13 May 2021

Reminder: Consultation period for 2021/2022 budget

Before the start of each financial year, the residents of a retirement village must have access to the proposed budget documents for the next year. This is in preparation for the operator and residents budget consultation process. This bulletin aims to remind operators of their budgetary obligations.

What does the operator need to do?

Under the Fair Trading (Retirement Villages Interim Code) Regulations 2021 (the Code), the operator of a retirement village must establish appropriate procedures for consulting with residents and the residents’ committee on future planning and budgeting of the retirement village. This includes any proposed change to the operating financial arrangements of the retirement village.

To help with this consultation, operators must:

• Develop a proposed operating budget for the next financial year;
• Develop a proposed reserve fund budget for the next financial year (only if residents or former residents are contractually obligated to contribute to a reserve fund);
• Include the information used in the preparation of the proposed operating and reserve fund budget that a resident might reasonably expect to have access to. This may include relevant accounts of actual expenditure, and information explaining proposed fee changes or changes to the provision or availability of amenities or services;
• Display a copy of the above budget documents in a central location in the village. Operators must also make a copy of the documents available to each resident upon request. Both must occur no later than one month before the end of each financial year;
• Give each resident written notice stating where and when the budget documents will be available; and
• Ensure the proposed operating budget meets the formatting and content requirements of clause 17(3) of the Code.

What creates effective consultation?

A well-developed consultation process with residents and the residents’ committee can save an operator time and minimise disputes. It is also required under the Code.

The proposed budget determines the recurrent charges that residents will pay in the coming financial year. Village budgets and recurrent charges are a common cause of complaints. Effective consultation provides residents with the opportunity to have a say in the proposed budget. It also allows them to understand the proposed recurrent charges, which will minimise the possibility of a dispute arising.

Providing information plays a part in the consultation process. Effective consultation is much more than providing information - operators should fully engage residents and the residents’ committee in the decision-making process for the village’s budget.

The Code provides examples of effective consultation. This includes the operator giving the residents and residents’ committee the opportunity to express views on matters that affect the operation of, or experience of living in, the retirement village. The operator needs to listen and consider these views, comments and concerns before making a decision. The operator should respond to matters in writing in a timely manner. They should provide reasons why requests can or cannot be met, as well as taking steps to put in place requests where appropriate and reasonable.

Finalisation and approval of the budget

The proposed budget must not be finalised or approved until:

• Each resident receives their required minimum of 10 working days to consider the budget documents. This period starts the day after they are served the written notice of the location of the proposed budget documents.
• The operator holds an annual general meeting (AGM) of residents before the end of each financial year. This AGM specifically deals with matters relating to the final budget proposals for the next financial year.

Operators should not use the AGM as the initial means to engage with residents about the proposed budget. Operators should consult with residents and the residents’ committee before holding the AGM. Operators might consider encouraging residents to raise queries or concerns with the operator or with the residents’ committee, or to attend a pre-AGM conference where residents can voice their queries or concerns.