Some of the most commonly disputed issues in retirement villages are budgets, expenditure and capital replacement v capital maintenance. 

Recently the NSW Civil & Administrative Tribunal provided some observations in its findings in the matter of Alloura  Waters Retirement Village Residents Committee v Living Choice Australia Pty Ltd [2014] NSWCAT which  operators can use as a guide for approaching some of these commonly disputed expenditure

What issues were commented on?

The key issues which were raised and decided on or commented on by the Tribunal were:

Click here to view table

Tips for operators

With the distinction between capital expenditure and capital maintenance in the spotlight, operators should carefully  consider whether:

  • the expenditure incurred in relation to an item of capital changes the character or function of the item so that  there is a substantial improvement to the capital item beyond its original condition – capital replacement; or
  • the expenditure is necessary to ensure that the item of capital works and allows the item to continue to function  or preserve its ability to work AND it cannot be said that it would be more cost effective to replace the item – capital maintenance.

Also, when determining whether or not to adjust the approved budgets, an operator should exercise good  management practices and should be careful to ensure that there is no reduction in services to the residents of the  village as a consequence of the adjustment.