Bastion v Lodgecroft Pty Ltd t/a Pine Village Residential Resort

[2010] QCAT 237

CITATION: Bastion & Ors v Lodgecroft Pty Ltd t/a Pine Village Residential Resort [2010] QCAT 237

PARTIES:	Ms Elaine Bastion, Hildegard-Maria Frost, Lexie & Dudley Nelson, Owen McCaw, Margaret Hahn, Danny Hahn, Lascelles Buckby-East, Rosemary Campbell, Cecelia Elliot, Joyce & Ray Middleton, Colin Jones, June Crook, Gloria Coveney, Nikki Street, Margaret Watson, Jeanette Hitchen, Maree & Richard Smith, Henry & Janice Findlay, Cornelis Star, Bethne Koen, Thelma Cottmand, Doreen & Victor Hall, Jose Pilsbury, Warren & Lesley Scanlon, Leslie Rehak, David Palmer, Joy & Ken Payne, Cliff & Marcie Bell, Larry & Val Gavel, Alexander Wynne, Phyllis Walton, Joyce Murray, Pauline Ridsdale, Michael Evens, Amy Stewart, Edna Phethean, Pat Nielsen, Grahame Nielsen, Diana Billingham, Margaret Billingham, Wally & Margaret, Joan Morrison,  Cyril & Sheila Jarvis, Ernest & Georgina Chalmers, Robert Lewis, Dorothea Lewis, Patricia Bailey, Gary Wilson, Cheryl Wilson, Gerald Wright, Lloyd Elliott, Rose Meyrick, Joyce Gould, W Gould, Jon Hazeldine, Sigrid Wynne, Colin Holton, Jack & Bev Burke, Anne Gray, Ruth Wilson, Graham Wilson, Moira Potter, Alex Potter, Heather McNally, Neil McNally, Esme Joy Sullivan, Jessie Worth, Gail Moore, Ray Carey & Esther Carey, Victor & Carol Gauron, Jan & Des Cunningham, Nancy martin, Maureen Harris, Leila & Robert Donnelly, Valda & Joe Zigenbine, Garry & Evelyn Bradford, George Gilmour, Janice Carstens, Vanda Moore, Alan Wicks, Vera Wicks, Donald Dargusch, Dorothy Shaw, Anthony Shaw, Ronald Forbes, Ron & Tina Allen, Barbara Bowtell, Jill Brown, Bernice King, Mervyn King, Eric McGuinness, Bev Flanders, Ted Flanders, Joy & Ron Finlayson, Fred Swales, Adolf Labudda, Louisa Labudda, Ivan & Lyn Cole, Eileen Turner, Dorothy Lebherz, Kevin Lebherz, Des Tarren, Victor Hillier, Moya Shaw, Elaine Hood, Joan Rodgers, Bruce Francis, Johanna Francis, Sylvia Bishop, Alison Stafford, Phil Stafford, Wayne Kunde, Yvonne Downing, Helen McIntosh, Gustav Adolph Vollmer, Elizabeth & Robert Read, Richard & Moira Darmody, David & Sandra McTigue, Merelyn Lexington, Colin Leonard Clark, Lorna Kornas Cecelia Kimball and Mr & Mrs J MacDonald
v
Lodgecroft Pty Ltd t/a Pine Village Residential Resort

APPLICATION NUMBER:   MH029-09    

MATTER TYPE: Other civil dispute matters

HEARING DATE:     Decision on the papers

HEARD AT:  Brisbane

DECISION OF: Peta Stilgoe

DELIVERED ON: 1 April 2010

DELIVERED AT:      Brisbane

ORDERS MADE: The application is dismissed.

CATCHWORDS :  Manufactured Homes – site rent increase – increase excessive – GST – fair market rent – Manufactured Homes (Residential parks) Act 2003 – sections 69 and 70

APPEARANCES and REPRESENTATION (if any):

APPLICANT: 

RESPONDENT: 

REASONS FOR DECISION

1. Lodgecroft Pty Ltd (“Lodgecroft”) operates the Pine Village Residential Resort (“Pine Village”) at Burpengary. The applicants are residents of the village. They are objecting to a rent increase to market notified on 14 August 2009. It had the effect of increasing the rent from $115.60 per week to $125.00 per week.

2. The agreements between the residents and Lodgecroft provide for a review of the occupancy fee to market “on the third anniversary of the commencement date and at each three-yearly anniversary thereafter”. It is common ground that there have been no reviews to market since 2001. The notice of increase adopted a uniform date of 1 September, regardless of the date of the anniversary of a resident’s agreement.

3. The matters that I am able to have regard to in deciding the residents’ application are set out in section 70(3) of the Manufactured Homes (Residential Parks) Act (“the Act”). I will consider each element in turn.

The range of site rents usually charged for comparable sites in comparable residential parks in the locality of the park

1. The residents contend that a market review is not possible because residential parks are not operating within a free market. They cite the definition of “free market” from Wikipedia and say that the fact that a park owner may quote a higher rent to potential incoming residents, while not disclosing what current residents are actually paying, constitutes a regulated market.

2. The definition of market rent was considered by Austin J in Alcatel Australia v Scarcella [1]. At paragraph 46, His Honour said this: “… (the) task assigned to the valuer is to determine the rental value, taking into account all relevant factors. There must be a rent at which a hypothetical willing lessor and a hypothetical willing lessee will agree.”

   [1] [2001] NSWSC 154

3. As to the  concept of “market”, His Honour referred to the definition in Helvering v Walbridge[2]: - “enough competition between buyers and sellers to prevent the exigencies of an individual from being exploited'…It may well imply that the goods have several possible buyers, so that a necessitous seller shall not be confined to one; and that there are several possible sellers of the same goods or their substantial equivalent, so that a hard-pressed buyer shall not have to accept the first offer.”

   [2] (1934) 70 F (2d) 683

4. I prefer the definition of His Honour Justice Austin. I consider that a valuer can establish a market rent and that the park industry is a free market, not a regulated market. I do not accept that “market rent” equals the rent paid by residents within the last 12 months.

5. Pine Village has approximately 200 sites made up of 154 manufactured home sites and a number of cabins and caravan sites. It has a tennis court, swimming pool, office, amenities building adjacent to the caravan sites, manager’s accommodation, a large equipment shed and storage areas.  Lodgecroft proposes to develop the northern part of the site with new relocatable homes, a new community building, bowling rink, large pool, library, darts area, cinema, lounge/bar area and dance floor (“the proposed redevelopment”).

6. Lodgecroft obtained a report about comparable rents from Mr Stanaway of John Watt & Associates. A summary of that report is:

Site	Detail	Rent
Bindawalla Gardens/Kurrajong Sanctuary	200 sites. Recreational area with community hall (similar amenity to Pine Village)	$130.96
Pacific Palms	Eight rink bowling green, licensed bowls club, pool, on-site grocery store, BBQ area, pool (superior to Pine Village)	$99.65
Palm Lake	Bowling green, sports clubhouse, craft room, workshop, sauna, indoor heated pool, outdoor pool, community hall, mini golf course, tennis court and shop (superior location and complex)	$128.78

1. The report also gives details of sites further afield and the median rent for two bedroom flats or units in the Caboolture Shire area.

2. Mr Stanaway distinguishes Pacific Palms on the grounds that no review to market has been carried out since 2005, the owner is achieving significantly higher sale prices for new homes within the park and this factor appears to allow the owner to charge a lower rent. In a report dated 11 March 2010, Mr Stanaway points to recent tribunal decisions that indicate the average rental across Queensland is $115 to $135 per week, indicating that Pacific Palms is “out of line”.

3. The residents say that Pacific Palms is not out of line and is a far superior venue. They also say that Palm Lake is superior. They do not accept that the tribunal should consider evidence of rentals outside the locality of this park, given the language of section 70(3)(a) and the decision of Member Spender in Hacker & ors –v- New Concept Development Pty Ltd[3].

   [3] [2009] CCT MH036-08

4. I understand the reference to parks outside the local area to be evidence to support Mr Stanaway’s contention that Pacific Palms is out of line, not evidence in support of the subject increase.

5. I accept that Pacific Palms and Palm Lake are superior facilities. They are not “comparable” within the meaning of the Act. That leaves Bindawalla Gardens/Kurrajong Sanctuary. Mr Stanaway says that the facility is comparable to Pacific Pines. The residents argue that Pacific Pines is “far inferior” on the basis of a Mr Stanaway’s report dated 16 February 2006 where the park was described in those terms.

6. There are three possibilities. Mr Stanaway was wrong in 2006, he was wrong in 2009 or the nature of the parks he was comparing had changed. In his report of 17 August 2009, Mr Stanaway notes that the Pine Village is the former Burpengary Pine Village with an additional 5.6 hectares. The facility of Pine Village as reviewed in 2009 is not the same facility he reviewed in 2006. Mr Stanaway has written two further reports since the residents’ observations about his 2006 report and he has not resiled from his view that Bindawalla Gardens/Kurrajong Sanctuary is comparable to Pine Village. I am satisfied that this is so. On that basis, the proposed rent is comparable – indeed less than – the rent charged at Bindawalla Gardens/Kurrajong Sanctuary.

7. I accept that parks with superior facilities are charging a lower rent but I am persuaded that this is because those parks have not undergone a recent review to market. Bindawalla Gardens/Kurrajong Sanctuary has recently been reviewed to market; it is reasonable to assume that it is an accurate representation of the market into which this site is to be reviewed.

The increased site rent compared to the previous site rent

1. The previous site rent was $112.75 per week. On 12 August 2009, Lodgecroft gave notice of a CPI increase to $115.60 per week. The proposed site rent after a review to market is $125.00 per week.

2. The residents say that:

   (a)The notices are poorly presented, incomplete and confusing.

   (b)Lodgecroft makes no reference to the CPI rent increase. The residents concede that the CPI Increase is correctly calculated.

   (c)The review to market now applies to all residents, not just those who have been in the park for three years or more.

   (d)The review to market is inextricably linked to a future development.

3. Section 69 of the Act requires a notice of proposed rent increase to state:

   (a)The amount of the proposed increase;

   (b)The basis for the proposed increase;

   (c)The day the proposed increase is first payable;

   (d)If the home owner considers the increase is excessive, the home owner may apply to the tribunal, within 28 days after receiving the notice, for an order reducing the amount of, or setting aside, the increase.

4. The notices are not signed but it is clear that they have been issued by Lodgecroft. The notices comply with section 69.

5. The review to market, and the decision of this tribunal, can only apply to those residents who properly received notices of a review to market.

6. The notice of rent increase was $125.00 per week until such time as a development occurs. At that time, the rent will increase to $130.00. Only the increase to $130.00 is linked to the redevelopment. Lodgecroft does not press for the tribunal’s decision to include a future increase to $130. That is appropriate as the date from which it will take effect, and the nature of the facilities that will trigger the increase, are uncertain.

7. I note that a similar situation – a CPI review followed shortly thereafter by a review to market – occurred in Hacker. The member had no difficulty with that course of events, nor do I have any difficulty. If the CPI increase had not occurred, the review to market would still have resulted in a rental of $125 per week.

8. The increase from $112.75 per week to $125.00 per week is an increase of just over 10%. The increase from $115.60 per week to $125.00 per week is just over 8%. That increase has to be considered not as an annual increase (which it is not) but within the 3-yearly review to market. Given that the rents have not been reviewed to market since 2001, the rent increase can be seen as a market correction over an eight-year period.

The frequency and amount of past increases

1. The history of past increases is:

Date	Rent (per week)
1 September 2002	$89.00
1 September 2005	$97.70
1 September 2008	$112.75
10 September 2009	$115.60

1. The percentage increase from 2002 to the proposed rent is about 40%. Mr Stanaway notes that residential rents rose 85% in the six year period from September 2002 to September 2008. He also notes that the cost of vacant land in the area rose 253% in the same period.

Any increase in the CPI number during the previous site rent period

1. CPI has been factored in appropriately each year. It is not suggested that any CPI increase was so significant that an additional review to market cannot be contemplated.

The amenity or standard of the common areas or communal facilities

1. There is considerable dispute between the residents and Lodgecroft on this issue. The residents say that:

   (a)The park is neglected because Lodgecroft is waiting to attend to matters when it undertakes the proposed redevelopment.

   (b)Professional cleaning of the public areas ceased resulting in a lower standard of cleanliness.

   (c)Street lighting is very poor.

   (d)The shared road has broken up making walking (especially at night) difficult. The residents provided photos of road damage and copies of emails about the planned repair.

   (e)Residents are concerned about security.

   (f)Lodgecroft has not attended to ongoing repairs and maintenance.

2. A number of residents have expressed their views about the park amenity in letters to the tribunal.

3. Lodgecroft, of course, denies these assertions:

   (a)All complaints received in writing are attended to immediately.

   (b)Street lighting is unchanged since the park’s inception. There are plans to install solar street lighting but street lighting is a balance between adequate lighting for residents to get about the site while ensuring that no resident’s sleep is disturbed by the lighting.

   (c)There has been no complaint about the standard of cleanliness.

   (d)The park is kept in good repair. Lodgecroft submitted a copy of a Workplace Health and Safety report dated October 2008 and a report from Council dated 21 January 2010.

   (e)All roads and maintenance are attended to “as required”. Lodgecroft acknowledges that wet weather does cause problems with the roads and maintenance.

   (f)It supports both the social club and residents’ activities. Lodgecroft has provided copies of invoices in that regard.

   (g)Because of concerns about security, Lodgecroft has organised random, nightly “drive throughs” of the park and requested that police drive through the park if they are in the area.

4. I accept the respondents’ photos show potholes and roads in poor repair but they are not placed in context. I do not know when they were taken, the circumstances that led to the state of disrepair or the time taken to effect repairs.

5. I have independent evidence available to me. The Workplace Health and Safety report says “From observations made during the inspection, the general safety standard at Pine Village is outstanding and was a pleasure to inspect”.  The Council inspection notice, while noting some repairs were required, marked the park as “compliant”. I accept those assessments while noting that the condition of the park may not be as good as the residents would like.

Any withdrawal of a communal facility or service previously provided

1. The residents say:

   (a)Office hours have been reduced from 5 full days to 5 half days per week.

   (b)One of four staff members has not been replaced.

   (c)The external emergency phone was removed and not replaced.

   (d)The use of a double garage for storage has been withdrawn.

   (e)There is insufficient storage for ancillary club house equipment. Lodgecroft asked the Social Club to remove stock from a garage so that it could be used for Lodgecroft storage.

2. Lodgecroft’s response is:

   (a)Office hours were reduced because the park no longer offers overnight accommodation. It still employs three full time staff and one casual employee. It has arranged for personal letterboxes so that residents need not attend the office to collect their mail. It has also arranged for about 80% of residents to pay their rent by direct debit, so that they do not need to attend the office for this purpose.

   (b)The external emergency phone has been reinstated.

   (c)The residents do use the garage for storage although all that is stored there is one fridge. That area can be used for ancillary storage for the Social Club.

3. I consider that the reduction in office hours is a withdrawal of a community facility. However, I consider that the residents have been compensated by the installation of external letter boxes and the withdrawal of overnight tenants.

Any addition of a communal facility or service not previously provided

1. Lodgecroft is not relying on the external mail boxes as a reason for the increase, nor is it relying on the provision of new office facilities (which the residents say are difficult to access).

Any increase in the park owner’s operating costs for the park during the previous site rent period

1. Lodgecroft has provided the tribunal with an expenses report (excluding rates, water, gas and electricity, leasing and bank interest) or the years 2007 to 2009 inclusive. The expenses recorded for 2007 are very low. Lodgecroft purchased the park in 2007 and that may provide an explanation.

2. The increase in expenditure from 2007 to 2009 is 2125%.

3. Leaving aside 2007, the expenses still show significant increases in expenditure from 2008 to 2009.  In an overall increase in expenses of 12%, cleaning and maintenance costs increased 22%, wages 8.6%, waste disposal 66%, Advertising 311% and bookkeeping and clerical increased 133%. Lodgecroft made savings where it could: - commission paid was reduced, as was insurance and motor vehicle expenses.

4. The residents make some assumptions about Lodgecroft’s income. I cannot comment on the calculations of profit as a percentage of turnover or whether or not an additional $95,000.00 per annum is warranted. I note Lodgecroft’s comment that the review to market increase is not applied to all residents so the calculation of additional rent is overstated. That must be correct.

Whether the increase is fair and equitable

1. The residents say that the proposed increase is not fair and equitable because:

   (a)It is based on the future redevelopment.

   (b)Comparable parks are far superior.

I have already dealt with these issues.

(c)The review does not deal with GST properly.

(d)The residents have paid GST for many years and have received no benefit.

(e)Many residents cannot afford the increase

GST

1. The residents argument as to GST is as follows:

   (a)When GST was introduced in 2000, caravan parks were included in the definition of commercial residential premises and, therefore, were subject to GST. The government recognised that long term residents of caravan parks might be disadvantaged by the introduction of GST so it provided for a concessional rate of 5.5%. At the time of the concessional GST, caravan parks were very different from the “resort parks” of today.

   (b)Park operators had a choice of tax treatment; either imput taxed supplies or GST at the concessional rate. In a letter to Jon Sullivan MP dated 17 August 2009, the Treasurer Mr Swan said:

   “It can be expected that proprietors will reflect their GST costs in the rents they charge to tenants…Allowing a choice of tax treatment …offers them the opportunity to minimise the costs associated with providing such accommodation. It is expected that these providers would only charge the option of charging GST at a concessional rate where it would result in lower compliance costs, thereby benefiting residents. Long term residents of caravan and mobile home parks, therefore, should not be a at a GST disadvantage relative to tenants in residential premises.”

   (c)The residents understood that the previous owner charged GST instead of “asking a lot of money for major improvement”.

   (d)In the rent review in 2001, the park’s previous owners chose to impose GST rather than a review to market. The park’s previous owner told residents he would not be able to charge both GST and a review to market. Therefore, Lodgecroft can charge GST or a review to market but not both.

   (e)Because the residents pay GST, Lodgecroft should not be asking for a review to market. Lodgecroft can claim GST OR a review to market but not both.

   (f)At no time has Lodgecroft reflected, or passed on, any savings to the residents.

   (g)Rent would be lower if no GST was charged.

   (h)Two of the parks analysed by Mr Stanaway do charge GST.

   (i)Lodgecroft obtains a benefit from charging GST.

1. Lodgecroft says that GST is irrelevant to the review to market. What is important is the rent payable by the residents, whether or not it includes GST.

2. The previous owner has not provided a statement to this tribunal. I have not been able to test the accuracy of statements attributed to him. I cannot act of the “understanding” of residents without evidence providing me with a basis for that understanding.

3. I have been referred to a conversation between Ms Bastion and Ms Spottiswood in August 2007 in which Ms Bastion asked if Lodgecroft would consider the removal of GST to offset a large anticipated rent increase. Ms Spottiswood is said to have replied “No, no no, we couldn’t do that”. Assuming the conversation occurred, I do not think the residents are justified in concluding that meant that Lodgecroft knew of the benefits the tax imput credits gave it. The conversation is simply a request to remove GST that was declined.

4. I have a copy of a notice of rent increase from September 2001. It states …”your Mobile Home Tenancy has completed it’s(sic) 3 year cycle for market review and therefore you will be required to pay 5.5% GST on your weekly site fee…”. I accept that, in 2001, the park owners decided to add GST rather than increase the rent. I do not accept that this step precludes Lodgecroft undertaking a review to market. Actins in 2001 cannot bind people – both Lodgecroft and residents – who were not parties to that transaction. If an agreement provides for a rent review to market, a decision in 2001 unless expressed to be binding in the future and binding on future, unknown persons, cannot fetter the exercise of that right.

5. The residents have not been able to demonstrate that Mr Stanaway’s analysis of the comparable rents is affected by GST. That is understandable, as they do not have access to the details of Lodgecroft’s books of account. However, I cannot accept a mere assertion that Lodgecroft’s GST options will affect the rent that might be charged. In any event, I agree with Lodgecroft that the important comparison is the actual rental payable by a resident in each of the parks.

6. The Treasurer’s comments, made nine years after the introduction of GST do not assist the residents’ argument. The option of no GST or concessional GST was to ensure that park rentals, which were subject to GST, did not outstrip residential home rentals, which were GST exempt. As Mr Stanaway’s report demonstrates, even with the addition of GST, park rental is significantly lower than rents for flats or units.

7. The decision referred to by the residents – Bails –v- Tamberra Pty Ltd[4] makes reference to GST as a component of the rent under review but does not otherwise assist the residents’ argument.

   [4] {2009} QCCTMH 3

Affordability

1. The residents approach this argument in two respects. The first is that:

   (a)Lodgecroft must be making money. It has not lost any income.

   (b)If it is not making money, then that is through a lack of due diligence on purchase or poor operation since (given that Pacific Palms operates with a lower rental).

   (c)Lodgecroft must consider the collective interests of its residents and ensure that the residents’ investment in the park is not jeopardised.

2. I have already commented on the significant increase in Lodgecroft’s expenses over the period 2007 to 2009. I do not otherwise understand the residents’ assertions. Some industries’ profits are regulated by legislation. This is not one of them. There is no law against a business making a profit, or even increasing its profit. If the residents are saying that Lodgecroft is not entitled to increase its profit margin, then they need to demonstrate a basis for that contention other than it is “unfair”.

3. The second aspect is that many residents are on a fixed or limited income, they are having difficulties making ends meet even on the current rent, rental assistance is maximised when the rent charged reaches $125.00 per week, and the proposed increase will be a significant burden to them.

4. Lodgecroft has provided a copy of the current rent assistance guidelines. Assistance is paid at $0.75 for each $1.00 paid over the threshold up to the maximum amount. The rent threshold for a single person with no children is $49.40 per week. The maximum amount payable for a single person is $55.60 per week. On the proposed rent, a single person would have to pay $69.40 per week rent. The current single person’s pension is $335.95 per week. The proposed rent represents 20.6% of the pension. As noted in Hacker the Queensland Department of Housing considers that housing is affordable when it does not exceed 25% of assessable income. The proposed increase, although significant to the residents, still places the rent within an acceptable range.

Anything else the tribunal considers relevant

1. There is material before the tribunal about the relationship between the residents and Lodgecroft. The principal source of tension seems to be the social club. The residents assert that their social club activities are frustrated by Lodgecroft; Lodgecroft says that it provides financial support to the social club. The expenses report submitted by Lodgecroft does show an annual figure for social club supplies. A degree of tension between the parties during this difficult time is understandable. I do not consider that there is any specific complaint that means that the proposed increase is not fair and equitable.

2. Lodgecroft points to the fact that all new residents are paying $125.00 per week as evidence that it is a fair market rental. The residents argue that a park owner cannot rely on its own rental increases as evidence of market rent.

3. The tribunal does accept evidence of what new residents are prepared to pay in determining whether a proposed rental is reasonable (see Hacker). It is evidence of market rent. If no new residents were prepared to pay the proposed rent increase, then it would not be a market rent. That new residents are prepared to pay the proposed rent, being fully aware of the facilities offered at the park, what is available at nearby parks and at what rent is strong evidence that that the proposed rent is market rent. The fact that they did not know what the existing resident were being charged does not affect my view. They could have asked – there is no evidence that they did so.

Conclusion

1. I confirm the site rent at $125.00 per week for those residents who had reached the third anniversary of the commencement of their tenancy agreement. I do not confirm the increase in site rent to $130.00 per week when, or if, new facilities are constructed. That is an argument for another time.