MHOA Victoria Detailed Agenda 2023/24

Manufactured Home Owners Association (Vic) Inc’s immediate priority is to advocate for amendments to the Residential Tenancies Act 1997, Part 4A. In its current form the Act offers very limited protection for home owners. This Agenda is a plan of action and a list of our demands to the Victorian Government on behalf of all home owners in Manufactured Home Villages.

Our Agenda for 2023/24 includes but is not limited to:

Background
Land-Lease Residential Villages represent a fast-growing type of housing Australia-wide. In Victoria, this is home to thousands of older residents, offering an attractive proposition of independence and access to the community. A significant proportion of the residents of these villages are reliant on a fixed income from the Aged Pension.

Rapid growth in this housing sector has created a mismatch between existing legal and regulatory frameworks and dispute mechanisms. Residents who reside in these villages own their own homes, but do not own the land on which their home is sited. Effectively they have the worst of both the renting and owning worlds, resulting in the insecurity of renting but the responsibilities of owning.

Residents generally don’t have the option to move elsewhere if conditions or relationships with the village owners deteriorate. Effectively they are trapped. Unable to afford to stay because of unaffordable site rental fees and not being able to leave because of unaffordable exit fees, also known as Deferred Management Fees.

Without significant reform, residents of Manufactured Home Villages enjoy few legal protections and mechanisms for recourse. This leaves home owners vulnerable to exploitation and abuse.

Standalone Legislation for Manufactured Home Villages
Manufactured Home Villages deserve legislation which is not shared with any other housing choice.

In Victoria, the legislation that governs these residential villages is lumped in with Caravan Parks and split between Part 4A and Part 14 of the Residential Tenancies Act 1997 and the Residential Tenancies (Caravan Parks and Moveable Dwellings Registration and Standards) Regulations 2010.

There is apparent conflict between these diverse regulations which can leave village owners and residents at loggerheads. Current legislation is biased against home owners, provides opportunity for exploitation by village owners and is not fit for purpose.

Examples of current unconscionable legislation places the onus on the resident to take action whilst the village owner has no incentive to participate:

• Residents only option is to go to VCAT when a new ‘Fixed Price’ annual site rent is introduced and furthermore, when a site rent increase is disputed, the increased amount must be paid until the dispute is settled.
• Village owners are entrusted with making all the rules for residents whilst residents who live and interact within the community are excluded from this process.
• New residents can be paying an increased site rent well before the annual site rent commencement date.

Standardised Lease/Site Agreements
Standardised Lease/Site Agreements are required so that village owners cannot mislead residents about their entitlements and liabilities.

Residents have reported pressure to sign Lease/Site Agreements which are not standardised and often complex. Some Lease/Site Agreements include unfair, unreasonable, and sometimes illegal conditions, often with diverse Lease/Site Agreements within the same village. Residents commonly sign these in good faith, only coming to understand the consequences of those conditions after the fact. Residents are unlikely to understand contract law, and rarely challenge these Lease/Site Agreements for fear of legal costs or being targeted by village owners. Legal advice is very limited, as the Victorian Law Institute advised that they do not have anyone versed in the Residential Tenancies Act legislation.

All Manufactured Home Villages to be registered with Government
Residential Villages, whether dedicated or mixed use, should be registered with the State Government in a similar way that Retirement Villages are registered with Consumer Affairs Victoria.

In Victoria, Residential Villages are covered by Part 4A of the Residential Tenancies Act 1997. They are sometimes referred to as Lifestyle Villages, Manufactured Home Villages, Mixed Use Caravan Parks and Part 4A Villages and vary greatly in size, style and quality. Some have evolved from former Caravan Parks and some are purpose built from the ground up.

There is no one reliable source of information about the number and size of these villages, yet there are many thousands of people, generally retirees, living in this type of housing.

Ceiling/Cap on annual site rent fees
A cap or ceiling for annual site rent fees needs to be written into new standalone legislation to ensure ongoing affordability for residents who are dependent on fixed income aged pensions and to protect the long-term viability of this housing sector.

Historically, village owners have increased site rents by around 3.5% per year. Over the last decade pensions have increased by an average of 2% and CPI hovered around 1.9%. However, in 2022/23 the CPI rose to 6.8%. Clearly, village owners have reaped considerable financial benefit over that time. It is vital that site rent fees are regulated to ensure they are fair, easy to quantify and reflect the actual value of services provided to the residents. Village owners’ business models enjoy high, ongoing profit margins and should not require home owners to contribute to business opportunities beyond the provision of standard maintenance services for the village.

The compound effect of ongoing site rent increases of 3.5% would have pensioners on a fixed income spending up to 35% of their income on site rent within 5 years. Many residents report their current site rent already exceeding 40% of their pension.

Government has established a rental stress level of 30% of income, so annual site rent increases should be capped to never exceed 30% of an aged pensioner’s fixed income.

Removal of CPI as a site rent modifier
The use of CPI as a site rent modifier should never have been legislated into the Residential Tenancies Act and needs to be removed. All it does is produce an income windfall for village owners and residents subject to this increase have no ability to challenge the increase via VCAT.

In times of high cost of living rises, any increase in CPI overrides the gazetted site rent increase thereby locking in that increased site rent and becomes cumulative into the future. This compounds an already unsustainable situation. For example, a two-year period of higher than normal CPI would have site rent as a percentage of fixed income reaching 45% in under ten years.

Removal of the Market Rent Review as a site rent modifier
The Market Rent Review needs to be removed as the basis for site rent increases. The Market Rent Review allows the Village Owner to “catch up” every few years, especially when real estate prices have increased. This does not constitute a higher income for the resident as that value is locked up in their home. There is also little evidence that the property valuer, hired by the village owner to estimate the site rental value, physically visits the village to arrive at the decision.

Abolish exit fees (Deferred Management Fees)
Many Residential Villages have adopted an exit fee or Deferred Management Fee however this can be unfair and exploitative without the limitations and protections provided by proper legislation.

Homes in Residential Villages represent the home owners’ major asset, often representing the resident’s life savings. In many cases, village owners are incentivised to delay a sale in order to sell newer homes from a recently opened village or to maximise Deferred Management Fees. Residents remain liable to keep paying site rent for as long as their homes remain for sale, in some cases months or years. This also affects families of deceased residents, with beneficiaries liable for the site rent for homes they now own but are not permitted to occupy.

Deferred Management Fees can accrue to well over $100K ranging from 20% to 40% of the sale price with little transparency or accountability as to how these fees are used, what they cover, or what distinguishes them from site rent. Residents wishing to relocate can become financially trapped and unable to leave, eliminating consumer choice.

The only payment a resident should be required to pay is a site rent fee (which includes maintenance), and no fees should be deferred.

Mandatory training for village owners/managers
There is a need for mandatory training for village owners/managers in how to interact properly with older residents.

Residents frequently report that village owners/managers lack basic skills in working with older people, or management skills generally. Many incidents have been reported where elderly residents have been bullied or intimidated by village owners/managers. Residents often express reluctance to exercise their rights out of fear of retaliation by owners/managers.

More transparency between home owners and village owners/managers
Residents report a lack of clarity by village owners about responsibility and lack of responsiveness to repairs and maintenance within the village community. These include unmaintained thoroughfares and damaged infrastructure such as fencing, plumbing, lighting, water intrusion, shifting foundations and rodent infestations, just to name a few.

Village owners should be legislated to maintain a register of maintenance requests so that the current status of each is visible to both residents and village owners. It is far too common for village owners/managers to initially dismiss maintenance requests, then delay such requests and finally deny any such requests ever existed.

Residents pay substantial site rent fees to village owners to rent the land and provide maintenance services but have no say on how and when services are provided. There is no transparency to how village owners expend their rental income.

Similarly, there is no transparency for village owners to divulge the basis on how base site rents and annual site rent increases are determined.

Dedicated Ombudsman for dispute resolution with binding powers
A dedicated Ombudsman service must be established to provide free, fair, and binding determinations on all matters relevant to Manufactured Home Villages.

Currently VCAT is not fit for purpose and is taking far too long to hear disputes. Many village owners just ignore them or appeal decisions with the full might of their legal resources whenever residents have a win.

VCAT can be intimidating and stressful for elderly residents who commonly lack an understanding of the relevant civil/legal issues and may fear reprisals from village owners/managers. Poor health, mobility, expense, and the fact that matters affecting a village community group cannot be heard, all contribute to make attending VCAT extremely daunting.