two people over two
years) and delaying the introduction
of this initiative by 18 months
Policy and advocacy on  Currently does not have sufficient
behalf of the community
funds to carry out this role.
of retirement village

Does not have a premises
residents.

RRVV membership fees may need to
Information & education
increase.
for members
Facilitating a collective
voice on issues, needs
and problems
Promoting interaction
between retirement
village residents.
Providing general
information
Encourage sustainability
in existing and future
retirement villages.
RVA provides advocacy,
support and promotional
There is already a power imbalance.
RVA providing the service would further
Empowers residents of retirement
villages

Residents will develop knowledge
and skills by learning by doing

Enhances consumer confidence in
the retirement village industry

Will build general confidence and
investment in the Victorian
retirement village industry

Reduces costs to residents, industry
and Government

Could be implemented
immediately subject to funding

CAV and the RVA could contribute
to costs of administrative support.

Funds may be available from the
Victorian Property Fund

Engagement could be by fixed
term contract for two years
RVA has an premises and capacity
28 March 2012
Retirement
Village Industry
CALC
Funded by VLA
and CAV
Council
of the
Aging/
Seniors
Victoria
COTA receives
funding from a
range of
organisations for
agreed priorities
services for retirement
village businesses and the
retirement village industry
at large.
Focused on consumer
advocacy, litigation and
policy organisation.
Main focus is information
and education for seniors
disadvantage residents
CALC skill base is advocacy and
litigation
There will be competing demand on
resources because of broader role
COTA will have competing demands on
resources because of broader role
CALC has an premises and capacity
COTA has an premises and capacity
Page 24
CONCLUSION
As stated above, reducing red tape and disputes will reduce costs. In addition, a strategic plan
simplifying the regulatory framework will also reduce costs and the risks of negative outcomes of
implementing change.
Residents priorities
It is understood that the priorities of residents of retirement villages include:






A happy healthy and caring community environment
Costs are kept to a minimum
Financial commitments are known
Having a say/a right to be heard
Improved communication and transparency in decision making about the village
A fairer and cost effective way to address issues of concern
The regulatory framework affecting retirement villages in Victoria can be made more effective
to address these priorities by:
1. Reducing red tape.
2. Reducing disputes.
3. Reducing costs.
Relevant Government policies and priorities
The retirement village community understands that Government funding for new projects is usually
allocated in the State Budget each year and there are limited resources available to take action
in between these processes unless other funding options can be identified.
To see whether the above opportunities to simplify retirement village living is achievable, it is
necessary to see how the vision to simplify retirement village living aligns with current
Government policies and priorities. Sources of Government policies and priorities include:
1. Discussion Paper: Retirement Villages: contract and information disclosure options, October
2011 which provides

The Victorian Government has made a commitment to ‘actively promote
better understanding of retirement village residents’ rights and obligations
both prior to entry into a village and also while a resident’.

The purpose of the Retirement Villages Act 1986 (‘the Act’): ‘to clarify and
protect the rights of persons who live in, or wish to live in retirement
villages’
28 March 2012
2. Premiers Website:

Government recognises that Victoria’s housing system is fundamental to our
productivity and our economy.

The Government acknowledges the changing housing needs of Victorians –
changing household size and composition, changing aspirations and choices
– and we know the housing system needs to respond to these changes and
work as effectively as possible.
3. The Victorian Government’s response to the Victorian Competition and Efficiency
Commission’s Final Report March 2012:
Recommendation 2.2: “Based on reviews of best practice regulatory development,
emphasis will be placed on ensuring:

early and meaningful stakeholder consultation;

regulatory approaches that are proportionate, with the ‘default’ position
of adopting non-regulatory options to achieve policy objectives;

regulation is administered and enforced to minimise administrative and
compliance costs; and

promotion of evaluation and a culture of continuous improvement.”
Recommendation 2.3: “The Government’s framework of Ministerial regulatory
governance involves all Ministers being responsible for achieving the red tape
reduction program and ensuring that the regulation they administer achieves
regulatory objectives with the lowest possible burden being imposed on businesses, the
not-for-profit sector and the community.”
A summary of this vision and strategy for implementation for RRVV is set out in Table 7 below. It
is anticipated that the work and the benefits following from that work can be realised within two
years.
Table 7: Timetable and action plan to simplify retirement village living
Year Vision
Goal


1
Reduced
red tape



Simplified village legal and
financial arrangements
Reduced processes or conflicting
processes applying to residents
committees
Less conflict
Reduced costs
Confidence and continued
investment in the retirement
village industry
Strategy




Set up a folder of key legal
documents affecting the village
Bottom up review of the regulatory
framework affecting retirement
villages
Identify key attributes of legal and
financial arrangements affecting
Victorian retirement villages
The RRVV (with assistance from the
RVA and CAV) will develop a range
of fact sheets for general meetings
and committee meetings
Page 26
28 March 2012



2
Reduced
disputes



2
Reduced
costs






Simplified village legal and
financial arrangements
Less processes or conflicting
processes applying to residents
committees
Confidence and continued
investment in the retirement
village industry
Improved communication and
processes between
management, committees and
residents
Improved financial transparency
and accountability in setting of
fees and charges
Reduced costs
Simplified village legal and
financial arrangements
Less processes or conflicting
processes applying to residents
committees
Confidence and continued
investment in the retirement
village industry
Improved communication and
processes between
management, committees and
residents
Improved financial transparency
and accountability in setting of
fees and charges
Reduced costs
Set up a folder of key legal
documents affecting the village
 Identify key attributes of legal and
financial arrangements affecting
Victorian retirement villages
 The RRVV (with assistance from the
RVA and CAV) will develop a range
of fact sheets for general meetings
and committee meetings
 The RRVV will engage administrative
support to provide independent
facilitation at general meetings, or
alternatively, a Retirement Village
Commissioner will provide an
independent facilitator at general
meetings.
 Pool resources to engage professional
administrative support for all villages.
Funding for administrative support will be
funded by:
 The collective RRVV, RVA and CAV
 The RRVV apply for funding from the
Victorian Property Fund,
 The RRVV may increase fees
 CAV charges an annual registration
fee for all villages (possibly requiring
amendments to the Act, significant new
regulatory powers, system changes
and a RIS)
 Alternatively CAV could apply for
funds from the Victoria Property Fund
to engage two full time workers to
provide administrative support and
independent facilitation of meetings at
all villages.

Page 27
28 March 2012
Figure 1: Flowchart of actions to simplify the regulatory framework
Context
Input
Output
Outcomes
Impact
Overly
complicated
regulatory
arrangements
for retirement
villages
Professional
administrative
support for
villages to find
solutions
Simplified
regulatory
arrangements
and
processes
Financial
sustainable
retirement
village
community
Supported
retirement
village
community
Year2:
Benefits are
realised
Year1:
Identify
the issues
Years 1 to 2:
Collect information, analyse and agree on
processes for simplification. Prepare checklists
and factsheets
Is this vision for retirement village living achievable?
In summary the vision is achievable, cost effective and aligns with the RRVV’s, RVA’s and
Government’s priorities.
Critical
success
factors
Aligns with
members
expectations
of the RRVV
Potential
stakeholder
support
Reduce red
tape priorities

Reduce
disputes
Financially
sustainable
Aligns with
Government
priorities
Achievable



Yes




Yes
Reduced costs




Yes
Improved
simplicity




Yes
RVA
Page 28