Review overview

At the end of 2020 the NSW Government released the Discussion Paper on the Statutory Review of the Residential (Land Lease) Communities Act 2013. Individuals and organisations were invited to provide feedback via a survey on the NSW Fair Trading website or by making a submission. Consultation was initially scheduled to close on 26/02/2021 but the deadline was extended to 12/03/2021.

The Tenants’ Union had been preparing for the review by consulting with home owners and Tenant Advocates over the preceding two years. We wanted to be certain we were fully informed and across the key issues of concern to home owners by the time the review came around. We published our report 5 Years of the Residential (Land Lease) Communities Act 2013 in August 2020 setting out our key issues for reform and recommendations for change.

The Tenants’ Union would like to thank all the home owners who took the time to participate in our survey and those who contributed through our forums and meetings. Your views and ideas are important to us and are a valuable contribution to the work we do.

The Discussion Paper was comprehensive, asking a total of 76 questions about the Act covering everything from the objectives to administration and enforcement. We were particularly pleased to see questions on all of the key issues we had raised with the Government in stakeholder meetings and through our 5 Year Report. In our submission the Tenants’ Union emphasised the need for a rebalancing of fairness and power in the Act, which we believe can be brought about through improving operator education and conduct, and addressing issues related to fees, charges and community rules.

Governance

The way in which a community is operated impacts all aspects of home owners’ lives from happiness to financial wellbeing. Throughout our consultation with home owners, the behaviour of operators and community employees was raised as a major concern. We heard everything from operators not understanding the law, to allegations of disrespect, bullying, harassment and intimidation. The Discussion Paper asked five questions about operator conduct and education in Chapter 4, which facilitated focused feedback on these very important issues.

In our submission we recommended an expansion of mandatory education to all key personnel in the operating company. This includes decision-makers and on-site employees engaged in the day-to-day operations of the community, dealing with resident queries and disputes.

The Tenants’ Union meets regularly with senior staff at NSW Fair Trading and we have been engaged in a number of discussions with them about complaints and compliance. We believe the current complaints process could be improved and that a more transparent process should be developed. The Tenants’ Union would like to see a pro-active regulator that has the necessary tools to enable it to monitor operator conduct, encourage improvement, and take appropriate enforcement action where necessary.

Community Rules

Also in Chapter 4, the Discussion Paper asked questions about community rules. Those who live in land lease communities will be acutely aware that community rules can have a huge impact on the freedoms of residents yet they have little to no input into the creation of those rules. The Tenants’ Union has argued for a new rule-making process involving residents of the community, and for the Act to enable rules to be set aside if supported by a prescribed percentage of residents. We also recommended that the Act improve clarity around compliance requirements for community rules, particularly in communities with both residential and holiday sites.

Fees, charges and affordability

When it comes to money there is a great deal more to consider and the Discussion Paper contained a number of opportunities to comment on the financial arrangements and obligations in the Act. The first, and most obvious, is site fees and site fee increases. Chapter 3 asked questions about fixed method increases, increases by notice, site fees in new agreements and voluntary sharing arrangements.

Fixed method site fee increases

Outasite and Outasite Lite readers will be aware of the Tribunal decision regarding the fixed method increase used at Kincumber Nautical Village, and the subsequent appeal of that decision by the operator (see also this article). This dispute shone a light on what can happen when there is perceived ambiguity in a legislative provision and one party is willing to take advantage of that, to the detriment of the other party.

The Tenants’ Union struggled with the question of whether fixed method increases should be permitted under the Act. We acknowledge a fixed method provides certainty to home owners but a percentage increase that has effect for the duration of a site agreement can produce high increases not commensurate with operating costs for the community. We are aware of fixed methods in recent site agreements ranging from 3.5% to 5.5% at a time when the Consumer Price Index is very low. Ultimately, we recommended that if fixed methods are retained in the Act home owners should be given a choice of fixed method or increase by notice, and a fixed method should apply for no more than 12 months (one increase) at which point it can be renewed, renegotiated or the home owner can move on to the increase by notice method. We also recommended that the option of ‘other’ is removed so that methods like the one at Kincumber Nautical Village are no longer possible.

Site fee increases by notice

Through the review the Tenants’ Union has argued for more transparency around site fee increases by notice, clarity regarding the operating expenses that can be included in a site fee increase, and for the Tribunal to have complete discretion when considering whether an increase is excessive.

Fair market value

Again, our readers will be aware that we consider the third method of site fee increase to be the most significant and challenging issue. That is, the increases that occurs when a home changes hands. We are pleased to see a question on this point in the Discussion Paper. The Tenants’ Union has rarely sighted a new site agreement with site fees at Fair Market Value since the Act commenced. Just at the time of writing this article, we received an email from an advocate in the Tweed where a real estate agent is questioning site fees in a new site agreement on behalf of his client. The selling home owner was paying $310.78 a fortnight but site fees for the prospective home owner are $382 a fortnight, an increase of almost $72 or 23%. The operator advised the agent the increase was because ‘the park has established a new market rent.’

Maintaining the residential site

Whilst not directly related to financial arrangements or obligations, another ambiguity in the Act has led to operators transferring the costs of maintaining and repairing community infrastructure to home owners. The Act requires an operator to provide a residential site in reasonable condition and fit for habitation at the start of a site agreement. However, it does not specify who should maintain and repair the site once the agreement has started. We think the answer is obvious – the operator owns the site and the home owner leases it so the operator is responsible. However, some operators have used the lack of specificity to make home owners responsible for structural retaining walls, slabs and driveways and subsidence. This issue was covered in Chapter 4 of the Discussion Paper (see also this article.)

The Tenants’ Union made two further recommendations regarding arrangements that benefit operators but provide little or no benefit to home owners. We said that voluntary sharing arrangements and special levy provisions should be removed from the Act.

Utility charges

The other big issue regarding charges is of course utility charges. This is particularly important for home owners who are supplied with electricity through an embedded network. The Tenants’ Union has met with the Government three times as part of the review and we have also held discussions with other key stakeholders specifically about electricity charges. It is a complex area but we are hopeful the Government will settle on a charging method that is fair to both home owners and operators.

The end of the agreement

Chapter 6 of the Discussion Paper covered issues such as interference with sales, assignment (transfer) of site agreements, sub-letting and termination.

The ability to assign a site agreement is an important right for home owners and prospective home owners. When a site agreement is assigned the incoming home owner moves into the community on the same terms as the exiting home owner, including site fees. The right to assign a site agreement provides enhanced protections for incoming home owners and places them in a better bargaining position if they choose to enter into a new site agreement with the operator.

Termination provisions in the Act are generally appropriate in our view, except section 127. It enables a site agreement to be terminated when the site is not lawfully useable for residential purposes, including when the site is approved as a short-term site. An operator in the Illawarra has recently issued termination notices to all home owners in the community on the basis it doesn’t have an approval to operate under the Local Government Act 1993 (see this article). The Tenants’ Union does not believe operators should be able to terminate site agreements in these circumstances, where alternative remedies are available.

What next?

The Government will consider the submissions and survey responses to determine whether and how the Act should be amended. It is likely there will be further consultation with stakeholders before the Government settles on a final position regarding the changes. The Government has indicated changes to electricity charges will be fast-tracked so we will see those changes first.

This article was published in Outasite magazine issue 7. Outasite is published annually. Outasite Lite email newsletter, is sent several times a year – subscribe here. All past issues are available in the archive.