Residential Land Lease Community Laws Get Updated

By Eloise Parrab, Land Lease Communities Officer at the Tenants’ Union of NSW

On 25th September 2024 the laws governing residential land lease communities changed. These changes are the first phase of the 48 recommendations that came out of the 5 year statutory review of the Residential (Land Lease) Communities Act 2013 (RLLC Act). These reforms are the result of many years of advocacy and law reform engagement by residents and supporters. We hope to see positive impacts unfold as a result of these reforms.

There will be other changes to the law on utility billing provisions which will commence on 11th December 2024.

The changes that commence this year account for 21 of the 48 recommendations. We will have to wait until 2025 for progress on the other important 27 recommendations.

This article summarises the changes and how residents will be impacted. We have also updated the factsheets on our website to reflect the new provisions. We encourage you to read the factsheets to ensure you understand all the new provisions. If you have any questions please get in touch with your local Tenants Advice & Advocacy Service.

What changed on 25th September?

• Home owners are now allowed to make certain minor alterations to their homes without operator consent.
• New voluntary sharing agreements cannot include entry and exit fees.
• Residents must be given a choice between a rent-only agreement or a voluntary sharing agreement, and be given information on cost implications of each.
• Operators will need emergency evacuation procedures in place and they must be tested once a year and keep records of the tests.
• Limits are now in place on when an operator can enter a home owner’s home without permission.
• Operators can only issue a dilapidation notice to a home owner if the dilapidation has been caused by the home owner.
• Operators must give 30 days written notice to residents if they are intending to lodge a development application or a planning proposal that may impact on the community.
• Increase from 90 to 120 days to the notice period for vacating a residential site, where a termination notice  is given on the ground  that the site is not lawfully usable for the purposes of  a residential site.
• Home owners are now entitled to compensation if their site becomes unlawful after they have occupied  the site, due to an action  of the operator.
• Operators are no longer allowed to end site agreements if a residential site has not been used for at least 3 years as the place of residence of the home owner or another person permitted to reside at the site.
• Home owners on the By Notice increase method  will have clearer insights  into the reasons for the site fee increase when they get  their notice.
• The value of the land is  no longer a relevant provision for the NSW Civil and Administrative  Tribunal (NCAT) when determining if a site fee increase is excessive.
• The Fixed Method site  fee increase method is  now limited to one  single element.
• A 12 month transition period has started for those existing Fixed Method site fee increases that contain more than one element.
• There is a new maximum price for electricity for all residents in embedded networks, including those residents who are supplied and/or billed by an external retailer such as Humenergy.
• There is now more transparency around operator electricity costs and their supply contracts.
• Low amp discounts return for residents on their daily supply charge.

What is changing on 11th December?

• New requirements for billing for electricity and other utilities.
• New requirements for utility receipts.

Electricity pricing overhaul for embedded network residents

One of the most significant changes in this initial phase is electricity pricing within embedded networks. As residents who live in embedded networks are well aware there have been lots of problems with charging for electricity since the RLLC Act commenced. We have provided updates on the many NCAT cases that were taken by residents in 20182020 to try and recover some of the amounts they were overcharged by their operators. We then ended up with the famous Reckless method for how operators were to charge home owners. Some home owners have found this method difficult as the per kw charge changes every billing cycle so it’s hard to budget. The Reckless method also did not apply to tenants and those residents supplied electricity by a third party. There was also no discount for residents when they were receiving low amps under the Reckless method.

The changes that commenced on the 25th September 2024 ensure that tenants and residents supplied electricity by third parties, such as Humenergy, benefit from clearer provisions and have the same rights as home owners in their community. Separate electricity daily supply and usage charges have returned and operators are no longer using the Reckless method for calculating a residents bill. Operators and third-party suppliers are not allowed to charge for electricity above the maximum utility charge. The maximum utility charge is the median retail market offer in each distribution district as determined by the Independent Pricing and Regulatory Tribunal (IPART) on a yearly basis. This may result in some residents paying more for their electricity than under the Reckless method. Other residents will be paying less. IPART has made its first determination of the median retail market offer in each distribution district (see  below) and this information can be found at fairtrading.nsw.gov.au/media-releases-news-updates/notices/new-laws-for-electricity-pricing-in-communities-with-embedded-networks

Discounts on daily supply charges are re-introduced for residents (and for the first time apply to tenants and residents supplied by a third party) receiving low amps. If supplied less than 30 amps, a resident will receive a 60% discount; and if supplied between 30 and 60 amps they will receive a 30% discount.

For utilities other than electricity (water for example) the operator cannot charge a resident an amount for the use of the utility that is more than the amount charged by the utility service provider  for the quantity of the  service supplied to or used  by the resident.

Under the amendments to the RLLC Act residents will have better access to information about the costs the operator or a third party supplier is paying for the electricity being supplied to the community. This information will need to be provided to residents at least once a year.

There will also be an obligation on operators and third party suppliers to review their supply contract at least once every 2 years or if the contract is longer than 2 years they must review before they enter into the next supply contract. In this review process they must compare with one other comparable offer from another retailer and the outcome of the review provided to each resident. 

When the utility billing provisions commence on the 11th December 2024 residents will only be obligated to pay for separately metered utilities if they receive itemised bills meeting specific requirements. The bills will need to comply with relevant National Energy Rules that apply to the particular supplier for gas and electricity. For other utilities (for example water) the RLLC Act will list what information must be included in the bill. Our electricity factsheet and water and sewerage factsheets on our website will be updated with all these details when these changes commence on the 11th December 2024.

From the 11th December 2024 if a resident pays for utility charges in person then they must immediately be given a receipt for the payment. The receipt must contain their name, the name and address of the community, site number, date payment received, billing period for the utility charges paid , total paid and any credit or debit as at the date payment was made by the resident. If a resident pays utility charges in another way they can ask for a receipt and it must be provided as soon as practicable after the payment has been received and include the same information detailed above.

Importantly the amendments to the utility provisions must be reviewed by the Minister for Better Regulation and Fair Trading within 3 years after  they commence and a report tabled in NSW Parliament within 4 years of the commencement date. The review will look at whether  the policy objectives relating  to utility provisions remain valid and whether the provisions are appropriate for achieving those objectives.

In addition, as we have reported in previous issues of Outasite, IPART conducted a review into pricing in embedded networks at the request of the NSW Government. Recommendations have been provided to NSW Government from that review which suggest a maximum charge that is lower than the median retail market offer. If the IPART recommendation is accepted then there may need to be further amendments to the RLLC Act to ensure that residents in embedded networks are not paying more than embedded network customers living outside of land lease communities.

Improvements in  site fee increases

One of the biggest reforms is that from 25th September 2024 all new Fixed Method site fee increases are limited to a fixed calculation that contains only one element. This will simplify calculations for site fee increases and give more certainty to home owners. An example of a fixed calculation that is one element is a dollar amount or increase in CPI since the last site fee increase or a % amount. It can only be one of these elements.

There can also only be one fixed method increase a year unless the increase is tied to an increase in the age pension.

Unfortunately those home owners who already have more than one element in their fixed increase method (for example CPI plus %) will need to wait 12 months before their operator must negotiate a new single element fixed method or they can choose to go on by notice method at the end of the 12 month transition period. The 12 month transition period will end on the 25th September 2025.

We would encourage home owners to do the calculations on any offers made by the operator for a new fixed method. If they are offering a % amount it’s worth doing the sums to see what your site fee will look like in 5 or 10 years as the increase compounds. In the table below we have an example which shows the impact of a 3% and a 5% annual site fee increase over a 5 year period – more than $1,000 a year by the end of  the 5th year! 

Importantly no home owner needs to sign a new site agreement if the method for their site fee increase changes. The operator can prepare a document for home owners to sign which outlines the new compliant fixed method increase. The existing site agreement continues and the parties have signed a document which contains the terms of the new fixed method increase.

If a home owner elects to go onto the By Notice method at the end of the 12 month transition period then you have the option to apply to NSW Fair Trading for mediation to dispute a site fee increase as excessive. You will need at least 25% of all home owners on the By Notice method to agree to apply for mediation. Our factsheet on site fee increases provides further information on how to dispute a by notice site fee increase as excessive.

Additional changes to site fee increases will improve the rights of home owners on the By Notice method. Home owners on the By Notice method will have clearer insights into the reasons for increases in operators’ expenses when they get their site fee increase notice. If the increase is wholly or partially due to an increase in costs of specific items the operator will need to provide details about the item, the increase in the costs of the item and how the operator has apportioned the costs for this item when calculating the increase. This will be required for a site fee increase notice to be valid.

The value of the community land will no longer be a relevant factor in the Tribunal’s determination of whether a site fee increase is excessive.

Freedom for home owners to make minor alterations

Home owners are now allowed to make some minor alterations to their home without seeking consent  from the operator. The alterations that do not require consent are:

• installing door screens,
• window locks,
• window screens and
• window shutters on  your home.

Any other alterations will still require a home owner to write to the operator and seek consent. We have a sample letter to use when seeking consent which can be found on our website.

Voluntary sharing arrangements

Voluntary sharing arrangements (VSA) do not appear to have been taken up by many home owners. This is good news as the provisions in the RLLC Act since they were introduced in 2013 are seriously flawed and only provide a benefit to the operator. The Tenants’ Union is pleased to see they have been amended and entry and exit fees are no longer allowed. One of the VSAs that we were contacted about a few years ago concerned an entry fee of $3,000 paid on the basis the home owner would get a discount on their weekly site fees. They had lived in the community for several years when they discovered their site fee was the same as many of their neighbours and they haven’t received anything in return for the $3,000 entry fee they paid! It’s important that there will now be better transparency for prospective home owners under the amendments made to the RLLC Act.

Before operators can enter into this type of agreement with a home owner they must first offer a rent-only site agreement and provide home owner with details of the costs under each option so they can make a fully informed decision.

Entry and exit fees will still be allowed where there was already a VSA in place before the 25th September 2024.

Access to your home

An operator’s rights to access your home have been limited under the changes that commenced on the 25th September 2024. Previously, access to the site and a home owner’s home were allowed under the same circumstances.

Now an operator of a community, or a person acting on the operator’s behalf, may enter your home only in the following circumstances:

1. with your consent which  is given at the time of entry,
2. in an emergency if necessary to avert danger to life,
3. to comply with an obligation under another Act or law,
4. in accordance with an order of the Tribunal.

The operator can still  access the residential site under the same circumstances as before.  For further information please have a look at our factsheet on access.

All the factsheets on our website have been updated to reflect the changes that took effect on 25th September 2024. Our factsheets on utilities will be further updated when the utility billing provisions take effect on 11th December 2024. See tenants.org.au/thenoticeboard/factsheets

This article was published in Outasite magazine issue 12. Outasite is published once or twice annually. Outasite Lite email newsletter is sent several times a year – subscribe here. All past issues are available in the archive.