LAND LEASE COMMUNITY NEWS

Five year review

Bob Morris
"It is essential the government use the five year review of the Residential (Land Lease) Communities Act to ensure operators can only apply one method to increase site fees using the fixed method." – Bob Morris. Mr Morris is one of 52 residents at Kincumber Nautical Village who took a case to the Tribunal challenging the fixed method of site fee increases used in their community. See Fixed Method Site Fee Increases

At the end of 2020, which has been a very strange year so far, the Residential (Land Lease) Communities Act 2013 (RLLC Act) is due for review. The RLLC Act commenced on 1 November 2015 and the Minister responsible is required to review the Act as soon as possible after five years from commencement. 

Following the review, a report is to be tabled in each House of Parliament within 12 months after the end of the period of five years. If the RLLC Act review proceeds on time, which looks likely, this report would need to be tabled by 31 October 2021. 

The purpose of a statutory review of an Act is to determine whether the policy objectives remain valid and whether the terms of the Act remain appropriate for securing those objectives. In this article we delve into the detail of the policy objectives and discuss achievements, failures and what needs to change. 

Policy objectives 

To determine the policy objectives of the RLLC Act we have to look back to the period prior to commencement, when the (now repealed) Residential Parks Act 1998 was being reviewed and the RLLC Act was in development. In November 2011 the NSW government released a discussion paper entitled ‘Improving the governance of residential parks’. In this paper the government outlined a pre-election commitment to improve the governance of residential parks & strengthen the residential park industry. 

When the draft RLLC Bill was released in September 2013 the Minister for Fair Trading at the time stated “The purpose of the Bill is to modernise the regulatory framework for land lease communities and enhance protection for residents.” 

When we look at the RLLC Act itself, the objects include improving the governance and encouraging the growth and viability of land lease communities in the State. The objects also seek to enable prospective home owners to make informed choices and to protect home owners from bullying, intimidation and unfair business practices. 

In summary, the RLLC Act sought to encourage industry growth and viability, improve operator conduct, and better protect home owners when operators do the wrong thing. 

Industry growth 

Growth and viability are connected. If an industry is viable it is attractive to investors and new or bigger investment leads to growth. Prior to 2011 it was unknown how many residential parks there were in NSW and evidence regarding their viability was anecdotal. In September 2011 the (now repealed) Residential Parks Act 1998 was amended to require park owners to provide NSW Fair Trading with certain information about their parks. This information was used to create the residential parks register. 

In May 2012 NSW Fair Trading published a report profiling the residential parks industry, using information from the register. The report put the number of residential parks at 477, providing a total of 22,478 residential sites, housing 33,632 residents. 

The RLLC Act was assented to on 20 November 2013. Since that time, data from the residential parks register shows growth in communities, sites and residents. (See table below.) 

The growth and apparent improved viability of the land lease community industry cannot be attributed solely to the RLLC Act but we think it is fair to say the Act has been instrumental in encouraging confidence in the industry. 

Improved governance

When it comes to improved governance, unfortunately the RLLC Act appears to have fallen short. Governance in this context is essentially about operator conduct. It is about how operators conduct business in relation to the residents of the community. The government sought to improve operator conduct through the introduction of a negative licensing system and mandatory education for all new operators. 

To enable this new regime the RLLC Act contains a number of provisions including rules of conduct for operators. The rules require operators to: have knowledge and understanding of relevant legislation; act honestly, fairly and professionally with all parties in a negotiation or transaction carried out as operator; not engage in high pressure tactics, harassment or harsh or unconscionable conduct; ensure employees comply with the legislation; not misrepresent the nature or effect of a provision of the legislation. 

Although they read well, the rules of conduct have proven ineffective. Many home owners have complained about breaches of the rules of conduct to the regulator (NSW Fair Trading), however feedback provided to the Tenants’ Union is that this has not resulted in improved operator conduct.

Mandatory education for all new operators was also cited by the government as key to improving governance. Again, this objective has fallen short because there is no effective system of providing education or monitoring which operators have participated.

Another tool designed to improve governance is the requirement on the Commissioner for Fair Trading to publish on the internet particulars of enforcement or disciplinary action against an operator. Unfortunately the Commissioner does not currently publish this information.

Poor operator conduct is still a significant issue for many home owners across the State because the measures in the RLLC Act geared towards improving governance have been ineffective. In order to improve governance we need processes to address poor conduct including a proactive approach to compliance and enforcement. This requires a genuine commitment from government to address this issue and have a properly resourced regulator.

Protection of residents

The RLLC Act did bring some improvements to the rights of home owners and enhanced protection in certain areas. The removal of the old principal place of residence test has provided greater security of tenure, and beneficiaries and executors of deceased estates are now clearly covered by the Act.

The RLLC Act improved rights and protections regarding home sales and increased a home owners ability to determine who lives with them. Other improvements are around access arrangements, tree maintenance and greater access to the Tribunal to have a dispute resolved.

Conversely, some prior legislative protections appear to have been diminished rather than enhanced. Examples include: the relaxation of subject matter for community rules; the apparent transfer of site maintenance costs to home owners; the removal of assignment rights; reduced ability to challenge site fee increases; and, increased difficulty to achieve a site fee reduction when services or facilities are withdrawn or reduced.

The RLLC Act has a difficult job to do. It must balance the rights of parties with different interests, and that is not easy. It is unlikely the balance will ever be perfect but, at present the Act seems weighted too heavily in favour of operators and, having facilitated growth and viability, it now needs to tilt back towards better protecting residents.

It is important for land lease community residents to engage with the review process and let the government know what is and what is not working. There are a number of ways to do this including writing a submission and talking with your local Member of Parliament. 

The Tenants’ Union will be participating in the review and we have already started consulting with residents.