The following is an article published in the September newsletter of the consumer and advocate body Residents of Retirement Villages Victoria.
The article comes with the heading - Don't mess with old people!
It shows how things can go wrong in a retirement village over just 4 years and for such a large amount of money. There are some 467 retirement villages in Victoria with some 36,000 retirees residing in them. It would be naive to think that the problems outlined by this particular resident are not occurring in any of the other 466 Victorian retirement villages.
The name of the village resident and the name of the village operator are confidential under the terms of the settlement agreement.
The article details the actions of the operator the resident contended were invalid, together with the terms of the mutually agreed settlement.
The article as published -
"In May 2023, one of our members settled a long-running case with a village operator for $935,000. The terms are confidential except for the details revealed in this article.
This article is the story of an RRVV member who challenged the financial practices of a village operator in the face of legal and personal challenges. It warns operators who think old people have no fight left in them to think again.
Around four years ago, our member pointed out their operator was charging a service fee higher than the amount permitted by law and asked for a refund.
The dispute could not be settled, and our member filed a claim with the Victorian Civil and Administrative Tribunal (VCAT). By this time, COVID was again spreading, and VCAT was only holding hearings via ZOOM. VCAT's case backlog was growing.
At the first hearing, the VCAT presiding member ruled that the resident had not made out the case adequately but provided an opportunity to present a fuller case at another hearing in six months.
Our member asked us for assistance at this point. During our early discussions, we learned our member was also concerned, amongst other things, the operator was charging the village a fixed proportion of various head office overheads.
At the second hearing, the VCAT member accepted the amended points of claim and ordered the parties to attend a compulsory conference. This order introduced another six month delay.
The parties did not settle at the compulsory conference, and the operator's barrister argued that part of the claim was invalid. The VCAT member set a date for a case hearing, and gave our member leave to submit an amended claim.
By this time, our member was feeling the strain but managed to file the amended points of claim before the deadline.
Just before the operator’s deadline for filing its points of defence, it approached our member with an offer to discuss a settlement. This approach reinvigorated our member.
Here the resident included even further issues.
It was contended that –
1. The operator had used the village’s major maintenance fund to pay for unit renovation costs which were the operator’s responsibility. The fund was some $400,000 in deficit.
2. The operator used village staff to renovate those units for resale. The responsibility to pay those wages fell directly on the operator, not the residents.
3. The operator included in resident fees the operator’s cost for legal services incurred in this matter, some $45,000.
4. The operator levied across all residents’ costs where some residents had a direct contractual obligation to pay those costs.
5. The operator failed to provide sufficient information in their financial reporting. This is contrary to s34.3b of the Act and prevents residents satisfactorily identifying valid or invalid charges levied on them.
6. Contrary to s38.2, the operator levied a maintenance charge greater than the CPI calculated adjusted maintenance charge without the authority of the residents under s38.4.
7. The operator used simple averages and percentages plus a mixture of village and aged care costs when calculating the ‘management and administrative’ services charges levied on the village residents.
The parties settled the matter on the following terms.
1. At its cost, bring the major maintenance fund back to zero from a negative $400,000.
2. The operator committed to paying unit renovation costs, including staff wages, for those units where the resident did not have a contractual obligation to do so.
3. Maintenance and replacement costs plus staff costs to be levied against residents with a direct contractual obligation to pay those costs when not choosing a private contractor.
4. The operator is to refund the cost of their some $45,000.00 in legal fees, and to adjust the village financial report to reflect that.
5. The operator committed to using the s38 and s38AA statutory methodology to set service fees.
6. The operator committed to using the most accurate methodology to calculate charges for village management and administrative services.
7. The operator committed to providing financial reports and budgets in line with the provisions of s34.3b.
8. The operator committed to spending, some $500,000.00 on capital improvements to the village.
The residents have the controlling vote on which project.
Whilst the resident surrendered their individual monetary claim, they achieved a broader benefit for all village residents in the short and long term."
