November 2015
Voluntary sharing arrangments
In a residential land lease community
When moving into a land lease community you may be
offered a voluntary sharing arrangement by the operator.
As the name implies voluntary sharing arrangements
are voluntary - you have the right to choose not to
accept the arrangement being offered by the operator.
Alternately you can try to negotiate any aspects of the
arrangement with the operator to get a better deal. Make
sure you will receive a lower site fee or some other
benefit that is acceptable to you in exchange. It is
strongly recommended that you seek independent advice
before agreeing to any voluntary sharing arrangement.
What is a voluntary sharing arrangement?
Voluntary sharing arrangements provide alternatives to
the traditional option of buying a home outright and
paying only site fees. This may help to make land lease
community living accessible to more people.
Voluntary sharing arrangements can encourage both
home owners and the operator to have a shared interest
in the upkeep and appearance of the community.
Allowing the parties to share any financial benefit from
the sale of a home onsite recognises that a significant
part of its value is attributable to its being situated in the
community. Another income source for operators may
also take pressure off closures and rising site fees.
What types of voluntary sharing arrangements can
be offered?
The following are the types of voluntary sharing
arrangements permitted under the law that can be
offered to you:
Share of capital gain: A voluntary sharing
arrangement could specify that you agree to pay a
percentage of any capital gain to the operator (for
example, 20%). The `capital gain´ is the difference
between the price you pay for your home and the
price you receive for your home when you later sell it
on site. Naturally, if the price you receive for your
home when you move out is less than what you paid,
there is no capital gain and no fee would be payable.
If you agree to share the capital gain, you cannot be
required to pay an on-site sale premium.
● On-site sale premium: An on-site sale premium is
an alternative to sharing capital gain. Under such an
arrangement you agree to pay the operator an
agreed percentage (for example, 10%) of whatever
your home sells for when it is sold onsite.
● Entry fee: An entry fee is an amount that you agree
to pay to the operator when you sign your site
agreement, or at another time specified in your
agreement such as when you move in. For example,
you may agree to pay the operator an entry fee of
$3,000. This fee is separate and in addition to the
price you pay for your home. An entry fee is not
refundable.
●
November 2015
Exit fee: An exit fee is a fixed amount (for
example $5,000) set out in your site agreement that
you agree to pay the operator when your home is
sold onsite or removed from the site.
● Deferred site fees: This arrangement allows you to
put off paying some or all of the site fees to a later
date specified in your site agreement. This may be
useful where you have a limited income or where
most of your money is tied up in an asset, such as
your former home.
●
Who can be offered a voluntary sharing
arragement?
Voluntary sharing arrangements can be offered to
prospective home owners before they enter into a site
agreement. Details of the proposed arrangement must be
set out in the disclosure statement. Voluntary sharing
arrangements can also be offered to existing home
owners if they want to enter into a new site agreement.
What should I get in return for a voluntary sharing
arrangement?
It is a matter for the operator to decide what incentives to
offer to encourage you to agree to a voluntary sharing
arrangement. This could be a reduction in your site fees
or a discount on the home price if you are purchasing it
from the operator. You should negotiate with the operator
about what they are willing to offer. If a reduction in site
fees is offered make sure you know how long this will
last.
Must I be offered a choice?
If you are buying a home from an existing home owner
the operator must offer you the option of a 'rent only' site
agreement. This is simply a standard site agreement that
does not contain any voluntary sharing arrangements.
The site fees under this agreement must be no higher
than the fees being paid by the current home owner,
unless they have been discounted for some reason (in
which case they cannot be higher than those sites of a
similar size and location in the community).
A site agreement with a voluntary sharing arrangement
must contain a written declaration must be signed by
both you and operator that a 'rent only' agreement was
offered and declined. The declaration must also state
that you received independent advice about the voluntary
sharing arrangement or waived this right. Should this not
occur the voluntary sharing arrangement will be
considered null and void.
When an operator/owner is selling a new home (or reselling an existing home they purchased from a former
home owner) they do not have to offer you the option of a
`rent only´ agreement.
When and how is a voluntary sharing arrangement
paid?
Most voluntary sharing arrangements will become
payable once you sell your home onsite. If the operator is
acting as your selling agent they can deduct the amounts
owing from the sale proceeds. Otherwise you have 14
days from the date the sale is finalised in which to pay.
Any agreement to share capital gain or to pay an on-site
premium is not enforceable if the home is removed and
sold off site or is bought by the operator.
What if I change my mind or later think the
arrangement is unfair?
If you enter into a site agreement that has a voluntary
sharing arrangement remember there is a 14 day
cooling-off period if you change your mind. You just need
to let the operator know in writing that you no longer want
to go ahead with the agreement. This right ceases if you
are a new home owner and you move into the home.
If at a later time you believe the arrangement you entered
into is harsh or unfair you may have remedies under the
Australian Consumer Law or the Contacts Review Act.
Seek advice in these situations about your options.
Voluntary sharing arrangement scenarios
Sue and Daryl
Sue wants to sell her home to Daryl who has offered to
pay $200,000 for it.
When Daryl approaches the operator he is offered two
site agreements. Under the first agreement Daryl is
offered lower site fees than currently exist for the site, in
return for agreeing to enter a fully disclosed sharing
arrangement with the operator.
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Under the second agreement Daryl is offered a 'rent only'
arrangement whereby he continues to pay the site fees
as per the existing arrangement with Sue. He is told that
he has an absolute right under the law to accept the
second agreement should he wish to do so.
Daryl decides that he can afford the existing site fees and
wants to obtain maximum value for the property when he
sells it. As such he takes up the second 'rent only'
agreement.
Brian and Madeleine
Brian is looking to sell his home to Madeleine. Both
agree that the home is worth $200,000. However
Madeleine is concerned she may not have enough
money upfront to pay for the home as she can only afford
to pay $180,000.
Instead of walking away from the deal Madeleine
approaches the operator to see if an alternative
arrangement can be struck. The operator informs
Madeleine that by law she has the right to a 'rent only'
agreement, paying the same site fees as Brian is paying.
However, the operator is also willing to put forward
$20,000 to help pay for the house in return for an
agreement stating that they will receive 10% of the sale
price when the house is later sold by Madeleine.
Madeleine agrees to this arrangement and purchases the
house from Brian. Without the possibility of a sharing
arrangement this sale may not have occurred.
Joe and Roger
Joe is interested in selling his home to Roger for
$200,000. Roger has the money upfront to pay for the
house from his savings. However, Roger is on a fixed
income and is worried that he may not be able to afford
the site fees on an ongoing basis.
He may have to walk away from the deal if he cannot
negotiate lower site fees, so Roger approaches the
operator with this issue. The operator informs Roger that
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This fact sheet must not be relied on as
legal advice. For more information about
this topic, refer to the appropriate
legislation.
he has an absolute right to a 'rent only' arrangement, but
that there is also the possibility that the operator can
lower the site fees if a sharing arrangement can be
agreed upon.
The two parties proceed to negotiate and come to an
agreement beneficial to both parties. Roger informs Joe
that he can now proceed with the sale.
Mollie
Mollie has put her property on the market. After showing
her house to several prospective residents the highest
offer she has obtained is $200,000. However, the
operator of the park also learns that Mollie is interested in
selling.
The operator is interested in the property knowing that if
they own it they can sell it to a future resident under a
sharing arrangement. After learning that the highest offer
was $200,000, the operator offers to beat this by
$10,000, to which Mollie agrees.
Because a new bidder was introduced to the market
Mollie has been able to sell her home at a higher price
than previously would have been possible.
Greg
Greg is an existing resident who has resided in the same
land lease community for 10 years. Greg has a fixed
income and is worried that his site fees are starting to
become unaffordable.
Greg likes the community lifestyle and does not want to
be forced to move out, so he approaches the operator to
see if they can reach a sharing arrangement that will
lower Greg´s site fees to a level he can afford.
After negotiating with the operator the two reach an
agreement. Greg can now afford the site fees on an
ongoing basis meaning that he can continue to live in his
home.
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