Fair market value: challenging site fee increases in new agreements
03/11/2016
The Tenants’ Union (TU) was one of the stakeholders in the consultation with the Government on the review of residential parks legislation during 2011 and 2012. A key area of difference between the industry and those of us representing the rights of residents was site fee increases.
The TU was well aware of resident concerns about high site fee increases and one of they key problems in this area was the increase in site fees when residents moving into a park signed a new site agreement. Park owners invariably offered new agreements with site fees higher than other residents were paying and this impacted on everyone when the next site fee increase came around. The park owner would argue that the higher site fee was the market value for sites in the park.
This practice of increasing site fees in new agreements was one of the main reasons park residents valued assignment so highly, and perhaps why park owners disliked it. If a resident assigned their agreement to the purchaser of their home, the purchaser took over that agreement and the site fees could not be increased at that point.
The Government did listen to these concerns and the Residential (Land Lease) Communities Act 2013 (the Act) requires that when an operator enters into a new site agreement the site fees must not exceed fair market value. Fair market value according to the Act is the higher of either the site fees paid by the current home owner or the site fees payable for sites of a similar size and location within the community. This seems straightforward but unfortunately some operators have either misunderstood, or don’t think this section of the Act applies to them.
In a community on the Central Coast two new home owners were given site agreements with site fees $43 a week above the fair market value for similar sites. These are extraordinary increases and clear breaches of the Act by the operator but getting a remedy is difficult for home owners. These two home owners did not become aware that they were paying much higher site fees than others in the community until a few months after they moved in and the time limit for a Tribunal application on this issue is 28 days.
The Tenants’ Union has heard from home owners in other communities where the practice of increasing site fees for new home owners continues and in the examples we have been given, the increases have been above fair market value. It is disappointing that some operators continue to put profit ahead of their legal obligations and we urge all home owners that may have been affected by such practices to call NSW Fair Trading on 13 32 20.
Residential (Land Lease) Communities Act 2013
Section 109(5)
The site fees under the new site agreement must not exceed fair market value.