Hammond Villages Pty Ltd v Residents of Hammond Village
[2010] QCAT 186
•29 April 2010
| CITATION: | Hammond Villages Pty Ltd v Residents of Hammond Village [2010] QCAT 186 |
| PARTIES: | Hammond Villages Pty Ltd |
| v | |
| Residents of Hammond Village in accordance with Attachment A |
| APPLICATION NUMBER: | MH034-09 |
| MATTER TYPE: | Other civil dispute matters |
| HEARING DATE: | 15 April 2010 |
| HEARD AT: | BRISBANE |
| DECISION OF: | Mr Leslie Clarkson |
| DELIVERED ON: | 29 April 2010 |
| DELIVERED AT: | BRISBANE |
ORDERS MADE: | 1 The site rent of respondents’ sites with site rent of $101.54 per week as at 18 November 2009 is increased to $109 per week, including GST, effective as from 15 April 2010. 2 The site rent of respondents’ sites with site rent of $109.11 per week as at 18 November 2009 is increased to $117 per week, including GST, effective as from 15 April 2010. 3 The site rent of respondents’ sites with site rent of $114.77 and $118.44 per week as at 18 November 2009 is increased to $120 per week, including GST, effective as from 15 April 2010. |
| CATCHWORDS : | Manufactured homes site rent dispute – Market rent review outside express terms of site agreements – Manufactured Homes |
APPEARANCES and REPRESENTATION (if any):
| APPLICANT: | Hammond Villages Pty Ltd, represented by the Park Manager of Hammond Village, Mr Neville Murray |
| RESPONDENT: | Residents of Hammond Village as listed in Annexure “A” to the Application, as varied by the Tribunal Order dated 23 December 2009, through resident and spokesperson, Mr Fred Harris. |
REASONS FOR DECISION
Introduction
Hammond Villages Pty Ltd (the applicant) applies for an order confirming a proposed rent increase for the 207 park residents listed in Annexure “A” to the application, as varied by the Order of the Queensland Civil and Administrative Tribunal (the Tribunal) dated 23 December 2009.
The application is made under s.71(7) of the Manufactured Homes (Residential Parks) Act 2003 (the Act).
The application was filed on 18 November 2009 in the Registry of the Commercial and Consumer Tribunal.
On the commencement of the Queensland Civil and Administrative Tribunal Act 2009 (the 2009 Act), namely 1 December 2009, the Tribunal replaced the Commercial and Consumer Tribunal.
Under section 256 of the 2009 Act, a pending proceeding (being a proceeding commenced in one of the tribunals replaced by the 2009 Act but not heard by the replaced tribunal prior to 1 December 2009) is taken to be a proceeding before the Tribunal. Under section 271 of the 2009 Act, the Tribunal has the functions of the former tribunal and can make a decision that the former tribunal could have made in relation to the proceeding.
Background
The applicant is the owner of a residential park, “Hammond Village” (the Village), located at 22 Hansford Road, Coombabah, Queensland.
The Village comprises a 245-site manufactured home estate.
The residents of the Village occupy their sites pursuant to site agreements and there are three different versions of site agreements in operation. Two versions contain clauses allowing for an annual rent increase in line with movements in the CPI. The most recent version contains an annual CPI rent adjustment clause with a market review every 3 years.
There are 174 residents who occupy their sites pursuant to site agreements which do not contain a market review provision and there are 71 residents who occupy their sites pursuant to site agreements which do contain a market review provision.
The rents payable for the sites vary, depending on the date of the respective site agreements, and are inclusive of GST.
In August and September 2009, the applicant served a notice of proposed increase in rent site pursuant to section 71(2) of the Act on the residents of the Village.
The applicant proposed to increase the rent for each site to $128 per week. The effect of the proposed increase would be two-fold. First, to increase site rent to accord with perceived market value, and second, to equalise rent paid for all sites.
An equal rent for all sites would result in variation of the amount of rent increase among the respondents, particulars of which are detailed hereunder.
Of the 245 residents who were given a notice of proposed increase in rent, 207 residents have either formally rejected the proposed increase or have not provided a written response to the notice. The latter group of residents is deemed to have not agreed to the proposed increase pursuant to section 71(6) of the Act.
The Legislation
Relevant legislation included ss.70 and 71 of the Act.
Section 70 makes provision for a home owner to apply to the Tribunal for an order about a site rent increase in circumstances where the park owner gives notice under section 69 of the Act of a proposed increase in site rent payable under the site agreement.
Relevant factors to which the Tribunal may have regard when deciding the application are outlined in section 70(3), and are listed as follows:
(a)the range of site rents usually charged for comparable sites in comparable residential parks in the locality of the park, or if there are no comparable residential parks or sites, the range of market rents usually charged for residential accommodation in the locality;
(b)the increased site rent compared to the previous site rent;
(c)the frequency, and amount, of past increases in the site rent payable
under the agreement;
(d) any increase in the CPI number during the previous site rent period;
(e) the amenity or standard of the common areas and communal facilities;
(f) any withdrawal of a communal facility or service previously provided at the park;
(g) any addition of a communal facility or service not previously provided at the park;
(h) any increase in the park owner’s operating costs for the park during the previous site rent period;
(i) whether the increase is fair and equitable in all the circumstances of the case;
(j) anything else the tribunal considers relevant.
Section 71 makes provision for a park owner to apply to the Tribunal for an order about a site rent increase in circumstances where the park owner gives notice, outside the terms of section 69 of the Act, of a proposed increase in site rent payable under the site agreement.
Section 71(8) provides that in deciding the application, the Tribunal may have regard to the matters mentioned in section 70(3).
The matters listed in section 70(3) are relevant to the Tribunal’s determination of the application, whether brought by a park owner or by a home owner. In this case, it is the park owner who brings the application because the proposed increase in rent is not in accordance with the provision for rent increases in the respective site agreements. The onus therefore lies on the park owner to persuade the Tribunal to uphold the proposed increase. See Palmpoint Pty Ltd v The Residents of Bribie Pines Island Village & Ors [2007] QDC130.
The Evidence
Part of the material filed in support of the application was a letter from Mr Jamie Brown, Valuer, employed by CB Richard Ellis (C) Pty Ltd, dated 3 August 2009. The letter states that Mr Brown had been instructed by the Park Manager to undertake a rental determination of the Village. After taking relevant considerations into account, Mr Brown’s opinion of a market rent for sites at the Village, as at 3 August 2009, was $128 per week per site (fully inclusive).
Mr Brown gave oral evidence in response to questions from the Tribunal and from Mr Harris, the relevant parts of which are set out below.
Mr Brown agreed with the proposition that the comparable parks set out in the schedule on page 1 of his letter are relevant for consideration by the Tribunal as comparable residential parks in the locality containing comparable sites, with the exception of Golden Crest Manors and Riverside Residential Resort, both of which are significantly superior to the other parks mentioned in the schedule. Comparable residential parks in the locality of the Village are therefore, according to Mr Brown, Harbourside Residential Resort, Emerald Gardens, Paradise Lake Resort, and Lewani Palms.
Mr Brown referred to “gated security” and “onsite management” as typical facilities provided in a manufactured home estate. These facilities, particularly gated security, are likely to be very important to the perception of safety and general wellbeing of residents of a park. The usual form of onsite management is carried out by staff who predominantly live in the park and administration hours are normally 9am to 5pm through the week, with some administration provided on weekends. Mr Brown considered that full time onsite management was a “pretty important” facility.
Mr Brown stated that he was familiar with the listed comparable parks in the area. While all parks have their own identifiable characteristics, and some variations to facilities and services, overall, their respective facilities and services were fairly similar.
Of the comparable parks, Mr Brown considered that Emerald Gardens was a reasonable choice as a park most closely comparable with the Village. Emerald Gardens had a superior range of facilities which were of better quality, being newer. Emerald Gardens had gated security, full-time management (as compared with the lesser hours at the Village), larger bowling green, resort-style (and apparently more appealing) swimming pool, better quality car-wash area, and a convenience shop within the grounds. On the other hand, the Village had superior barbeque facilities, and a tennis court, whereas Emerald Gardens does not. [Mr Brown confirmed that the reference in his letter to a “night lit tennis court” at Emerald Gardens was an error.]
In relation to the general state of repair of the Village facilities and the state of the grounds, Mr Brown considered that the property did not look unkept or neglected at the time of his inspection, and that in his view there were no significant differences in these aspects between the Village and the comparable parks.
Mr Brown was asked to explain his valuation figure of $128 per week in circumstances where his valuation lists comparable parks in the locality at rents ranging from approximately $118 to $123 per week. In response, Mr Brown referred to the residential parks listed at page 7 of his report. These are parks in Bethania, Waterford, Mr Warren Park, Eagleby, Burpengary, and Bribie Island. Mr Brown believes that the higher rents payable at these parks indicate a higher market value is appropriate for parks such as the Village. In fact his valuation describes the circumstances thus: the subject and the immediate surrounding manufactured home estates have not kept up with market forces. It is the examination of rents outside the immediate vicinity of the Village and the other comparable parks which Mr Brown says inclined him to arrive at a site rent valuation of $128.
In Mr Brown’s view, one of the reasons for site rent in the comparable parks to fall behind market value elsewhere is that the increased costs associated with the parks in the locality of the Village had not yet been taken into account. While Mr Brown was aware of a 24% increase in local authority rates for the 6 months to December 2009, he was unable to quantify other increases in costs.
Mr Brown was asked to direct his mind to the wording of section 70(3)(a), and particularly to the description of comparable residential parks in the locality of the Village. Given his evidence about the comparable parks in the locality to which the Tribunal may have regard, Mr Brown was asked if he could give an opinion as to a fair market rent for the Village, taking into account the site rent in those parks. After some further discussion about the rent payable at Emerald Gardens and the comparisons between Emerald Gardens and the Village, Mr Brown’s opinion of a reasonable market site rent for the Village was $120 per week.
The Park Manager, Mr Murray, gave the following evidence to the Tribunal.
Office hours are 10am to noon and 2pm to 4pm on weekdays. The office is not open on weekends. The Village had security arrangements many years ago, but does not have any security now.
Mr Murray stated that the Village facilities and the grounds are in excellent condition.
Mr Murray stated that he took up the management role at the Village in 2002. At that time there were four full-time employees, two occupied in management and sales, and two employees occupied in maintenance and cleaning. There are now only three full-time employees, and the provision of extra staff is arranged from time to time, when required.
Mr Murray outlined various additions or improvements to facilities as including renovation of the swimming pool, repairs to bowling green, purchase of an oven, and the laying of a small concrete path. Mr Murray conceded that most of these items might be more accurately described as maintenance issues, rather than additions to facilities.
Mr Murray stated that since the establishment of the Village, the only rent adjustments have been in accordance with the CPI, with the exception of an increase of $3 per week in 2000 to allow for GST costs. Of the three types of site agreements, only the most recent (described as Agreement 3 in his Statement filed on behalf of the Applicant) contains provision for a market rent.
Mr Murray stated that rents payable in the Village vary according to the date of occupation of the site by the resident and the rent applicable at that time. At the time the application was filed (18 November 2009) the various weekly site rents payable by the respondents were: $101.54, $109.11, $114.77, and $118.44.
Mr Murray also stated that if the Applicant had increased site rents in accordance with the terms of the site agreements, all rents would have been adjusted in accordance with the increase in the Brisbane All Groups CPI, which for the relevant period was 2%.
Mr Harris on behalf of the respondents made a number of submissions, including the following.
Mr Brown’s Valuation contains various inaccuracies and misdescriptions which tend to cast doubt on the weight which should be accorded to his conclusions.
It is inappropriate of Mr Brown to refer to the rent of parks outside comparable parks in the locality of the Village, as that is not a matter within the confines of section 70(3)(a) of the Act.
Mr Harris took no issue with the figure of $120 per week as an appropriate valuation figure, but submitted that the Tribunal should make deductions from that figure, having regard to the other factors outlined in section 70(3).
Other factors include the amenity or standard of the common areas and communal facilities, and the slovenly appearance of the Village. Mr Harris’ oral submission was to the effect that the Village was not so much neglected and unkept per se, but that this description was applicable in the context of a comparison with the condition of other comparable parks.
Mr Harris also referred to the withdrawal of services, such as security patrols, hot water to showers near the swimming pool, certain sheds providing lock-up storage, and a reduction in management hours.
Further, the proposed rent increase will cause financial hardship and anxiety to the majority of the respondents who are at the lower range of income levels and who are receiving pensions and fixed incomes. Mr Harris invited the Tribunal to find that the proposed rent increase is not fair and equitable in all the circumstances.
Findings
Section 70(3)(a) – site rent for comparable parks in the locality
While there were some minor inaccuracies in Mr Brown’s Valuation, the Tribunal took no issue with the overall professionalism of Mr Brown’s Valuation and his conclusions, so far as they may relate to general valuation principles. However, the critical issue for the Tribunal was whether Mr Brown’s initial valuation figure of $128 was based on criteria to which the Tribunal may have regard – that is, the criteria outlined in section 70(3)(a). In other words, was Mr Brown’s opinion based on site rents charged for comparable sites in comparable residential parks in the locality of the Village?
Locality is not defined in the Act. Various dictionaries refer to: a particular neighbourhood or area; a surrounding or nearby region; relating to a town or small area rather than the whole state or country.
The Tribunal is inclined to the view that one of the factors relevant to the question whether this term is given a narrow or wide interpretation is the number of comparable parks in the immediate vicinity of the subject park. That is, if there are sufficient comparable parks in the immediate vicinity of the subject park to give a reasonable range for sensible comparison, it is not necessary or appropriate to widen the concept of locality to include parks which would not normally be regarded as in the immediate vicinity, and which thus do not share the particular circumstances or characteristics pertaining to parks in the local area.
In Kenmont Investments & Others v Jackson & Winter [MH 030-08] 31 March 2009, the Queensland Commercial and Consumer Tribunal was concerned to arrive at a market rent for Emerald Gardens. The tribunal decision included a finding that certain parks in the locality were comparable parks with Emerald Gardens. They included: Harbourside Residential Resort, Lewani Palms, Paradise Lake Resort, and Hammond Village.
The Tribunal was provided with no submissions which might compel it to consider a departure from the findings of the tribunal in Kenmont Investments. On the contrary, Mr Brown agrees that these parks are comparable and local. The Tribunal finds accordingly that the residential parks mentioned in the previous paragraph are comparable residential parks in the locality of the Village. The Tribunal also finds that, of the parks mentioned, it is reasonable to adopt Emerald Gardens as one of the parks most closely comparable to the Village.
It may well be, as Mr Brown asserts, that increased operating costs for parks have so far not been taken into account when setting rents in the Coombabah locality. It may well be also that rents payable for parks of approximately equal quality to the Village outside the locality are not on a par with those within the locality. But on the face of it, those issues do not directly bear on the matters outlined in section 70(3)(a). The Tribunal finds that, on the face of Mr Brown’s valuation and his oral evidence, his site rent valuation is not founded on the expressed criteria to which the Tribunal may have regard, and his valuation of weekly site rent for the Village of $128 is not accepted.
Mr Brown’s evidence is to the effect that the Emerald Gardens market review in 2008 resulted in a weekly site rent figure of $120. Current rent is now $122.57 per week as the result of an increase in 2009 according to the CPI.
Mr Brown’s evidence is also to the effect that Emerald Gardens generally has a wider range of facilities and services, which are considered to be slightly superior to the Village, and that is the basis for his estimate of $120 per week. Mr Harris does not disagree with Mr Brown’s estimate.
The Tribunal finds that a weekly site rent for the Village of $120 represents a fair market rent, having regard to the matters outlined in section 70(3)(a) of the Act.
Section 70(3)(b) – Site rent increase compared to previous site rent
Adopting $120 as the market value, without deduction, the following increases would be applicable to the respondents:
| Current rent | Market rent | Increase | Percentage Increase |
| $101.54 | $120 | $18.46 | 18.2% |
| $109.11 | $120 | $10.89 | 9.9% |
| $114.77 | $120 | $5.23 | 4.5% |
| $118.44 | $120 | $1.56 | 1.3% |
Section 70(3)(c) – Frequency of past increases
The parties agree that past increases in rent have been calculated in accordance with the CPI, with a one-off increase in 2000 of $3 per week to make allowance for the GST. Site rents in the Village have never been the subject of a market review.
Section 70(3)(d) – CPI increase
It is common ground that the relevant CPI figure is a 2% increase, and the Tribunal finds this figure substantiated.
Section 70(3)(e) – Standard of common areas and facilities
Mr Harris and Mr Murray disagree on the overall condition and appearance of the Village. Mr Harris’ material included photographs of aspects of the facilities and the grounds which indicate that some maintenance work is required. However, as to the overall standard of the common areas and the facilities of the Village, the Tribunal is inclined to accept the evidence of Mr Brown in this regard. That is, the Village appears to be reasonably well maintained, and overall the Village compares reasonably well with Emerald Gardens and other comparable parks in the locality.
Section 70(3)(f) – Withdrawal of facility or service
Some of Mr Harris’ allegations about the withdrawal of services are not disputed by Mr Murray because the latter states he simply does not know. Some services or facilities were withdrawn years before he took up the manager’s position. It is not disputed, however, that security arrangements were cancelled, and there has been a reduction in staff and office hours.
For a number of reasons, the Tribunal is not inclined to consider a reduction of rent based on the withdrawal of facilities or services.
First, the more significant facilities or services mentioned were withdrawn many years ago. It is likely that a significant number of respondents were not residents at a time when these facilities were in operation. Thus the facilities and services provided at the Village when they took up residence are likely to be largely unchanged from the current facilities. Many of the respondents have not therefore experienced the loss of the facilities or services to which Mr Harris refers.
Second, Mr Brown’s estimate of $120 for site rent at the Village was based on a comparison of facilities within comparable parks, and particularly those of Emerald Gardens. Mr Brown appeared to be very familiar with the parks in question, and in the Tribunal’s view, his comparison of the features of Emerald Gardens and the Village was insightful and thorough. While Mr Brown’s comparison did not specifically take into account any withdrawal of facilities pertaining to the Village, nevertheless the current lack of certain facilities in the Village when compared to the facilities of Emerald Gardens clearly influenced his conclusion about the overall superiority of Emerald Gardens and his estimate of an appropriate site rent which might be applied to sites at the Village.
The Tribunal finds that the lack of certain facilities or services in the Village (whether withdrawn or never in existence) has already been taken into account in arriving at a reasonable site rent by way of comparison of all relevant factors. The Tribunal concludes therefore that it should make no allowance under this section for any reduction in rent.
Section 70(3)(g) – Addition of communal facility or service
The Tribunal finds that apart from a small concrete path, there has no other addition of a community facility or service.
Section 70(3)(h) – Increase in park owner’s operating costs
Mr Brown gave evidence to the effect that Gold Coast Council rates have increased by approximately 24% in the 6 months to December 2009. No other specifics were provided to the Tribunal, but the Tribunal is entitled to take judicial notice of the fact that there have been significant increases in operating costs for all parks in recent years. Further, one of the objects of the Act is to encourage the growth and viability of the residential park industry. The Tribunal accepts that a residential park is a commercial investment and the applicant is entitled to a fair return from its business.
Section 70(3)(i) – Whether increase is fair and equitable
Mr Harris provided no substantiation of the hardship the respondents will endure if the rents are increased according to the initial valuation of Mr Brown, or to the subsequent figure provided by Mr Brown. However, Mr Harris’ submission that most of the residents are in receipt of pensions or other fixed incomes was not disputed by Mr Murray. The Tribunal is entitled to accept the proposition that significant increases in site rent will have an adverse affect on those residents on fixed incomes and who might generally be considered to be in the lower income brackets.
The parties made various submissions about the rent assistance which might be available to some respondents. The Tribunal finds that not all of the respondents will be entitled to full rent assistance to ameliorate the effect of a large weekly increase.
The parties acknowledge that if site rents had been adjusted in September 2009 in accordance with the provisions of the site agreements, there would have been an increase of approximately 2% along the lines of the movement in the CPI. This would have brought the respondents’ respective site rents to the levels outlined in the following table. Further, if those levels were then increased to the market rent as determined by the Tribunal, there would still be significant increases in rent for the respondents at the lower rent ranges, as the table also demonstrates:
| Existing rent | CPI increase at 2% | CPI rent (notional) | Further increase to $120 | Percentage increase CPI rent to valuation |
| $101.54 | $2.03 | $103.57 | $16.43 | 15.8% |
| $109.11 | $2.18 | $111.29 | $8.71 | 7.8% |
| $114.77 | $2.29 | $117.06 | $2.94 | 2.5% |
| $118.44 | $2.36 | $120.80 | Nil | Nil |
The notional CPI rent in the table is the rent that the respondents might reasonably have anticipated to have applied to them if the provision for rent increase in their respective site agreements had been adhered to by the applicant. It represents the figure to which the respondents might have had regard in their forward planning and budgeting exercises.
The Tribunal finds that the imposition of the market rent of $120 for those respondents paying weekly site rent of $114.77 and $118.44 is an increase which is fair and equitable. However, the Tribunal also finds in all the circumstances that (even after taking into account an increase in accordance with the CPI) further increases of site rents of 15.8% and 7.8% for the two lower rent ranges are not fair and equitable.
The Tribunal concludes that a fair and equitable increase in site rents for the two lower range site rents is represented by a further 5% increase over and above the notional CPI adjusted site rent. That is, in effect, an overall increase of approximately 7% for the two lower range site rents which were applicable at the time the application was filed. This would result in weekly site rents for all the respondents’ sites as follows:
Site rent of $101.54 is increased to $109 per week;
Site rent of $109.11 is increased to $117 per week;
Site rent of $114.77 is increased to $120 per week;
Site rent of $118.44 is increased to $120 per week.
Section 71(10) of the Act requires the Tribunal to state the day from which the increased rent is first payable.
The applicant’s notices of proposed increase in site rent were served on the respondents in August and September 2009, and provided for the increase to operate not less than 2 months after the notice was given. When canvassing the proposed increase day [section 71(2)(c)] the parties accepted that, if the respondents had agreed to the proposed increase, the earliest time from which the proposed increase could have applied to all respondents was around 1 December 2009.
The notices proposed a rent increase based on supporting material which on its face appeared to be unsustainable, and in fact has been so held. The Tribunal was provided with no submissions on the point, and finds no justification to backdate the increase in site rent to any time prior to the hearing.
Orders
Orders were made accordingly.
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