It's gold! The value of your site agreement
03/11/2015
One of the most concerning changes in the new Residential (Land Lease) Communities Act 2013 is the introduction of ‘voluntary sharing arrangements’. Under the voluntary sharing arrangement provisions an operator can offer new site agreements that include entry and exit fees and entitle the operator to a share in the sale price, or in any future capital gain on a home when it is sold.
Operators are not obligated to offer site agreements containing voluntary sharing terms and where they do, in most circumstances they must also offer a ‘rent only’ agreement. This is the case for current home owners who choose to enter into new site agreements, and prospective home owners who purchase a home from a current home owner.
However, if a prospective home owner buys a home from the operator, the operator may choose to only offer a site agreement containing voluntary sharing terms.
In the debate on voluntary sharing terms operators and the Government took the position that they are a positive change because they will provide home owners with a choice – but is it a real choice?
Let’s look at a couple of possible scenarios.
Scenario One
You own your home, and have been living in the park for the last five years. The operator approaches you, asking you to sign a new site agreement containing voluntary sharing terms now that the Residential (Land Lease) Communities Act is the law.
To tempt you, the operator offers you a reduction in your current site fees (from $170 to $160) in return for a 10% share of the sale price when you sell your home.
How can you confidently predict how much longer you will stay in the park and therefore calculate whether this is a good deal or not?
Scenario Two
You want to sell your home, and have lined up a keen potential buyer. The buyer talks to the operator about entering into a site agreement.
The operator presents the new buyer with two options: they can enter into a rent only agreement with higher site fees than you are currently paying; or they can enter into an agreement with voluntary sharing terms and keep paying the same site fees as you pay.
The voluntary sharing term is a $10,000 entry fee. Is this a real choice for the home owner?
You don't need a new agreement
You do not have to sign a new site agreement just because the law has changed. Your existing agreement continues to apply under the new Act. If you are considering entering into a new agreement, it is important to seek independent advice before you sign.
Provide a real choice - Assign your existing site agreement
Under section 45 of the Residential (Land Lease) Communities Act 2013 you (as the home owner) have the right to assign your site agreement to someone else. If you assign your agreement to the purchaser of your home they take over the agreement on the same terms.
You need the written consent of the operator to assign your site agreement, but they cannot unreasonably refuse to give consent. If they do, you can apply to the NSW Civil and Administrative Tribunal (NCAT) and the operator can be ordered to consent to the assignment.
You should think of your existing agreement as an asset, because there is real value in being able to assign it to someone. In practice it means that when you are selling your home you can confidently assure a potential buyer that they can continue to pay the same site fees you have been paying. Additionally the buyer will not have to agree to voluntary sharing terms.
New fees and charges
The Residential (Land Lease) Communities Act 2013 introduces a number of new fees and charges including a sewerage usage charge and late fees on utility accounts that are not paid on time. However, the savings and transitional provisions protect current residents from these new fees and charges.
Schedule 2 clause 15(2) provides: ‘Any new fee or charge permitted by this Act does not apply to any agreement entered into before the commencement of the relevant provisions of this Act.’
If you do not enter into a new site agreement you do not have to pay the new fees and charges.
Remember, you do not need to sign a new agreement. Your current site agreement is still valid under the new Act.