GM & JM Holland trading as Cooloola Cabins and Caravan Park v Reid
[2013] QCAT 678
•13 December 2013
| CITATION: | GM & JM Holland trading as Cooloola Cabins and Caravan Park v Reid & Ors [2013] QCAT 678 |
| PARTIES: | GM & JM Holland trading as Cooloola Cabins and Caravan Park (Applicant) |
| v | |
| Gordon Reid, Lorraine Learhinan, David Morris, Ross O’Donnell, Graham Lee, Ailsa White & Barbara Fitzmaurice (Respondent) |
| APPLICATION NUMBER: | OCL040-13 |
| MATTER TYPE: | Other civil dispute matters |
| HEARING DATE: | 15 November 2013 |
| HEARD AT: | Maroochydore |
| DECISION OF: | Member Kanowski |
| DELIVERED ON: | 13 December 2013 |
| DELIVERED AT: | Brisbane |
| ORDER MADE: | 1. The weekly site rent of the respondent residents is increased to $106.05 per week with effect from 1 July 2013. |
| CATCHWORDS: | Manufactured homes – whether significant increased operational costs – whether significant facility upgrades – effect of change in pricing arrangement for water Manufactured Homes (Residential Parks) Act 2003 Qld s 70(3) s 71, s 99A |
APPEARANCES:
| APPLICANTS: | Mr GM Holland spoke on behalf of himself and Mrs JM Holland. |
| RESPONDENTS: | Mrs Barbara Fitzmaurice spoke on behalf of herself and the other respondents (most of whom were present at the hearing). |
REASONS FOR DECISION
Introduction
Mr and Mrs Holland own the Cooloola Cabins and Caravan Park. There are about 40 manufactured homes in the park. The owner of each manufactured home rents a site from the park. On 23 April 2013 Mr and Mrs Holland gave the residents notice of a proposed increase in site rent from 1 July 2013. The notices proposed an increase in the weekly rent from $95.95 to $115.95. The notices explained the change as follows:
·first, the consumer price index (CPI) rise usually applied in July of each year, as permitted under the site agreements, would not be applied – this meant around $2.20 was foregone;
·second, there would be a decrease of $2 because of a change in the water pricing arrangement, as explained in an accompanying notice;
·third, there would be an increase of $22, comprising $7 for increased operational costs and $15 for facility upgrades.
The net effect would be to increase rents by $20 per week. (A few residents had been paying weekly rents other than $95.95: either $86.60 or $100, as explained in paragraph 57 below. For these residents as well, an increase to $115.95 was proposed).
The notices said that there had been no increases in rents, apart from CPI increases, since the rents were set in 2004. It is undisputed, though, that for the sites that had fresh water connected, an $8 per week increase had been applied from the point when fresh water was connected.
The notices were given under section 71(3) of the Manufactured Homes (Residential Parks) Act 2003 (Qld) (the MH Act). Some of the residents agreed to the proposed increase. Others, including the present respondents, did not. Mr and Mrs Holland have applied to QCAT for an order about the proposed increase, under section 71(8) of the MH Act.
Legislation and issues
A preliminary issue is whether the rent increase application should be struck out. If it is not struck out, the substantive issues arise under section 71. That section permits a park owner to propose a rent increase, not provided for in a site agreement, if the increase is necessary for the park owner to cover:
·significant increased operational costs in relation to the park, including significant increases in rates, taxes or utility costs for the park;
·unforeseen significant repair costs in relation to the park; or
·significant facility upgrades in relation to the park.
The proposed rent increase cannot be based on a market review of site rent.[1] If a resident does not agree with the proposed increase, the park owner may apply to QCAT for an order.[2] QCAT may have regard to the various matters, such as the amenity of common areas and whether the increase is fair and equitable, mentioned in section 70(3)(d) to (l).[3] Section 71 also sets out the types of orders that QCAT can make.[4] If QCAT confirms an increase in the rent, it must state the day from which the increased rent is payable.[5]
[1] Manufactured Homes (Residential Parks) Act 2003 (Qld) s 71(2).
[2] Ibid s 71(8).
[3] Ibid s 71(9).
[4] Ibid s 71(10).
[5] Ibid s 71(11).
Accordingly, the issues to be decided are:
·should the rent increase application be struck out?
·if not, is the rent increase necessary to cover the cost of relevant expenditure?
·if so, what other matters are relevant?
·what order(s) should be made?
·if there is to be a rent increase, from what date should the increased rent be payable?
Should the rent increase application be struck out?
Prior to the hearing the respondent residents filed an application for the rent increase application to be struck out.[6] The residents noted that the proposed rent increase notified on 23 April 2013 was for an increase in the weekly rent to $115.95, but in a letter filed in QCAT on 10 October 2013 Mr and Mrs Holland sought an increase to $123.82. The residents contended that Mr and Mrs Holland were seeking to have QCAT approve an increase other than the increase initially notified.
[6] Under the Queensland Civil and Administrative Tribunal Act 2009 (Qld) s 47.
When I raised this at the start of the hearing, Mr Holland informed me that he would not, in the present application, be asking QCAT to increase the rent beyond $115.95.
It is apparent from the terms of section 71 that it is not open to a park owner to seek an order from QCAT for an increase in rent beyond the amount initially notified to residents. Accordingly, had Mr Holland persisted with an argument that the rent should be increased to a figure above $115.95, the appropriate course might perhaps have been to strike out the rent increase application. However, Mr Holland having advised that such a submission would not be made, there is no reason to strike out the rent increase application.
Is the proposed rent increase necessary to cover the cost of relevant expenditure?
OPERATIONAL COSTS
The notice of 23 April 2013 said that since March 2007 electricity costs had risen 63%, rates 54%, sewerage licensing 472%, and garbage collection 140%. Further, maintenance of infrastructure (two watering systems, electrical metering and sewerage treatment plant monitoring) and employment costs had exceeded the CPI.
It is common ground that the rents had been increased by 19% for CPI across the period March 2007 to April 2013.
Mr and Mrs Holland have provided electricity, rates, sewerage licence and garbage collection invoices, which do show very substantial increases. For example, annual sewerage licensing costs rose from $500 in 2007 to $5,400 in 2010, before dropping back to $3,091 in 2012. A substantial portion of the electricity cost would have been passed on to residents, because the park on-supplies electricity and invoices residents for their consumption. However, of course, the park would itself use (and carry the cost of) a portion of the electricity for lighting, pumps, pool filtration etc.
I find that there has been a significant increase in the operational costs for electricity, rates, sewerage licensing and garbage collection.
Mr Holland says that $7 per site per week was the figure advised by his accountant as necessary to cover the increased operational costs, and I accept this figure. It appears reasonable, bearing in mind that there would ordinarily have been a CPI increase of around $2.20 in any event. On the basis of 40 sites, a $7 weekly increase per site translates to approximately $14,560 additional revenue per year to cover increased operational costs.
I have taken into account that manufactured homes are not the only part of the business. Mr Holland told me that there are currently 40 sites under the MH Act, and two under the residential tenancies legislation. There are also caravan sites but they are used infrequently. He does not allow overnight stays, but occasionally someone will stay for a few weeks or months. Also, he knows the people who run the local flying school, and their students stay in the park at times. The respondent residents do not challenge this overall picture, though Mrs Fitzmaurice believes there may be four sites under the residential tenancies legislation.
Overall, I am satisfied that the park is predominantly made up of homes under the MH Act, with the other aspects of the business comprising only small components. It is likely that Mr and Mrs Holland have increased the rents charged in the other aspects of the business as well, so I am satisfied that the manufactured homes residents are not being asked to subsidise the other parts of the business.
FACILITY UPGRADES
The notice of 23 April 2013 said that a number of improvements had been made since 2004, at a cost ‘in excess of $250,000’. This expenditure was broken down into five groups, with expenditure totalling $250,000:
·provision of concreted roadways ($140,000);
·removal of trees, establishment of gardens and hedges, and tidying up of park entrance ($36,000);
·upgrade of electrical supply system ($30,000);
·sewerage upgrades and works to stop ground water entry ($16,000); and
·renovation of the exterior of the amenities block; new pool fence; and fence to hide the sewerage plant ($28,000).
Many of these are matters of infrastructure. Before discussing them in detail, it is necessary to consider the meaning of the expression ‘significant facility upgrades’ in section 71(1)(c)(iii). Is it intended to refer just to recreational enhancements, such as the addition of a swimming pool or a tennis court, or does it also refer to improvements in basic infrastructure such as sewerage?
‘Significant facility upgrades’ is not defined in the MH Act. ‘Facilities’ is defined, but only to the extent of saying that it includes furniture and equipment.[7] In the context of residential parks, one might speak of facilities such as swimming pools and games rooms, but also of facilities such as onsite power and wifi access. This suggests that facilities can include both recreational and infrastructure items. Similarly, the word ‘equipment’ used in the definition of ‘facilities’ could include things as diverse as exercise bicycles and sewerage pumps. The MH Act also uses the expression ‘communal facilities’[8] and ‘mail facilities’.[9] The breadth of the word ‘facility’ can also be seen in dictionary definitions which include ‘something that makes possible the easier performance of any action’, and ‘a building or complex of buildings designed for a specific purpose’, such as ‘toilet facilities’.[10] All residential parks require infrastructure, and most if not all will also include recreational facilities. The references in the MH Act to various types of facilities, including a utilitarian one like mail, suggests that Parliament intended ‘facilities’ to refer to the broad range of facilities, including both recreational and infrastructure facilities.
[7] Manufactured Homes (Residential Parks) Act 2003 (Qld) Schedule.
[8] For example s 77(2)(a).
[9] Section 91.
[10] The Macquarie Dictionary, 5th edition.
On the other hand, ‘facility’ would not extend to something of mere visual amenity. ‘Facility’ connotes function for some particular purpose.
Accordingly, I consider that improvements in roads, sewerage systems and so on are capable of being significant facility upgrades. Of course there must be an upgrade, in the sense of a new or improved facility. The mere replacement of a worn-out item, or standard maintenance, would not be an upgrade. To be significant, the upgrade would have to be substantial, not merely the sort of routine, minor improvement that one would expect to see in a residential park over time.
Group 1: provision of concreted roadways
It is undisputed that most of the dirt or gravel roadways in the park have been replaced with concrete roadways. Mr Holland says this provides all-weather access, controls storm water run-off, and enhances the appearance of the park.
The residents agree that the concrete roadways make it easier to drive around the park. They say, though, that there are number of problems. These include that the concrete is slippery for pedestrians in wet weather; the surfaces are not adequately cleaned; edges have not been levelled with the ground; and there is no integrated storm water system. Mr Holland disagrees. He concedes some problems but says they are either unavoidable or not as extensive as the residents claim.
I accept that there are some problems with the concrete roadways. They are not a perfect solution. Perhaps the maintenance should be improved, and solutions found for the other problems. Overall, however, I consider that the installation of concrete roadways clearly amounts to a significant facility upgrade.
Group 2: removal of trees, establishment of gardens and hedges, and tidying up of the park entrance
Mr Holland says that a number of trees within the park have been removed, mostly at the request of residents. Garden beds and hedges have been established. Mr Holland says that garden beds and signs near the amenities block have made the entrance to the park much more visually appealing.
While trees and gardens add to the visual amenity of a residential park, they would not generally be regarded as ‘facilities’ because they are not used for any particular purpose. Vegetation can perform valued functions, such as providing shade or screening, but it is not suggested that the vegetation in question has served such purposes. I am not satisfied that the removal of unwanted trees, the addition of gardens and hedges, and the general tidying up of the entrance amount to facility upgrades. Even if they do, I consider they have been more in the nature of routine improvements that significant upgrades.
Group 3: upgrade of electrical supply system
Mr Holland says that an old, unreliable overhead electrical system has been progressively replaced with a modern, reliable underground system. He says that Energex insisted that the park act to replace the old system, after a series of blowouts in 2007. The residents do not dispute that an upgrade was required. I am satisfied that there has been a significant facility upgrade.
Group 4: sewerage upgrades and works to stop ground water entry
Mr Holland says that when he and Mrs Holland purchased the park in 1998 there was only one septic tank and a pondage system. Half a dozen sites had onsite systems. This was not a suitable long-term system, so in 2003 or 2004 they installed a sewerage treatment plant. This worked reasonably well in the first few years but problems later emerged during some very wet years. Various repairs were needed. Some pits needed to be replaced because it turned out that the original work had been shoddy. Another area of expenditure was replacing old earthenware piping, dating from probably the 1970s, with PVC piping. Mr Holland concedes that part of the total expenditure relates to the sewerage piping for the amenities block. The amenities block is seldom used by the manufactured homes residents because they have toilets in their own homes.
I am satisfied that the sewerage expenditure constitutes, in part, a significant facility upgrade and, in part, unforeseen significant repair costs. I consider the upgrades or repairs significant both in cost and because they have been for other than routine maintenance.
Group 5: renovation of the exterior of the amenities block; new pool fence; and fence to hide the sewerage plant
Renovation of the exterior of the amenities block
Mr Holland says that the exterior of the amenities block was unsightly. A ‘face lift’ was needed to improve the visual amenity of the park, because the amenities block is visible as one drives into the park. So a roof façade and verandah were erected, and the brickwork was plastered over.
The residents do not dispute that the external appearance of the amenities block has been improved. Indeed, the improvement is clearly apparent from the photographs.
The residents say that they rarely use the amenities block: perhaps only occasionally if they use the pool. Most also have their own laundries. They say that the amenities block is really for the benefit of the caravan park side of the business. They do not care what the outside of the block looks like. Further, the interior has not been renovated.
Mr Holland says in response that he originally had plans to decommission the block and turn the building into a common room. However, that plan did not come to fruition and instead he opted for a barbeque shelter near the pool. He says he has done some internal work in the amenities block, but this is not part of the claimed $28,000.
I consider that the expenditure on the exterior of the amenities block is in a different category to the expenditure on gardens, even though both relate to visual amenity. The amenities block is a facility available to the residents, even if they make little use of it. The visual appearance of a facility is a matter that properly warrants attention and, if necessary, expenditure. I am satisfied that the renovation was a significant facility upgrade.
New pool fence
Mr Holland says the new pool fence was needed because the old paling fence did not comply with new regulations. The residents do not dispute that the new fence was erected to meet safety requirements, but they argue that other aspects of the pool are not safe. They point to the gaps between some pavers, a problem with the new hand rail, and the alleged lack of a current safety certificate.
While it may be that there are some shortcomings with the pool, I am satisfied that the installation of the new fence was necessary. It went beyond routine maintenance, and amounted to a significant facility upgrade.
Fence to hide sewerage plant
Mr Holland says that the fence was erected to hide the unsightly sewerage plant. The residents acknowledge that the fence is appreciated by those living near the plant. They also consider that without a fence there could be health and safety concerns.
While again a matter largely of visual amenity, I consider that the erection of the fence was part and parcel of having the sewerage plant. A fence is really a necessary, or at least a desirable, adjunct to that facility. Accordingly, I find that that the erection of the fence amounted to a significant facility upgrade.
How much did the facility upgrades cost?
The notice of 23 April 2013 spoke of a cost in excess of $250,000. A letter from Mr and Mrs Holland’s accountant, David Elder of Crowe Horwarth, says that his firm’s review of capital expenditure shows $202,973 expended in the period July 2006 to June 2013. This is not exactly the same period as the one discussed in the notice, but Mr Holland says the main reason for the difference is that his figure of $250,000 includes some non-capital costs such as labour. He says his Quick Books program allows him to track expenditure on particular projects. I accept the cost figure of $250,000 given by Mr Holland. Although it includes some labour costs, which would ordinarily be accounted for as operational costs, I am satisfied that the labour involved was not for routine, recurrent operational tasks.
Is a rent increase of $15 per week necessary to cover the cost of facility upgrades?
Mr Holland says that the proposed increase was based on advice from his accountant that $15 was needed to recover the outlays and borrowing costs over a period of ten years. Allowing for inflation, I accept this. However the figure needs to be adjusted because I have found that the relevant expenditure was $214,000, not $250,000, once the expenditure relating to trees and gardens is excluded. Having accepted 85.6% of the expenditure as relevant, I find that the increase needed to cover the costs is only $12.84 (85.6% of $15). I do not consider that a further adjustment is needed on account of the fact that there are other aspects to the business, for the same reason given in relation to the operational costs.
What other matters are relevant?
Section 71(9) of the MH Act invites QCAT to consider the factors set out in section 70(3)(d) to (l). Consistent with the rule that the rent increase cannot be based on a market review of rent, section 71(9) does not invite QCAT to consider the section 70(3)(a) to (c) factors which relate to rents charged in other parks and for other forms of accommodation in the locality of the park. Accordingly, the parts of Mr and Mrs Holland’s written evidence that relates to the rental market, including the statement of Ray Smith, are irrelevant, and I have disregarded them.
I will consider the section 70(3)(d) to (l) factors below.
The increased site rent compared to the previous site rent
An increase from $95.95 to $113.79 ($93.95 plus $7 plus $12.84) would be an 18% jump. This is a considerable jump in one year: much more than the CPI (around 2%). Many if not all of the residents are on Centrelink pensions, which increase only at the rate of the CPI.
The frequency and amount of past increases in the site rent
As discussed earlier, rents increased 19% between March 2007 and April 2013, in line with the CPI.
Any increase in the CPI during the previous site rent period (the 2012/2013 financial year)
As discussed above, I have taken into account the CPI increase of approximately 2% in accepting as reasonable the proposed $7 rise for operational costs.
The amenity or standard of the common areas and communal facilities; and any withdrawals or additions to communal facilities and services
There have been some improvements in communal facilities such as roads and the power supply system, as discussed above. These have been recognised above as significant facility upgrades. The barbeque shelter has also been added in recent years. I am not aware of any other additions to, or withdrawals of, facilities or services. The residents say that the interior of the amenities block needs renovation, and Mr Holland does not deny this. The residents also suggest there should be improvements in facilities and services such as lighting, mail distribution, emergency procedures and garbage collection.
Any increase in the park owner’s operating costs during the previous site rent period (the 2012/2013 financial year)
Some of the operational costs have been discussed above, and recognised as having significantly increased over a six year period. Mr and Mrs Holland have not produced evidence of their total operating costs in any year, so I am not aware of any increase in 2012/2013.
Mr Holland says that the rent increase is necessary to maintain profitability. I note that one of the objects of the MH Act is to encourage the viability of the residential park industry.[11] However, Mr and Mrs Holland have not provided their profit and loss statements. At the hearing, Mr Holland said that he should not have to provide such information to anyone other than the Taxation Office. The problem, though, is that without such evidence, I cannot assess or give weight to Mr Holland’s claim that the rent increase is necessary to maintain profitability.
Whether the increase is fair and equitable in all the circumstances of the case, and anything else that QCAT considers relevant
[11] Manufactured Homes (Residential Parks) Act 2003 (Qld) s 4(3)(a).
There are a number of issues to be considered under this heading.
Whether facility upgrade costs should be passed on
The residents argue that Mr and Mrs Holland will reap a return on their capital investments when they sell the park. The cost of these investments should not, they argue, be passed on to residents. Further, Mr and Mrs Holland could recoup their costs more quickly by allowing overnight stays.
However, Parliament in enacting section 71(1)(c)(iii) has provided a mechanism for the passing on of capital investment costs when they relate to significant facility upgrades. There can, therefore, be no presumption that such costs should ordinarily not be passed on. Further, it can be assumed that Mr and Mrs Holland have legitimate business reasons for not allowing overnight stays.
Agreement by others to the rent increase
Mr Holland says the reasonableness of the proposed increase is evident from the fact that the majority of residents agreed to, and have been paying, the increased site rent of $115.95 per week. Also, new residents have agreed to weekly rents at that level.
However, without evidence from those other residents, it is unknown if they viewed the increase as fair and equitable, or if they simply did not want to be drawn into conflict.
Affordability of the rent increase
There is no detailed evidence about the affordability for individual residents. It is undisputed that at least some of the rent increase would be absorbed by increased rent assistance payable to those residents on Centrelink pensions.
Fresh water supply
As mentioned earlier, the rent increase proposal includes a $2 reduction (or, more accurately, a $20 increase instead of a $22 increase) because of a change in the water pricing arrangement effective from 1 July 2013.
The park supplies bore water to all sites. No charge is made for the bore water; nor is any charge proposed. The change relates to fresh water. Progressively, over the years, the park has moved to supplying fresh water to the sites. As at 23 April 2013, when the rent increase notices were sent, all but two of the sites had fresh water connected. The remaining two sites (neither of which is occupied by the respondent residents) were connected by 1 July 2013.
During 2012/2013 the rent was $95.95 rent per week for the sites connected to fresh water, and $86.60 for the two sites not so connected. According to Mr Holland, the $95.95 included an allocation of (up to) 2,000 litres of fresh water per week, with a separate charge applying only for any consumption over that level. All sites have water meters for the fresh water. (There were also a few sites paying a site rent of $100 per week for a ‘double water’ allocation. For those sites, a $6.05 per week decrease to $93.95 was proposed, before the $22 increase. So their position, for present purposes, was similar to that of the sites paying $95.95. It will be sufficient to consider the position of most sites, where the rent was $95.95).
On 23 April 2013 Mr and Mrs Holland advised residents that with effect from 1 July 2013, there would no longer be an allocation of fresh water. Instead, all fresh water consumed would be charged at the ‘buy in rate’ of $9.16 per kilolitre. Because of the removal of the 2,000 litre water allocation, the proposed rent increase was to be $20 per week instead of $22. In other words, Mr and Mrs Holland proposed compensation of $2 per week for the loss of the 2,000 litre water allocation.
The notice sent by Mr and Mrs Holland said that this change to the water pricing system was “following an agreement reached between owners and B. Fitzmaurice at QCAT conference on 3/4/13”. That was a reference to QCAT’s decision in case number OCL076-12, which was a proceeding brought by Mrs Fitzmaurice (alone) against the park. The orders giving effect to the agreement included an order that Mrs Fitzmaurice’s site fee be reduced to $93.95 per week from 1 July 2013, and that Mrs Fitzmaurice’s “water will be charged separately on a consumption basis only from 1 July 2013”. According to Mr and Mrs Holland, the agreement reached with Mrs Fitzmaurice “must flow on to all sites to avoid future conflict”.
Mrs Fitzmaurice, though, argues that her situation is peculiar (though not unique): she uses her own tank water, so the change in the pricing mechanism for fresh water has no impact on her. That is not the case, though, for those residents who rely on the park for all of their fresh water.
As the material before the tribunal does not show consumption figures, it is not possible to calculate the average financial impact on residents of the removal of the 2,000 litre allocation. It is reasonable to suppose that a two person household might well use in the vicinity of 2,000 litres per week. So the impact on households could be as high as $18.32 (the price of two kilolitres).
This assumes that Mr and Mrs Holland can lawfully charge $9.16 per kilolitre, which itself is contentious. The residents argue that charging $9.16 per kilolitre would breach section 99A of the MH Act. That section says that a park owner must not charge more for a utility than the amount charged by the ‘relevant supply authority’. ‘Relevant supply authority’ is not defined, but presumably it refers to the entity from which a park purchases a utility for on-supply to residents.
Section 99A applies when ‘under a site agreement, the homeowner is required to pay the park owner for the use by the homeowner of a utility ...’. The site agreements are not in evidence before the Tribunal, so I do not know if they contain such a requirement. But for present purposes I will assume they do, and that section 99A applies to water purchased by the park.
Mr and Mrs Holland pay $9.16 per kilolitre for trucked-in water, but not all of the fresh water supplied to residents is trucked-in water. The trucked-in water supplements rainwater gathered by Mr and Mrs Holland in the park’s tanks. The residents argue that Mr and Mrs Holland would be profiting from the sale of fresh water, consisting only partly of trucked-in water, at $9.16 per kilolitre. They say this would breach section 99A.
Mr Holland argues it would be impossible to calculate what portion of the water supplied to a site was trucked-in water, as opposed to rain water, as both types of water are mixed in the park’s water tanks.
I am not aware of any provision in the MH Act that regulates how much Mr and Mrs Holland can charge for rainwater they have collected. I do not think such rainwater comes within the scope of section 99A because it has not been purchased from a relevant supply authority. If there is something in the site agreements that regulates the cost that can be charged for utilities, it has not been brought to my attention. Therefore, so far as I am aware, there is nothing that would stop Mr and Mrs Holland from charging $9.16 per kilolitre for the rainwater as well as for the trucked-in water.
Accordingly, the financial impact of the loss of the 2,000 litre fresh water allocation could indeed be as high as $18.32 per week, especially for households with two or more occupants. For one-person households, the impact is likely to be lower: perhaps around half of that. For households with their own fresh water tanks, the impact is likely to be nil or minimal.
The residents argue that the starting point for any rent increase should be $86.60 per week, the rent charged in 2012/2013 for a site without a fresh water connection. Mr Holland argues that the starting point should be $93.95 (the rent for a site with fresh water connection less $2 for the loss of the 2,000 litre allocation). He says that the remaining $7.35 relates to the infrastructure cost of providing the fresh water connection. It appears, though, that there is nothing in the site agreements that gives a breakdown into infrastructure and supply elements. Given the potential financial impact on sites, I am not satisfied that $2 per week represents fair compensation for the loss of the allocation.
In my view, the only fair and workable approach is to make $86.60 per week the starting point for any rent increase, as the residents submit. If expenditure by Mr and Mrs Holland on water infrastructure, not already included in the $202,973 or $214,000 taken into account in the present proceeding, constitutes a significant facility upgrade, the appropriate course is for Mr and Mrs Holland, if they wish, to follow the section 71 procedure to seek an increase in rent. That way, they can obtain a contribution from the residents, if appropriate, to that infrastructure investment. Meanwhile, the residents should not be expected to fund past infrastructure expenditure, which has not been the subject of a section 71 process, at the rate of $7.35 per week.
Changes in the park, and the delay in seeking the rent increase
The residents argue that the expenditure on the new electrical supply system and on the sewerage works was driven by an increasing park population, and so it has been offset by increased rental revenue. Mr Holland, on the other hand, says that the average number of tenanted sites has not changed much since 2007. He does, though, say that the proportion of homes under the MH Act has increased. It is not necessary for me to resolve the question of whether the park has grown, because I do not consider that to be a factor of significance. I have found that rent increases, spread amongst the existing site owners, are necessary if the relevant expenditure is to be recouped.
The more significant issue is that of delay. Mr Holland acknowledges that the proposed increase is a large one, but says that the residents have been enjoying the enhanced facilities for years without having to contribute to the cost. There is merit in that submission. However, there would have been some comings and goings of residents over the last several years. The effect of delay is that the present population of residents is expected to carry the whole burden; that burden has not been shared with previous residents who had the benefit of improved facilities but who were not required to contribute extra. That is not fair, and I consider that a small discount should be allowed on the increase related to the facilities upgrades. There is no way of accurately quantifying the discount, on the limited available information, but I consider that a 3% discount would be appropriate. This would produce an increase of $12.45 per week, instead of $12.84, on account of the facilities upgrades.
The same consideration does not apply to the operational costs. The increase of $7 per week is for current operational costs, not past costs.
What order(s) should be made?
Mr and Mrs Holland seek an order that the weekly site rent be increased to $115.95. As explained above, though, I have found that the maximum allowable increase under section 71 would be $7 for operational costs and $12.84 for facility upgrades. On the basis of a $2 drop for the water changes, that would bring the weekly rent to $113.79.
However, I have also found that it would be fair and equitable to allow a $9.35 drop for the water changes, and to allow only $12.45 on account of the facility upgrades. On this basis, the new rent would be:
·$95.95 (2012/2013 rent);
·less $9.35 (for the water changes);
·plus $7 (for the increased operational costs);
·plus $12.45 (for the facility upgrades);
·making a total of $106.05.
The residents propose a new weekly rent of $97.10, calculated as follows:
·$86.60 (2012/2013 rent for sites without fresh water connection);
·plus $2 (CPI increase);
·plus $4 (for the increased operational costs);
·plus $4.50 (for improvements in services proposed by the residents, such as enhanced streetlighting).
The residents also seek a variety of other orders, such as that the invoices be more transparent, and that Mr and Mrs Holland read the utility meters at the intervals specified in the site agreements. While it is open to QCAT to make ‘another order it considers appropriate’ under section 71(10)(d), I consider that only orders relating to the proposed rent increase would be appropriate in an application under section 71. The other orders sought by the residents are not within the scope of a section 71 proceeding.
On balance, I consider that an order for a weekly rent increase to $106.05, as explained above, would be fair and equitable. This does represent a substantial increase, of over $10 per week, or 11%, on the 2012/2013 rent of $95.95. On the other hand, the residents have had the benefit in the past of not having to contribute (beyond CPI) to the increased operational costs and the facility upgrade costs.
From what date should the increased rent be payable?
As the residents had ample notice of a likely rent increase in excess of the CPI figure, it is appropriate that the rent increase take effect from 1 July 2013.
Conclusion
The appropriate order is that the respondents’ site rents be increased to $106.05 per week with effect from 1 July 2013.
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