Retirement Village Reports

What mandatory funds must the operator of a retirement village adhere to?

The operator of a retirement village must establish two compulsory legislative funds in certain states of Australia:

  • a capital replacement fund for replacing the village's capital items
  • a maintenance reserve fund for maintaining and repairing the village's capital items

What is the purpose of a Maintenance Reserve Fund (MRF)?

The purpose of a MRF forecast is to enable the retirement village to make adequate monetary provision for future maintenance items, in accordance with the requirements of the relevant legislation. It is an offence to use money in the fund for any other purpose, including crediting other funds. The operator uses the fund for day-to-day maintenance of the village, capital improvement or replacement, or body corporate property.

What is the purpose of a Capital Replacement Fund (CRF)?

Under legislation, a separate fund is established by the operator to provide for the ongoing long-term replacement of the villages capital items. Expenditure is undertaken each year in accordance with an independent Quantity Surveyor such as Quantum QS. It is an offence to use money in the fund for any other purpose, including crediting other funds. The operator cannot use the fund for capital improvement or to replace body corporate property.

How tribunal decisions can affect retirement village operators?

A recent Commercial and Consumer Tribunal decision reinforces the meaning and requirement of listing expenditure involved in providing each general service under the provisions of the Retirement Villages Act 1999 (RV Act).

This decision is a reminder to retirement village operators of the need to provide sufficient detail of expenditure in providing each general service, and that the accounts must separate those items of expenditure which can be increased under section 107 from those items of expenditure that need resident approval under section 106 for an increase beyond the CPI. Quantum QS forecasts plans will list out in which funds these belong MRF or CRF? Let Quantum QS help you.