Asset Management Plans and retirement village regulation NSW
The NSW Minister has written to address some outstanding concerns with how recent amendments to the Retirement Villages Act are to be implemented. The Minister advises that he has instructed his Department to draft amendments to Clause 26AA of the Regulation to limit the ability of an operator to take into account vacant units in the financial year following the vacancy, to only have those that have become vacant in the previous financial year (FY).
This is to ensure operators cannot carry forward losses, and thus increases to recurrent charges, beyond one year following the vacancy. As a transitional period provision of the 2021-22 FY, operators will only be able to recover for units that became vacant since the commencement of the reforms on 1 January 2021.
Another amendment will ensure that if an operator is not required to, or otherwise fails to, provide a budget to residents, the operator must then notify residents that a copy of 3-year estimates of capital maintenance is available for them to read and the operator must seek consent for the plan. The operator will be required to make this report available for all residents. The Government intends to require a suitably qualified person (which will include a quantity surveyor) to assess the Plan against criteria outlined in clauses 260 and 26F of the Regulation.
This person must then provide a written report, with engagement costs to be covered by recurrent charges. The Minister notes this is consistent with the intention of the regulation that operators should be able to use existing asset and maintenance registers, which are prepared by qualified professionals for taxation purposes, where these include the information required.
The Minister notes there is still some work to be done to clarify the practical operation of the new asset management requirements. In order to resolve these concerns the Minister has said he will delay commencement of offence provisions relating to the plans until 1 July 2022. This will mean that villages still need to prepare an asset management plan but will not be subjected to offence provisions until their 2022/23 FY. In addition, where a village has commenced its notice period on a proposed 2021/22 FY budget before the commencement of the proposed amending regulation, the operator will not be required to have its asset management plan reviewed by a qualified person for that budget cycle.
It is understood that these amendments will be drafted and gazetted in coming weeks.