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Village budgets 

A village budget is compulsory in most retirement villages where the residents pay recurrent charges. This ensures residents know the details of how their recurrent charges will be spent. In some circumstances, the operator is required to seek the residents’ consent to the proposed budget. There are limited cases where a budget is not required.

When is a budget not required? 

In some smaller villages, the residents can choose not to receive a copy of the village budget. This is only an option if the total amount of the recurrent charges to be paid during the financial year will be $50,000 or less.

A majority of residents must consent to not receiving annual budgets at a general meeting. The residents may also meet and vote to cancel their consent if they wish. If the amount of recurrent charges collected for a financial year exceeds $50,000, the consent ceases to have effect.

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Notice of proposed budget 

In villages where a budget is required, the village operator must:

  • prepare a proposed budget each year itemising how the recurrent charges will be spent during the next financial year, and
  • give each resident a written notice with a copy of the proposed budget at least 60 days before the start of the financial year.

The budget notice must state:

  • brief reasons for any changes in expenditure from the previous year
  • that the residents’ consent for the budget is required (see further below for when consent is required)
  • that a special resolution of the residents is required for any variation in the village services or facilities that causes a change in expenditure, and
  • that the operator may apply to the NSW Civil and Administrative Tribunal (the 'Tribunal') if the residents do not consent to the budget.

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What must be in a proposed budget? 

A proposed annual budget must include:

  • the amount of recurrent charges residents will pay during the year (including any expected increases by fixed formula if applicable)
  • the method by which the recurrent charges have been calculated
  • the total expected income from recurrent charges for the year
  • the total proposed expenditure of the village for the year
  • the effect of any expected surplus or deficit from the current year
  • all proposed categories of expenditure
  • the proposed expenditure in each category
  • the proposed and actual expenditure in each category in the approved budget for the current year
  • the method or calculation for sharing any item of expenditure between the village and the operator’s other villages or businesses (if applicable)
  • the method or calculation for sharing recurrent charges between residents, only if some residents are paying significantly higher recurrent charges than others (for example, because they are receiving optional services)
  • the expected surplus or deficit for the year.

If the proposed budget includes some of the operator’s head office costs or management or administration fees, these must be itemised to show the goods and services to which they relate and the approximate cost of those goods and services. However, the operator may provide a break down of the goods and services instead of an itemised list, but only if they give an undertaking to provide an itemised list within 10 business days of it being requested by any resident.

Operators must also provide details about how head office costs or fees have been apportioned between villages (where the operator owns two or more villages). This provides increased transparency as to the way in which the operator determines what each village pays towards the operator’s head office expenses, and allows residents to assess whether the amount they are contributing is proportionate to the actual services provided by their village.

The budget may provide for contingencies up to a maximum of $1.

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What must not be in the budget? 

There are some expenses which cannot be paid for from the money raised from recurrent charges. These items cannot be included in the budget:

  • fees for the operator’s membership of industrial or professional associations
  • overseas travel by the operator or their agent or employees
  • the cost of marketing vacant units
  • some payroll tax amounts,
  • head office costs that do not relate to services provided to the residents of the village, and
  • any other items for which the operator is financially liable under the legislation.

Payroll tax can only be included in the budget if:

  • the wages to operate the village for the year are more than the tax threshold set under the Payroll Tax Act 2007, or
  • before 1 March 2010, the residents had consented to pay payroll tax from the recurrent charges and they have not revoked the consent.

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Can residents ask for more information? 

The residents committee may ask the operator to provide any reasonable additional information needed to help the residents decide whether to consent to the proposed budget. If there is no residents committee, any resident can make the request. For example, the residents may wish to see quotations for any proposed work to be carried out or any service or facility to be provided. An operator must respond to a request by a resident or the residents committee for the itemisation of proposed expenditure if it is a reasonable request. An operator must provide this information within 10 business days.

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Do residents need to consent to the proposed budget? 

In general, a meeting must be held for the residents to consider the proposed budget and vote on whether to consent to it. This is by a majority vote, that is, more than 50% of the votes cast (in person or by proxy) need to agree to the budget for it to be accepted.

In some circumstances, the residents’ consent to the budget is not required. The residents’ consent is not needed if:

  • the recurrent charges have not been changed, or
  • the recurrent charges are being changed by a fixed formula, or
  • the recurrent charges are being changed other than by a fixed formula and the change is within the Consumer Price Index variation.

Where the residents’ consent is not required, they must still be given written notice and a copy of the budget.

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How is the residents' consent given? 

If the residents’ consent to the proposed budget is required, then certain procedures must be followed.

Within 30 days after receiving the operator’s request for consent, the residents must:

  • hold a meeting
  • consider the proposed budget
  • vote on whether to consent to the budget
  • advise the operator that they consent or do not consent (as the case may be), and
  • specify which items in the budget they do not agree with (if there are any they disagree with).

The meeting will be arranged by the residents committee, if there is one, or by the operator.

If the residents do not advise the operator of their decision within 30 days, they are taken to have refused consent to the budget.

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Resolving a dispute about the proposed budget 

If the residents do not agree with any items in the proposed budget, there are a number of steps which can be followed.

Firstly, the residents committee can ask the operator for more information, such as copies of quotes for proposed work and services. If there is no residents committee, any resident can ask the operator for information. The operator cannot refuse a reasonable request. The residents or residents committee and the operator could also discuss possible ways of reducing expenses. If a change to the proposed budget is agreed, the operator can prepare an amended budget.

If the residents and operator are not able to agree, Fair Trading may be able to assist by providing information about the law. Fair Trading cannot direct an operator to take a particular course of action.

If the majority of residents still do not consent to the proposed budget, the operator or a resident can apply to the Tribunal.

The Tribunal can:

  • make an interim order about items that are not in dispute
  • make orders to help the parties to reach agreement, such as an order to hold a meeting or prepare new costings
  • make recommendations about the costs and services to be provided
  • approve the proposed expenditure in the budget
  • approve different items of expenditure or different amounts, and
  • make other relevant orders about expenditure and liabilities.

If the dispute is not resolved by the time the financial year commences and an application has been lodged with the Tribunal, the operator may only spend money to meet the reasonable and necessary costs to ensure the village continues to be properly managed. The Tribunal may make orders about this expenditure if appropriate.

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Voting on recurrent charges increases and budgets 

If the operator is required to seek the residents' consent to change recurrent charges and to approve the proposed budget, this must be done by two separate votes. This means that:

  • if any residents’ recurrent charges are being increased by more than the CPI variation (other than by fixed formula) a vote must be held for the affected residents to decide whether to consent to the variation; and
  • where the residents’ consent is required for the proposed budget, this is a separate vote in which all the residents are entitled to participate.

This means that residents can consider and vote on the increase in recurrent charges separately to deciding whether they agree with the line items and amounts in the proposed budget.

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Model budget 

A model budget is provided for residents and operators to better understand the types of items that could be included in a village budget.

The model budget is not compulsory, and does not have to be used by a village operator.

Download a copy of the Model budget on the NSW Fair Trading website.

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