There's still time to negotiate fixed-method site-fee increases

If you are a home owner with non-compliant fixed-method site fee increases, you can still act on your rights. But be quick!

Who does this apply to?

Home owners who have a site agreement that was:

• entered into before 25 September 2024, and
• has a built-in fixed method of site fee increase, and
• that method doesn’t comply with the amended sections 65 and 66 of the Residential (Land Lease) Communities Act 2013.

The Act has given home owners in this situation 12 months – until 24 September 2025 – to negotiate with their operators about how site fees will be increased under the site agreement.

Fixed methods that are now considered non-compliant

• An increase with more than one element.
• An increase that happens more than once in 12 months (unless it is calculated using the variation in aged pension – this can occur up to twice per year)

Here are two examples we have seen of fixed increase methods which are no longer compliant:

Example 1:

CPI + 2%

Example 2:

1. Any positive change in the CPI; plus
2. 3.75%; plus
3. A proportional share of any increase in costs incurred by the Operator since the calculation of the last site fee increase calculation for the following:-
   • electricity and water (net of any amount that has been recouped from Home Owners); plus
   • gas; plus
   • communications; plus
   • rates; plus
   • any other government (federal, State or Local) charges or taxes other than company tax. Plus
4. The effect of any change in the rate of GST or similar tax that is included in the site fees rounded up to the nearest dollar.

The two methods are very different but were both allowed under the repealed section 65 and section 66 regarding increase of site fees by a fixed method.

Compliant methods

Here are 3 examples we often see that use a compliant single element fixed method of increase:

• Using a dollar amount only (one time per 12 months)
• Using CPI rates only (one time per 12 months)
• Using the variation in age pension only (can be twice in 12 months)

These ones are allowed and there is nothing for home owners to act on.

Recommendations

The requirement to update non-compliant methods arose from the 5-year statutory review of the Residential Land Lease Communities Act 2013 which produced 48 recommendations.

Related recommendations from the 5 year Statutory Review (November 2021)

#10 Make the fixed method of increase simpler to understand and easier to predict by limiting the number of variables that can be used in the ‘other’ option to a single variable.

#11 Existing site agreements that are subject to multi-variable fixed method increases must be reviewed within three years from the commencement of the amended Act so that they comply with the single variable requirement.

Note: The Tenants Union were successful in advocating for this to be reduced to 1 year as there was no justification for the prolonged disparity and disadvantage.

#12 Limit site fee increases using the fixed method to once per year, except where the increase is pegged to the age pension in which case it would be limited to twice per year.

Is there a process for reviewing non-compliant fixed methods?

A number of home owners and resident committees are in the midst of negotiations with operators to vary non-compliant fixed method increases. In some cases home owners or resident committees have initiated those discussions and in other communities the operator has issued a notice proposing a new method. This can include opting to change from a fixed method of increase to a ‘by notice’ method of increase. Whichever way the negotiations are started, both parties must consent to the change.

During the negotiation period the non-compliant method stays in force until an agreement is reached. Once an agreement has been reached it is enforceable by way of a written variation of the existing term in the agreement, or by entering into a compliant site agreement. Our recommendation is to vary the existing term of the agreement because a new compliant site agreement could introduce different terms in it than the existing one has.

If no agreement is reached then the legislation states that by 24 September 2025 a non-compliant fixed method term becomes void and moving forward, site fees can only be increased using the by notice method under section 67 of the Act.

Some operators have imposed short deadlines for home owners to reply to an offer to vary the term, when the legislation gives parties up until 24 September 2025. It is recommended that home owners ask for more time if needed.

During negotiations, operators must act honestly, fairly and professionally. They cannot mislead, deceive, or use high-pressure tactics. Home owners experiencing difficulty can apply for voluntary mediation with Fair Trading NSW. Voluntary mediation can be applied for using the same form as is used for compulsory mediation however home owners will need to clearly state their request for mediation is about making a non-compliant fixed method of increase compliant and fair.

So is that the end of the matter?

Even after the transition date, home owners and operators can still negotiate compliant fixed method increases under Schedule 2 Part 3, clause 24 of the Residential Land Lease Communities Act.

Considering the different increase methods

Fixed methods offer predictability but can’t be disputed as excessive in the Tribunal, and high percentages compound over time. ‘By notice’ methods require 60 days written notice, occur maximum once yearly, and can be challenged as excessive by at least 25% of affected residents through mediation, then potentially NCAT.

The Tribunal cannot order increases below operators’ actual and projected costs, but many operators struggle to properly establish these costs. Recent NCAT decisions show successful challenges, with ‘by notice’ site fee increases limited to 4.2% (North Coast community) and 3.5% (South Coast community) when operators failed to properly disclose financial records. Your local Tenants Advice and Advocacy Service (TAAS) or Resident Association offer advice about varying the fixed method term in your agreement. TAAS contact details are provided on the back of this magazine.

For earlier stories in Outasite on the now banned practice of multiple element fixed method increases, see Issues 6 and 8 at tenants.org.au/thenoticeboard/outasite-archive

The Tenants’ Union recently joined the Northern Rivers Tenants Advice & Advocacy Service to visit a few communities including Casino Lifestyle Village, Riverside Evans Head and Thyme Lifestyle Resort Evans Head. In those communities and many more we have heard from, home owners with non-compliant fixed method increases in their agreement are considering their options.

Some examples of offers from operators:

This article was published in Outasite magazine issue 13. Outasite is published once annually. Outasite Lite email newsletter is sent several times a year – subscribe here. All past issues are available in the archive.