Capital maintenance is the ongoing repair and upkeep of the major physical assets of a retirement village.
For everyday maintenance and repairs of items within residents' premises, see page Maintenance and repairs.
Which capital items is the operator responsible for?
The operator is responsible for all items of capital in the village except items owned by a resident, items on common property, items installed by residents for private use, and roads within the village managed by local government or other authorities.
Items of capital include buildings and structures, plant and machinery, and village infrastructure.
Items of capital also include the following, which are specifically listed in the regulations:
- walls, cladding, floors, ceilings and roofs
- boilers, central heating equipment and pumps
- fences and gates
- garage doors, lockable sheds and car ports
- air-conditioning systems and units
- roads and pathways within the village
- solar panels and electric vehicle chargers.
The capital maintenance plan
The operator must prepare a capital maintenance plan covering all items of capital that the operator is responsible for.
The plan must set out:
- the items anticipated to need maintenance or replacement within 10 years
- the present condition or state of repair of each item
- when each item or component will need to be repaired or replaced
- the estimated cost of repair or replacement
- the expected life of each item once repaired or replaced
- any information the operator relied on in preparing the plan, such as survey plans and inspection reports.
Residents can get a copy of the plan at the annual meeting as the operator must at the meeting:
- table a copy of the plan
- present a report on its implementation during the previous year
- report on any unplanned maintenance expenditure during the year.
The capital maintenance fund
A capital maintenance fund is required if the operator sets aside a portion of maintenance charges to fund future capital maintenance after the end of the financial year in which those charges were paid.
There are rules around how maintenance funds are collected and spent to ensure they are used only for legitimate maintenance purposes.
Funds paid into a maintenance fund
Where a fund is established, the operator must pay into it:
- the portion of maintenance charges set aside for future capital maintenance
- amounts received under any insurance policy for damage to property covered by the capital maintenance plan
- interest earned on the investment of the fund
- any portion of payments made by residents on entry, during residence, or on exit that the operator considers may be required for capital maintenance, including portions of deferred management fees.
The operator determines what portion of maintenance charges and other resident payments is set aside for the fund.
Use of maintenance funds
Money in the fund may be paid out to fund capital maintenance in accordance with the capital maintenance plan. Funds may also be used for urgent matters where these are:
- to comply with a court or VCAT order
- to undertake urgent capital maintenance where immediate expenditure is necessary to ensure safety or prevent significant loss or damage
- to repair items where the need was not foreseeable when the plan was prepared; or to obtain required insurance for the village.
Urgent expenditure must not exceed the amount necessary for the purpose.
Resident oversight
Residents can see the fund balance and payments into and out of the fund in the annual financial statement presented at the annual meeting.
What cannot be funded from maintenance charges or the fund
Neither maintenance charges nor the capital maintenance fund may be used to fund:
- the construction of a new building or a new stage of the village
- depreciation of items of capital
- the renovation of vacant premises.
The cost of capital replacement must be borne by the operator and cannot be recovered from maintenance charges.
Owners corporation exemption
The operator is not required to prepare a capital maintenance plan or establish a capital maintenance fund if there is an owners corporation incorporated in respect of the retirement village land, and the owners corporation has both a maintenance plan and a maintenance fund under the Owners Corporations Act 2006.
A retirement village’s information statement will indicate if there is an owners corporation.