Hoey v Hometown Australia Lennox Pty Ltd

[2022] NSWCATCD 200

Civil and Administrative Tribunal

New South Wales

• Amendment notes

Medium Neutral Citation:

Hoey v Hometown Australia Lennox Pty Ltd [2022] NSWCATCD 200

Hearing dates:

8 November 2022

Date of orders:

28 November 2022

Decision date:

28 November 2022

Jurisdiction:

Consumer and Commercial Division

Before:

W Priestley, Tribunal Member

Decision:

(1) The respondent’s name is amended to Hometown Australia Lennox Pty Ltd.

(2) Under section 157 (1) (b) and (j) of the Residential (Land Lease) Communities Act (“the Act”), the respondent is ordered to comply with its obligation under section 109 (5) of the Act by reducing the amount of weekly site fees in the site agreement between the parties signed by the applicants on 28 September 2021 (“the agreement”), so they do not exceed $174.90 from the commencement of the agreement, except as adjusted by the annual increase method in the agreement.

(3) Under section 157 (1) (d) of the Act, within 28 days of the date of these orders, the respondent is to refund to the applicant the amount the applicant has paid in site fees in excess of $174.90, as adjusted by the annual increase method in the agreement.

(4) Should there be any dispute as to the calculation of the amount ordered to be refunded in Order 2, or the implementation of these orders, the parties may request the Registrar to re-list the matter.

Catchwords:

Site fees; fair market value

Legislation Cited:

Residential (Land Lease) Communities Act - Sections 4, 12, 104, 109, 110, 115, and 157

Cases Cited:

Hometown Australia Lennox Pty Limited v Debra Bullivant [2022] NSWCATAP 161 (17 May 2022)

Loughton v Hometown Lennox Pty Ltd [2021] NSWCATCD 19 October 2021;

Henderson v Hometown Lennox Pty Ltd [2022] NSWCATCD 19 April 2022

Category:

Principal judgment

Parties:

Ross and Denise Hoey – applicant
Hometown Australia Lennox Pty Ltd - respondent

Representation:

K Wright represented the applicant
L Toussaint represented the respondent

File Number(s):

RC 22/33571

Publication restriction:

NIL

REASONS FOR DECISION

The application

1. The application was lodged on 26 July 2022 and seeks orders under sections 156 and 157 of the Residential (Land Lease) Communities Act (“the Act”) that the respondent comply with its obligation to set site fees at fair market value as prescribed in section 109, and that site fees paid in excess of fair market value be refunded to the applicants.

The issues that need to be decided

2. Whether the Tribunal has jurisdiction to make the orders sought; I have found the Tribunal has jurisdiction under sections 156 and 157.

3. Whether $199.68 per week in site fees a new site agreement made 23 September 2021 exceeds “fair market value”, and if so by what amount. I have found “fair market value” at the time the site agreement was made was $174.90, and the respondent should repay the applicant all site fees paid in excess of that amount, as adjusted for annual increases.

Evidence

4. Both parties had, in accordance with directions made by the Tribunal, lodged and given to each other copies of documents they relied on at the hearing. Supplementary oral evidence was given at the hearing in response to questions asked by the Tribunal. In particular, supplementary oral evidence about the location and size of the applicants’ site and its similarity to other sites was given. The parties also lodged written submissions. At hearing the applicant lodged photographs showing the community in flood in the late 1990’s, 30 June 2005, and March 2022, along with a table listing various sites and the fees payable for them. The respondent lodged a surveyor’s map of the community.

Findings

5. On 8 September 2021 the applicants received a “Disclosure Statement” from the respondent, as required by section 22 of the Act. That statement was provided as the applicants had expressed an interest in buying the home on site 32 in the respondent’s community. The home was offered for sale by an existing home owner, not the respondent.

6. The disclosure statement said the site fees being paid by the seller of the home on site 32 were $174.50 per week, and the range of site fees being paid in the community was $164.40 to $199.68 per week. A weekly site fee of $199.68 per week, was proposed for a new site agreement between the applicant and the respondent.

7. On 28 September 2021, the applicants entered into a site agreement with the respondent in the standard form. Weekly site fees were agreed as per the disclosure statement.

8. The exact date the applicants settled the purchase of the home on site 32 is not known. An email from the respondent’ Jayne Thomas to the vendor’s agent, dated 27 September 2021, indicates it was probably before the site agreement was made.

9. On 28 June 2022, the applicants’ representative requested the respondent to review the site fees and adjust them to $174.50 per week, so as to recognise “fair market value”. A refund of all site fees paid in excess of $174.50 was also requested.

10. The respondent replied on 15 July 2022 that it believed site fees of $199.68 was “fair market value”, and declined to reduce that amount. At that stage a “dispute” for the purposes of section 156 (1) and 157 (1) (j) arose. The application was made within 28 days of the dispute arising and is therefore in time.

11. The only site which had a weekly rent, or site fee, of $199.68 when the disclosure statement was given to the applicant on 8 September 2021, was site 4. Shortly after the disclosure statement was given, the owner of the home on site 4 commenced an application to the Tribunal to have her weekly site fees reduced on the basis they had not been set at “fair market value” in accordance with section 109 (6). That application was successful, but the decision was overturned by the Tribunal’s Appeal Panel, which pointed out a potential anomaly in the safeguards for home owners in section 109.

12. I have considered the evidence of the level of site fees that existed at the time of the disclosure statement. Except for site 4 ($199.68), those fees ranged from $164.40 to $176.90.

13. The respondent provided a surveyor’s map (E 1) showing the location and size of each of the sites in the community. That map was produced shortly before the hearing. The applicant queries how the measurements were made, and disputes the accuracy of them on a number of bases, including the location of the pegs that may have been used by the surveyor. The surveyor was not available at hearing, and without cross-examination the exact accuracy of the map cannot be determined. Nevertheless the map is a very useful aid in determining sizes and locations of sites relative to site 32. The challenge to the area ascribed to site 32 can be dealt with on the oral evidence adduced at hearing.

14. The surveyor’s map shows site 4 has an area assessed as 365 square metres, and the applicants’ site (32) has an area assessed as 346 square metres.

15. Site 32 is bisected towards its rear boundary by an open drain. The drain is shown fairly full of water in a photograph that is exhibit E3. That part of the site to the rear of the drain can only be accessed by a small foot-bridge. The area of the drain cannot be used for anything. It does not appear to be what might be termed a “water feature”, and detracts rather than adds to the amenity of the site.

16. There was a dispute about the area of site 32 that the drain covers. At hearing, Ms Thomas, who has been the operator’s manager for a number of years and who I infer knows the layout of the sites very well, estimated the drain was about 3 metres wide. There is no dispute it runs across site 32 for 11 metres. Accordingly Ms Thomas estimated the area as 33 square metres. Mr Hoey is a retired builder. He said he measured the width of the drain “from lip to lip” and found it was 4.9 metres. I prefer Mr Hoey’s evidence because he actually measured the distance across the drain, and is experienced in making such measurements. Accordingly I find the drain is 11 x 4.9 metres, and covers 53.9 metres of site 32, giving the site a usable area of 291.1 square metres.

17. The drain runs through the rear of sites 34, 31, 30, 28, and 27, as well as site 32. It is uniform in width.

18. The drain is not shown on the surveyor’s map. It was hand-drawn by Mr Hoey at the hearing on a copy which is marked E1.

19. The applicants provided a table (E2) which includes the size and site fees of other sites they say are similar in size and location to site 32. They range from site 22 which is 588 square metres and $174.90 per week to site 86, which is 236 square metres and $169.75 per week.

20. In my view the sites which are similarly located to site 32, are those which are located such that the drain runs through them. They are sites 34 (544 metres and $166.70 per week), 31 (338 metres and $166.70 per week), 30 (436 metres and $166.70 per week), 28 (446 metres and $164.40) and 27 (for which a size and weekly fee has not been provided).

21. Site 32 is located in an area where the risk of major flooding is said to be 1 in 50 years, while site 4 (which the applicant says is of similar size and location) is subject to 1 in 100 year major floods.

Consideration

Jurisdiction

22. The respondent says the Tribunal does not have jurisdiction to make an order under section 115 reducing the site fees to “fair market value” as that term is defined in section 109 (6). It is submitted the wording of the section 115 requires an application to be made before the amount of site fees is agreed.

23. The section reads;

115 DISPUTES RELATING TO SALE

(1) A home owner, prospective home owner, operator or selling agent may apply to the Tribunal for the resolution of any dispute concerning the sale of the home, the terms of the proposed site agreement or the proposed site fees, in particular--

(a) any dispute about compliance with a provision of this Part, and

(b) any dispute about whether a sale commission, incidental expense or other fee or charge is payable to the operator or agent in relation to the sale of the home, and

(c) any dispute about the amount of a sale commission, incidental expense or other fee or charge payable or paid to the operator or agent in relation to the sale of the home(including a claim that a sale commission is excessive when compared to sale commissions charged by local real estate agents), and

(d) any dispute about interference by the operator or another person with the sale of the home, and

(e) any dispute about the reasonableness of a decision by the operator  not to enter into a site agreement with a purchaser or prospective home owner.

(2) The Tribunal may make the following orders--

(a) an order that the home owner or prospective home owner pay a sale commission, incidental expense or other fee or charge of a specified amount to the operator or selling agent,

(b) an order reducing the amount of sale commission, incidental expense or other fee or charge payable by a home owner or prospective home owner to the operator or selling agent,

(c) an order that the operator or selling agent refund any sale commission, incidental expense or other fee or charge paid by the home owner or prospective home owner to the operator or selling agent (or any part of such a commission, expense, fee or charge),

(d) an order preventing interference with the sale of the home,

(e) an order requiring the operator to take all necessary steps to facilitate the sale of the home to a specified prospective home owner ,

(f) an order that the operator pay compensation where--

(i) there is or has been interference by the operator with the sale, whether by action or inaction, or

(ii) the operator refuses to enter into a new site agreement without reasonable grounds,

(g) any ancillary order that the Tribunal, in the circumstances, thinks appropriate.

(3) Without limiting its powers, the Tribunal may dismiss an application by the home owner for compensation under subsection (2)(f)(ii) if the Tribunal is satisfied that the grounds on which the operator declined to enter into a site agreement with a prospective home owner were reasonable.

24. The respondent’s interpretation is correct. Section 115 relevantly allows a “home owner” or “prospective home owner”, or the “operator” to apply to the Tribunal for resolution of a dispute about “proposed site fees”, in the context of a “proposed site agreement” (emphasis added). The section does not permit an application to be made to resolve a dispute about site fees which have been agreed in a site agreement. Neither the site fees nor the site agreement would be “proposed”. The “home owner” referred to is the one selling the home, not one who has completed the purchase of the sale of the home, and entered into a new site agreement with the operator.

25. However section 109, subsections (5) and (6) still apply, and the operator is obliged to set the site fees at “fair market value”. Section 109 reads:

109 OPERATOR TO ENTER NEW SITE AGREEMENT 

(1) This section applies if a purchaser or prospective home owner under a contract, or proposed contract, for the sale of the home (the "sale contract" ) requests the operator of the community to enter into a new site agreement (the "new site agreement" ) for the residential site with the purchaser or prospective home owner.

Note : This section is not relevant if the purchaser or prospective home owner intends to remove the home from the community.

(2) The operator must enter into the new site agreement after the request is made, unless--

(a) the operator declines to enter into the agreement and does so on reasonable grounds (including, for example, the ground that it appears reasonably unlikely that the sale contract will be entered into), or

(b) without limiting paragraph (a), the operator and the purchaser or prospective home owner do not agree on the terms of the proposed agreement.

(3) If the sale contract is entered into before the new site agreement is entered into--

(a) the contract may include a term to the effect that the contract is subject to the new site agreement being entered into within a specified period after the contract is entered into, and

(b) the contract is unenforceable if it includes that term and the new site agreement is not entered into within that period.

(4) If the new site agreement is entered into before the sale contract is entered into--

(a) the agreement may include a term to the effect that the agreement is subject to the sale contract being entered into within a specified period after the agreement is entered into, and

(b) the agreement is unenforceable if it includes that term and the sale contract is not entered into within that period.

(5) The site fees under the new site agreement must not exceed fair market value.

(6) Fair market value is the higher of the following--

(a) the site fees currently payable by the home owner who is selling the home,

(b) the site fees currently payable for residential sites of a similar size and location within the community.

(7) The operator must not unreasonably delay or refuse to enter into a new site agreement referred to in subsection (2).

26. Once the prospective home owner has, as required by section 109 (1), asked the operator to enter into a new site agreement, the site fees in the agreement must not exceed fair market value as prescribed by the section. The question then becomes, what remedy the home owner has, if any, if the site fees exceed fair market value and have been agreed by the home owner in the site agreement. The respondent submits the Tribunal has no jurisdiction at all, unless a dispute about fair market value in a new, or proposed, site agreement, interferes with the home owner’s ability to sell the home. Essentially the respondent argues that Part 10 of the Act, in which sections 109 and 115 are located, “covers the field” in respect of disputes about how site fees are initially determined in new site agreements between an operator and a purchaser of a home owned by a home owner (i.e. not owned by an operator or another type of owner who does not meet the definition of “home owner”). Once the site fees have been agreed, the respondent says, the only power the Tribunal has to reduce fees is under section 64, if facilities or amenities are withdrawn or not provided. The respondent contends, sections 156 and 157, being general provisions, must be subservient to the specific powers in section 115.

27. Those submissions are rejected. Section 157 (b) enables the Tribunal to order an operator to comply with the Act. That must mean that if the operator has not complied with its obligation to set site fees in accordance with s 109 (6), the Tribunal can order it to do so. Similarly section 157 (j) enables the Tribunal to make orders to settle a dispute. Section 115 is an avenue open to a home owner selling a home, or a prospective home owner contemplating buying a home, before a site agreement is entered into. Sections 156 and 157 provide an avenue after the site agreement has been unconditionally entered into.

28. I also note Loughton v Hometown Lennox Pty Ltd, [2021] NSWCATCD 19 October 2021 and Henderson v Hometown Lennox Pty Ltd [2022] NSWCATCD 19 April 2022 concluded the Tribunal had jurisdiction under s 157 (b) and (j), and noted at paragraph 107 two other cases in which the Tribunal had exercised jurisdiction under that section in similar matters. While, as the respondent says, those cases are not binding, I find them persuasive and follow them.

29. Whether $199.68 per week in site fees in the new site agreement made 28 September 2021 exceeds “fair market value”, and if so by what amount.

30. The Macquarie Concise Dictionary, 4^th edition, defines “similar” as “having likeness or resemblance, especially in a general way”. It does not mean identical, or exactly the same.

31. Paragraph 18 above sets out the sites with a similar location to site 32. However all but site 31 are of a significantly larger size. Site 31 is 338 square metres which is almost identical to the size of site 32. The site fees charged for it at the time the disclosure statement was given to the applicants were $174.90, which was 40 cents more than the owners of the home on site 32 were paying when they sold the home to the applicants.

32. Site 4, not located such that it has a fairly large drain running through it, is not in a similar location to site 32, and should not have been used in the determination of “fair market value”, as it is not a relevant site in terms of section 109 (6) (b). The respondent’s submission that there is no difference or benefit in the locations of sites 32 and 4 is rejected. The differences and benefits between the sites are set out above. If I am wrong in that conclusion, and the location of all sites is considered the same, I would reject the respondent’s submission that the reference to “residential sites” in section 109 (6) (b) should be interpreted as allowing only one site of similar size and location to be used for the purpose of setting site fees in the new agreement. In that regard I would rely on the reasoning in Loughton and Henderson v Hometown Lennox Pty Ltd [2022] NSWCATCD 19 April 2022 that an operator cannot “cherry pick” just those sites with fees which support an increase in site fees. The average of all similarly sized sites would need to be determined.

33. As $174.90 is the higher of the amounts derived by the proper application of section 109 (6), that amount is “fair market value” and should have been the amount of site fees in the agreement. The respondent has failed to comply with its obligation in section 109 (5) not to have site fees in a new site agreement exceed fair market value. The amount of excess is $24.78 per week, and the respondent should refund all amounts paid in excess of that, as adjusted by the annual increase method.

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I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales.

Registrar

Amendments

04 September 2023 - Formatting amendments.

Decision last updated: 04 September 2023