Updated guidelines have been published clarifying how retirement village operators (RV Operators) can be reimbursed for costs associated with producing newly required Asset Management Plans (AMP) in New South Wales.
RV Operators are required by 1 January 2022 or 1 July 2022 to comply with the AMP provisions, which is a significant and expensive endeavour.
Although the guidelines, published by the Secretary of the Department of Customer Service, are not binding, they were created with the intention to assist RV Operators to comply with their obligations under the Retirement Villages Act 1999 (NSW), (RV Act)).
It is also intended that NCAT may take the guidelines into account when considering an operators’ compliance under the RV Act. However, the extent to which the guidelines are binding or reflect the actual operation of the RV Act and the expenses related to the AMP are yet to be tested.
The guidelines provide that RV Operators have two options available to recover costs incurred in producing and reviewing an AMP:
- reimbursement from the capital works fund; or
- recurrent charges through the budget.
However both options are subject to important qualifications.
Capital Works Fund
The guidelines provide that an RV Operator can utilise the capital works fund for costs related to producing and reviewing an AMP. However, an RV Operator must receive the consent of the residents by obtaining a special resolution to use the funds for this purpose.
A special resolution requires a meeting of the residents of the retirement village held in accordance with the RV Regulations with 75% of the residents consenting to the special resolution.
Recurrent Charges
Alternatively, the guidelines provide that an RV Operator may seek reimbursement from the annual budget, which is funded by recurrent charges.
The guidelines note that, ordinarily, recurrent charges cannot be used for an operator’s management and administration costs, but if the costs are associated with providing services to residents and are included in the annual budget and itemised, then the costs are allowed.
The guidelines clarify that costs associated with producing and reviewing the AMP are “services to residents” and as such, the costs are not in breach of the RV Regulations. Once included in the proposed budget, the residents must consent to the use of the recurrent charges in the usual way under the RV Act.
The overall key theme from the guidelines is that RV Operators have both options to reimburse themselves for costs associated with producing and reviewing an AMP but consent of the residents is required for both.
The issue of obtaining consent and the inclusion of the costs generally could give rise to disagreements and as a result, whether the guidelines are binding or reflect the proper interpretation of the RV Act is still to be determined.
If you need clarification on the updated guidelines in relation to funding AMP costs please contact a member of our Health, Aged Care and Retirement Villages team.
Authors
Arthur Koumoukelis | Partner | +61 2 8248 3437 | [email protected]
Lucinda Smith | Partner | +61 2 9020 5748 | [email protected]
Christopher Allen | Law Graduate