Owners and operators of a residential park (also known as a “land lease community”) or a mixed-use park with manufactured home sites will know that a very important aspect of their business is the site rent payable under site agreements and the manner in which the site rent may be increased over time.
In this article, Partner Anthony Pitt from our Property practice discusses site rent increases in land lease communities and briefly highlights the key requirements and differences across Queensland, New South Wales, Victoria and Western Australia.
While most States have enacted legislation to regulate the operation of residential parks, each differs with respect to the relevant requirements that apply to increases in the site rent. We briefly discuss some of the key requirements and differences in this article.
Queensland
In Queensland, the site rent is usually increased by an annual increase mechanism and a market review at stated intervals.
The Manufactured Homes (Residential Parks) Act 2003 (Qld) requires that:
- the basis of increase must be set out in the site agreement;
- the site rent can be increased using only one basis at a time; and
- there must be a minimum of one year between each increase.
The park owner must give the home owner a notice stating various required matters at least 35 days before the general increase day. If the home owner wishes to dispute the increase on the basis that it is excessive, the home owner may apply to QCAT.
For a market review, the park owner must engage a registered valuer to perform the market review, and must consult with the home owners committee about the market valuation at least 63 days prior to the proposed increase day. A copy of the market valuation must also be provided with the notice.
Additionally, a park owner can seek to increase the site rent outside of the site agreement on two months’ written notice based on significant increased operational costs, significant repair costs, or significant upgrade costs, but the home owner must agree and, if not, the park owner must apply to QCAT to seek the increase.
The Queensland Government recently released a Consultation Regulatory Impact Statement for consultation that canvassed a wide variety of reforms with respect to site rent increases. Industry bodies and participants have made submissions about these proposed reforms, and we await the Queensland Government’s response as to what it proposes to do.
New South Wales
The Residential (Land Lease) Communities Act 2013 (NSW) provides that a site agreement must specify an increase based on either:
- an increase by a fixed method (which can either be a fixed amount or a fixed calculation); or
- an increase by notice.
For an increase by a fixed method, a site agreement must not provide that the site fees may be increased by more than one fixed method; and, if more than one method is specified, the method that results in the lower increase is the applicable method to be used.
The park owner must give the home owner at least 14 days’ written notice of a fixed increase, and the home owner does not have the right to challenge a fixed increase in NCAT on the basis that it is excessive.
For an increase by notice, notice must be given in writing to all home owners of the community at the same time at least 60 days before the increase day, and no more than once in any 12-month period. In response to the increase:
- at least 25% of the home owners who received the notice may lodge an application for mediation on the ground that the increase is excessive within the first 30 days of the notice and, if unsuccessful, it may progress to NCAT (where the application must be made within 14 days on behalf of all affected home owners (other than those who opt out of the application)); and/or
- a home owner may apply to NCAT on the basis that the increase is substantially excessive when compared with increases for similar residential sites in the community within 30 days after the notice of the increase was given.
Victoria
The Residential Tenancies Act 1997 (Vic) provides that a site agreement must specify that the site rent is to be increased by either:
- a fixed amount in accordance with a specified method; or
- a non-fixed amount.
The Act specifically provides that an increase by a fixed amount includes a calculation of a stated percentage or the CPI whichever is higher.
The site rent must not be increased at intervals of less than 12 months.
For an increase by a fixed amount, the park owner must give at least 28 days’ written notice of the increase; however, the home owner has no express right to dispute the increase on the basis that it is excessive.
However, for an increase by a non-fixed amount, the park owner must give at least 60 days’ notice of the proposed increase. If the home owner considers the increase to be excessive, they may:
- within 30 days, apply to the Director of Consumer Affairs Victoria to investigate and prepare a report considering the increase; and
- thereafter within 30 days of receiving the report, if necessary, apply to VCAT.
Western Australia
The Residential Parks (Long-stay Tenants) Act 2006 (WA) prohibits certain forms of site rent increases, including:
- where the review of the rent is at intervals of less than 12 months (for a site-only agreement);
- where the term does not, for each review to be carried out, state the amount of rent or a single basis for calculating the amount of rent;
- a market review (unless entered into before the commencement of this provision); or
- where the term provides that the rent may not be reduced if the reviewed rent is less than the current rent being paid.
For an increase provided for in the site agreement, the park owner must give 60 days’ written notice of the increase.
Alternatively, a park owner can seek to increase the site rent outside of the site agreement on 60 days’ written notice based on significant increased operational costs or significant unforeseen repair costs, but the home owner must agree and, if not, the park owner must apply to SAT to seek the increase.
Summary
The above is just a brief snapshot of the relevant requirements that apply to site rent increases across these jurisdictions. It is important for owners and operators of residential parks and mixed-use parks with manufactured home sites to be aware of the differing requirements and to seek advice as to how they apply to the site agreements in force in the relevant community.
More information
For more information or assistance, please contact Partner Anthony Pitt from our Commercial Property practice. Our expert team provides detailed and commercial advice to all stakeholders in the sector (including park owners and managers, landowners and industry representative bodies) on the legalities of developing, owning and operating a caravan/tourist park or a manufactured home park/land lease community.
With a sophisticated understanding of property market trends in Queensland and across Australia, we provide tailored commercial advice to help you not only run your park, but also build a strong, successful business.