Recently at NCAT
03/11/2016
The right of a home owner to be able to assign their site agreement to someone who purchases their home has become a key battle ground under the Residential (Land Lease) Communities Act 2013 (‘the Act’). Early in the year the NSW Civil and Administrative Tribunal (the Tribunal) made a couple of decisions that operators were required to consent to the assignment of site agreements because they could not unreasonably refuse a request. However, in May the Tribunal made a different decision.
Farraway v Galt Investments Pty Ltd was an application by the home owner (Farraway) that the operator consent to the assignment of his site agreement to the purchaser of his home. Mr Farraway had asked the operator to consent to the assignment and the operator had refused. The applicant put forward a number of arguments about why the operator could not unreasonably refuse the request to assign, but the Tribunal dismissed the application. Here we look at the decision and the reasoning behind it.
To properly understand the issues surrounding assignment it is necessary to go back to the repealed Residential Parks Act 1998 (the Parks Act). Under that Act a resident (home owner) had the right to assign their site agreement and the park owner (operator) could not unreasonably refuse a request to assign. These were also terms of every site agreement signed under the Parks Act.
Following the review of the Parks Act the Residential (Land Lease) Communities Bill 2013 limited the right to assign a site agreement to the fixed term only and there was no provision that the operator could not unreasonably refuse a request to assign. This Bill was passed by the Lower House and was then sent to the Upper House of Parliament.
In the Upper House, the assignment provision (section 45) was amended. The restriction on only being able to assign during the fixed term was removed and a new sub-section preventing the operator from unreasonably refusing a request for assignment was inserted. However, there was a drafting error in the new sub-section. It uses the term ‘tenancy agreement’ when it should say ‘site agreement’. In Farraway the Tribunal applied a very literal interpretation of these words.
Section 45
(1) A home owner may, with the written consent of the operator of the community:
(b) assign the site agreement
(3) The operator must not unreasonably withhold or refuse consent to the assignment of a tenancy agreement.
Mr Farrway’s agreement was a ‘Residential Tenancy Agreement for Landlords and Tenants of Moveable Dwellings or Moveable Dwelling Sites.’ The Tribunal determined that this agreement was a site agreement and that, had the Parks Act still been in force the operator could not have unreasonably refused the request to assign the agreement.
The Tribunal went on to consider what a site agreement is under the Act and found that it is different to a tenancy agreement – a tenancy agreement cannot also be a site agreement.
Based on this finding the Tribunal determined that the ‘reasonability test’ applies only to tenancy agreements and not to site agreements. The Member cited the Second Reading Speech concerning the new Act (in the Lower House) but as we have pointed out – section 45 was amended in the Upper House. Had the Member looked to the speeches on the amendment they may have interpreted the words differently.
Further analysis of the decision highlights a number of other issues:
1. The Residential (Land Lease) Communities Act 2013 does not cover tenancy agreements – they fall under the Residential Tenancies Act 2010. Section 45(3) cannot be about the assignment of an agreement that falls under another Act.
2. Section 45 grants a right to assign a site agreement, not a tenancy agreement. The title and subsection (1)(b) do not mention assignment of a tenancy agreement and it is therefore illogical that subsection (3) would deal with the refusal of a right that is not provided.
3. Subsection (6) provides a right to apply to the Tribunal where a dispute arises, including a dispute about consent being withheld or refused. This right is only available to home owners and operators. If subsection (3) was about tenancy agreements then tenants would also have the right to apply to the Tribunal.
For these reasons we believe this decision should not be relied upon. Fortunately, it is not binding on other Tribunal Members and we therefore may see decisions in the future that interpret the assignment provisions differently.
STOP PRESS: The Government recently considered an amendment to section 45 of the Act to change ‘tenancy agreement’ to ‘site agreement’ but the amendment also restricted assignment to the fixed term. Following advocacy from resident groups and the Tenants’ Union the Government withdrew the amendment and has indicated further consultation will be undertaken with stakeholders before another amendment is put forward.