Did Consumer Affairs Victoria misinterpret the law - Did village residents pay more in fees than required by law - Who will repay the $100m to residents - Who will be held accountable.
A statement on the Consumer Affairs Victoria website can mislead retirement village residents into paying a substantially higher maintenance charge than they are statutorily obliged to pay. The statement reads:
“A retirement village can only increase the amount of their maintenance charge annually in accordance with increases in the consumer price index (CPI).”
It continues:
“A bigger increase is only allowed if it is approved by a special resolution passed at a meeting of residents.”
The statement misleads residents into a belief that the only control on increasing their fees is whether an increase exceeds CPI, operators rely on this to obtain a maintenance charge greater than the adjusted maintenance charge calculated under the Act, without resident authority.
The underlying issue is the proper construction and function of the expression “adjusted maintenance charge” in the Retirement Villages Act 1986 (Vic) (“the Act”), particularly ss 38 and 38AA. That construction is set out below.
The question is whether the adjusted maintenance charge is:
- itself the recurring charge payable by residents as claimed in Parliament by the then Minister, Ms Shing; or
- a statutory amount calculated under s 38AA which operates to regulate and limit the amount of the separate “maintenance charge” that an operator may require residents to pay.
For the reasons set out below, it is the latter when the relevant provisions are read together. The central textual support for this view is s 38AA(2)(i), which is address at paragraph 3 below.
1. The Act expressly defines “maintenance charge” as a charge payable by a resident
Section 3C(1) provides that “maintenance charge” means a recurring charge payable by a resident under the relevant retirement village contract:
- for the provision of goods or services (other than optional services) by the operator; or
- to contribute to the costs of managing the retirement village, including employment, maintaining facilities and capital maintenance.
Section 3(1) further provides that “maintenance charge” has the meaning given by s 3C. Parliament has therefore expressly identified the “maintenance charge” as the recurring financial liability of the resident, with a substantive meaning independent of the calculation contained in s 38AA.
2. Section 38AA prescribes a formula for calculating a different statutory amount – it does not define the maintenance charge
Section 38AA is headed “Formula for calculation of adjusted maintenance charge”. Section 38AA(1) provides that the adjusted maintenance charge for a relevant financial year must be determined in accordance with subsection (2), which in turn requires the adjusted maintenance charge to be determined in accordance with a formula.
The critical provision is s 38AA(2)(i), which provides that the variable “A” in the formula is “subject to subparagraph (ii), the adjusted maintenance charge for the previous relevant financial year for the village.”
This wording is significant. For an existing retirement village, Parliament did not identify “A” as:
- the maintenance charge payable in the previous year;
- the actual amount collected from residents in the previous year; or
- the costs incurred by the operator in the previous year.
Instead, Parliament expressly selected the previous year’s adjusted maintenance charge as the starting point. That creates a statutory chain – previous adjusted maintenance charge → statutory formula → current adjusted maintenance charge – and so establishes a rolling statutory calculation.
3. Section 38AA(2)(i) expressly distinguishes “adjusted maintenance charge” from “maintenance charge”
The distinction becomes particularly clear when s 38AA(2)(i) is read together with s 38AA(2)(ii). Subparagraph (i) applies to an existing village and uses “the adjusted maintenance charge for the previous relevant financial year.” Subparagraph (ii), by contrast, deals with a new retirement village that has operated for only one relevant financial year, and substitutes “the maintenance charge for that relevant financial year.”
Parliament has therefore deliberately used two different expressions – “adjusted maintenance charge” and “maintenance charge” – and that difference cannot readily be dismissed as accidental.
For a new village, there is no previous adjusted maintenance charge from which to calculate the statutory amount, so Parliament uses the actual maintenance charge as the initial figure. Once that initial figure exists, however, the Act moves to the rolling mechanism in s 38AA(2)(i), under which the previous adjusted maintenance charge – not the previous actual maintenance charge – becomes the basis for the next calculation.
This is powerful textual evidence that the adjusted maintenance charge is a statutory calculated amount which regulates the maintenance charge, rather than merely being another name for whatever amount the operator happens to charge residents.
4. Section 38 confirms that the two expressions perform different functions
Section 38(2) provides, in substance, that an operator must not request or require a resident to pay a maintenance charge that is greater than the adjusted maintenance charge, subject to the statutory exceptions. The provision is framed as a comparison – maintenance charge exceeding adjusted maintenance charge – which is the circumstance triggering the statutory prohibition.
The prohibition is not expressed as “an operator must not require a resident to pay an adjusted maintenance charge greater than …”, nor does it say “the adjusted maintenance charge is the maintenance charge payable by the resident.” Instead, it establishes a comparison between the two: the maintenance charge must not exceed the adjusted maintenance charge. The natural operation of that provision is therefore to make the adjusted maintenance charge the statutory controlling amount against which the actual maintenance charge is measured.
5. Section 38(4) reinforces the distinction
Section 38(4) provides that the payment of a maintenance charge that is greater than the adjusted maintenance charge may be approved by a special resolution of residents. Again, Parliament has distinguished the payment of the maintenance charge from the adjusted maintenance charge against which that payment is measured. The statutory scheme is therefore capable of operating as follows:
Maintenance charge = the recurring charge payable by the resident under s 3C
Adjusted maintenance charge = the amount calculated under s 38AA
Section 38 = the provision which ordinarily prevents the first amount from exceeding the second
6. The function of s 38AA is regulatory, not merely an accounting exercise
The better construction is that s 38AA establishes a statutory ceiling or control mechanism. It does not merely provide an internal accounting calculation of no legal consequence, nor does it create a second fee payable by residents. Its legal function is to determine the amount above which the operator ordinarily cannot require residents to pay a maintenance charge.
Put simply: s 3C identifies what constitutes a maintenance charge; s 38AA determines the statutory adjusted amount; and s 38 regulates the relationship between the two. That construction gives each provision a separate and coherent function.
7. The construction is supported by the structure of the formula
The operation of s 38AA(2)(i) would be difficult to explain if “adjusted maintenance charge” simply meant the actual amount residents paid.
If that were the intention, the logical formula for an existing village would be to take the previous year's maintenance charge and adjust it.
Instead, apart from year 2 Parliament requires the calculation to begin with the previous year's adjusted maintenance charge.
Consequently, s38AA creates a self-perpetuating statutory control figure. For example:
| Year | CPI | Operator Maintenance Charge | s38AA Adjusted Maintenance Charge (Ceiling Amount) | Basis of s38AA Adjusted Maintenance Charge | Excess over Adjusted Amount |
| 1 | - | $100,000 | - | - | - |
| 2 | 3% | $108,000 up 8% | $103,000 | s38AA(2(ii) $100,000 + 3% | $5,000 |
| 3 | 2% | $110,160 Up 2% | $105,060 | s38AA(2(i) $103,000 + 2% | $5,100 |
In year 2 the operator's proposed maintenance charge is $108,000. The s38AA adjusted maintenance charge is $103,000. The two figures are not identical; the latter establishes the statutory upper limit of $103,000. Residents have the right under s38(4) to choose which of the two values to pay, $108,000 or $103,000.
In year 2, the operator let residents vote on which of the two fees to pay, but for the wrong reason. A vote based on CAV's plain-English explanation where an increase is higher than CPI, overlooking the statutory provisions of Section 38(2) and subsequently s38(4).
In year 3 the operator’s proposed maintenance charge is $110,160. The s38AA adjusted maintenance charge is $105,060. The two figures are not identical; the latter establishes the statutory upper limit of $105,060. Residents have the right under s38(2) and subsequently s38(4) to choose to not to pay $110,160.
In year 3, the residents right to a vote was denied under CAV's plain-English explanation that the increase was no greater than CPI, ignoring the 38(2) protection for residents in that they are not required to pay a maintenance charge greater than the statutory upper limit of $105,060.
8. The purpose of the Act supports this construction
Section 1 states that the purpose of the Act is to clarify and protect the rights of persons who live in, or wish to live in, retirement villages. The interpretation of Victorian legislation is also governed by s 35 of the Interpretation of Legislation Act 1984 (Vic), which requires a construction promoting the purpose or object underlying the Act to be preferred, and permits consideration of parliamentary proceedings and explanatory material.
The construction advanced here provides residents with a coherent statutory protection: the operator identifies the maintenance charge falling within s 3C; the statutory formula establishes the adjusted maintenance charge; s 38 ordinarily prevents the operator from requiring residents to pay a maintenance charge exceeding that amount; and an increase beyond that amount requires the statutory approval mechanism or must fall within an express exception. That construction gives practical effect to the protective purpose of the Act.
9. The parliamentary debate does not displace the statutory text
I acknowledge that, during the passage of the 2025 amendments, the Minister at the time stated that:
“The adjusted maintenance charge is not [a] benchmark. It is an actual maintenance charge payable by residents …”
The Government opposed an amendment which would have replaced “adjusted maintenance charge” with “benchmark maintenance charge”. I raise that statement because it is likely to be relied upon in support of the first construction. However, it does not, in my submission, answer the statutory construction question, and the statutory text itself remains primary.
More importantly, the Minister’s statement does not alter the fact that s 38AA(2)(i) expressly defines the starting point for the annual calculation as the previous adjusted maintenance charge, while s 38(2) expressly prohibits a resident being required to pay a maintenance charge greater than the adjusted maintenance charge. Those provisions continue to distinguish the two concepts.
The parliamentary statement may support the proposition that the adjusted maintenance charge can be the amount actually payable where the operator’s maintenance charge is set at that amount. It does not, however, establish that the two expressions are legally synonymous. Indeed, the proposed amendment is itself revealing: the fact that Parliament was asked to replace “adjusted” with “benchmark” demonstrates that the terminology was recognised as potentially confusing. The amendment was rejected, but rejection of a proposed amendment does not itself amend the operative text or eliminate the textual distinction between the two expressions.
10. The practical consequence
The consequence of the preferred construction is that an operator cannot simply treat any amount it chooses to charge residents as the “adjusted maintenance charge”. The starting point must be the statutory scheme: first, identify the maintenance charge within s 3C; second, calculate the adjusted maintenance charge strictly in accordance with s 38AA; and third, apply s 38 to determine whether the proposed maintenance charge exceeds the statutory amount.
The adjusted maintenance charge cannot properly be used as a device to redefine what constitutes the underlying maintenance charge. Conversely, an operator cannot avoid the statutory limitation by characterising an amount as part of the “adjusted maintenance charge” when that amount has not been determined in accordance with s 38AA.
11. The particular significance of s 38AA(2)(i)
The central submission of this letter is that s 38AA(2)(i) is inconsistent with the proposition that the adjusted maintenance charge is simply the actual maintenance charge payable by residents. For an established village, the statutory formula does not take the previous year’s actual maintenance charge as its starting point – it takes the previous year’s adjusted maintenance charge. The Act therefore establishes a distinct statutory figure which is carried forward from year to year, and the fact that the figure may ultimately become the amount actually charged to residents does not alter its statutory function.
The distinction is analogous to a statutory maximum: the fact that a person may lawfully be charged the maximum amount does not mean that the maximum itself is necessarily the same legal concept as the underlying charge.
12. Conclusion
For the reasons given above, the proper construction of ss 3C, 38 and 38AA is as follows:
- “maintenance charge” is the recurring charge payable by the resident as defined in s 3C;
- “adjusted maintenance charge” is the amount determined under the statutory formula in s 38AA;
- for an existing village, s 38AA(2)(i) requires the calculation to commence from the previous year’s adjusted maintenance charge, not the previous year’s actual maintenance charge;
- s 38(2) establishes the ordinary statutory prohibition against requiring a resident to pay a maintenance charge greater than the adjusted maintenance charge;
- consequently, the adjusted maintenance charge performs the function of a statutory controlling amount, or ceiling, for the maintenance charge; and
- it should not be treated as a separate fee payable by residents, nor used to enlarge or redefine the underlying maintenance charge contrary to s 3C.
In short, the adjusted maintenance charge and the maintenance charge are distinct statutory concepts, and s 38AA calculates the former for the purpose of regulating the latter.
13. The Consumer Affairs Victoria website statement should be corrected
Returning to the website statement: on the construction set out above, it is materially incomplete, and contended misleading. By telling residents that an operator “can only increase” the maintenance charge in line with CPI, or with a special resolution, the statement omits the separate and more fundamental statutory constraint in s 38(2) – namely, that the maintenance charge must not exceed the adjusted maintenance charge calculated under s 38AA, regardless of whether the proposed increase happens to track CPI.
An operator can point to this statement and suggest that any increase in line with CPI is lawful, when in fact the statutory ceiling is the adjusted maintenance charge, which may be lower.
To ensure full protection and rights under s38(2) and s38(4) for an already vulnerable cohort, Consumer Affairs Victoria must revise their website statement to accurately reflect the provisions of s38 and s38AA, including the s38AA adjusted maintenance charge as the statutory ceiling.
