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Manufactured Homes in QLD

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Investing in a Residential Park and Manufactured Home

In Manufactured Homes residential parks, the homes are situated on a designated site within the development and the home owners pay a weekly site rent to the park owner under a Queensland Government prescribed document called a “Form 2 Site Agreement”, which is signed by both parties and allows the home owners to legally reside on that land under specific terms and to receive a continuous license to utilise the common areas and facilities that are provided and maintained by the park owner. The executed site agreements attach to the land and bind successive land owners which helps protect residents from being forcibly removed from such a development in the event of land ownership transfer. The park owners may or may not be the registered land owner and both parties benefit from payment of the weekly site fees from each Home; making this form of development a multi-faceted option for the astute property developer.

A notable complexity around purchasing a Manufactured Home is in regards to financing such a purchase as financiers are very reluctant, if not completely adverse, to lending on these investments. This is essentially due to the fact that without land ownership being attached to the Manufactured Home a financier cannot register a first mortgage over the property and are only left with the option of registration of interest on the Australian Personal Property and Securities Register, which is generally not deemed sufficient for the extent of the capital investment required. Accordingly, the benefit of purchasing within these residential parks and enjoying such community living is left to the over 50’s who are cashed up for such a purchase and can hold the Manufactured Home as their personal property outright.

 Residency in a Manufactured Homes Residential Park

The over 50’s community interest in the Manufactured Homes residential parks has also been fueled by the distinct difference from retirement villages where on-going fees and exit fees are generally quite extensive and can result in a substantial loss to a residents capital investment when terminating residency in the retirement village.

There has been recent discussion in the Queensland sector around the government setting up some of these Manufactured Homes residential parks for housing commission purposes and pensioners, where government approved residents would pay a weekly fee to reside in the residential park in a particular Manufactured Home and payment of such site fees may be connected to social welfare entitlements of individuals in those categories. This will be an interesting area of development to watch in years to come, not only in Queensland but in the other states of Australia as further consideration is given to better management of housing arrangements connected with the demands of our social welfare system.

 Manufactured Homes Legislation and Recent Changes

Manufactured Homes and residential parks have been fairly well regulated in Queensland since the commencement of the Manufactured Homes (Residential Parks) Act 2003 with prescribed forms, on-going reviews and proposed amendments by the Queensland Government since its inception. 1 October 2017 signified the commencement of the new Manufactured Homes (Residential Parks) Regulation 2017 (Qld). Section 3 of the new Manufactured Homes Regulation is a significant change to previous regulations because it now sets out 19 categories of “special terms” applied in part 3 of a Form 2: Site Agreement which are considered “prohibited special terms” for the purposes of section 25B of the Manufactured Homes (Residential Parks) Act 2003 (Qld).

Previously regulations in this area had not specified prohibited special terms to this extent, but further regulation was deemed necessary to ensure that owners of Manufactured Homes are not subjected to particularly onerous terms and that transparency and further obligations are imposed on park owners so that Manufactured Home owners are not mislead or taken advantage of under these specific terms which are imposed on their residency within the development.

The categories of “prohibited special terms” cover things such as; a special term that states that a rental increase is calculated in accordance with the consumer price index but the rental increase effectively includes additional charges, terms that require a home owner to gain the consent of the park owner before the home owner complies with a requirement under law, terms that restrict or prohibit an alteration to a home that is not visible from the outside of the home, terms that state that the park owner does not warrant that the site is suitable for use as the site of a manufactured home, or a term that states that the park owner may exclude a person from being approved to reside in the residential park without having reasonable grounds for the exclusion, amongst a number of other specific regulations.

Park owners will now need to ensure that if such terms exist in their Form 2: Site Agreements that they do not attempt to enforce such terms moving forward, as well as reviewing the terms in any new site agreements being executed to ensure that these do not include such terms. Should Park Owners contravene this regulation it is an offence under Section 25B of the Manufactured Homes (Residential Parks) Act 2003 and penalties are imposed. Home Owners now have greater protection under this new regulation, which will be welcomed by many investing in this type of property and residing within these residential parks.

The Housing Legislation (Building Better Futures) Amendment Act 2017 was also passed by the Queensland Parliament on 25 October 2017 and assented to on 10 November 2017 and contains amendments to the Manufactured Homes (Residential Parks) Act 2003 to increase transparency in the relationships between park owners and their staff and home owners, and to strengthen consumer protections and provide more security to home owners of Manufactured Homes

The changes will also result in improved pre-contractual disclosure processes when purchasing a Manufactured Home which will introduce a 21-day waiting period to ensure prospective home owners have time to consider information provided by park owners and will receive documents in stages, have time to shop around and seek expert legal and financial advice before they sign the contract, and will also sign a site agreement that contains a no-fault cooling-off period that may be used to terminate the agreement if required.

Amendments will impose a limit of rent increases under the site agreement to one per year, and increase the transparency of market rent review calculations, and prohibit administrative fees for provision of utilities, including meter reading. A more specified process for in-park dispute resolution will also be included, prescribing how these matters may be handled internally before being escalated to the Queensland Civil and Administrative Tribunal. Importantly, for the safety of residents within these residential parks, upcoming changes in the provisions of the Manufactured Homes (Residential Parks) Act 2003 will help ensure that emergency services and health care workers have access to residential parks at all times, with specific emergency management plans are in place.

As with the changes instigated recently under the Manufactured Homes (Residential Parks) Regulation 2017 (Qld), the amendments to the Manufactured Homes (Residential Parks) Act 2003 will be welcomed by new purchasers of Manufactured Homes, and those home owners already residing in these residential parks, providing further security in their investment and in the on-going lifestyle benefits offered by these ventures.

Manufactured Homes and the development of purpose built residential parks is certainly gaining increased momentum in Queensland, with key developers in this space currently having multiple sites under construction. The impact of increasing popularity and consumer demand for these Manufactured Homes will certainly make this area of property investment one to watch in the coming years! Astute buyers of Manufactured Homes should ensure they seek legal advice in the early stages of considerations to purchase, and these should be sought from a lawyer well versed in these matters given the complexities and increased regulations in this niche area of property investment.

Article by Ruth Nean; Associate of MBA Lawyers, Varsity Lakes, Queensland, February 2018

Some pitfalls of retirement villages and manufactured homes.

Retirement villages and manufactured homes are popular choices for retirees looking to downsize, but each of them comes with rules and regulations that it is essential you understand. Discovering the pitfalls and make a well informed choice before proceeding with the purchase of a home in either of these accommodation options is essential to your future security and mental wellbeing.

Note that legislation and applicable regulations can change between state jurisdictions.

As with any business affairs that may impact our financial, physical and mental well-being, and more so if you are concerned about what you may pass on to loved ones, it is essential that you gain a thorough understanding of what you are signing up for. This includes how you or your beneficiaries might be allowed to liquidate and indeed benefit from your investment at the appropriate time.

As many of us consider our living options as we advance in years, we consider lifestyle, proximity to friends, family, amenities/services and affordability. It is hoped that any areas used for retiree living are located such that they are an integral part of broader communities.

There is plenty to consider, it’s not all straightforward and laws change (too) frequently. Do be sure to read all the applicable documentation and there is plenty but take your time, seek assistance from legal and accounting advisors if you wish, that have experience in this area, and be wary of claims / assurances not in that documentation. Be informed and assume nothing.

Manufactured Home Parks

Along with your own living space you may have common use facilities at your disposal. These may be over and above what you might have in a unit or apartment, perhaps parking areas for guests, swimming pool, gym, BBQ areas, tennis courts etc. These are of course shared, and you need to be comfortable with that form of space sharing and communal living. If so, you will no doubt find these additions very attractive. Of course you need to be sure you will use them, as you will be paying for their maintenance.

Less maintenance can mean a chance to sit back and relax, but you will in the end pay for future maintenance issues in any rent increases.

Your checklist for manufactured or relocatable home communities

Do be aware of the following:

  • You will not own the land associated with your home, and the landowner may not be the manager of the park.
  • You will pay rent for the land and rent can, and most likely will, be changed annually. You may not have any say in that change other than that it may be defined or limited within your Site Agreement (contract) and/or by State legislation. Check those terms carefully before signing anything. Read the Manufactured Homes (Residential Parks) Act as this is the document used to define your contract and site agreement.
  • Purchasing your manufactured home may impact arrangements you have with Centrelink e.g. rental assistance and pension; it is your responsibility to keep Centrelink informed. You can apply for rent assistance, you will need documentation from the Park Management to take to Centrelink.
  • The homes are called chattels and as you will not own the land you cannot get any loans for or against it
  • Rent for the land will continue to be payable while ever your home is located there, irrespective of whether you are living in it and there may be rules as to how long you can leave it empty
  • Check any terms & conditions related to selling e.g. where advertising is allowed, restrictions on selling through agents, mandated selling through park owners etc. Again, be aware that rent is still payable (as above), while you or your power of attorneys are trying to sell. Most site agreements have tight rules on this area, so negotiate before you sign the site agreement, one day you will need to have the home sold and many people just do not realise how confining this is to them selling on
  • You have no control over who your neighbours will be, with limited recourse outside standard obligations should their behaviour be unacceptable to you. Whilst this is the case in any residence it can have greater impact at close quarters. There are rules but many will just do their own thing, and noise is certain with the closeness of many of these homes. And there is the issue of if you complain there could be repercussion socially and there is little that management will do in most cases.
  • The landowner and park managers may change without notice and the good relationship you had with management when you moved in may not continue. Always remember they are employees and they are not your friends, so always be wary of any contact with either the park owner or managers.
  • There is no obligation on the landholder to continue the land use as it was when you moved in, or to continue operation of the park. The risk of this may be higher where the park is located in areas where land values are increasing. The land may be worth much more if sold for another purpose, e.g. residential development.
  • Although parks may be advertised for over 50’s, unless the landowner has been granted a specific exemption other age groups cannot, by law, be refused a place – this is not the case in a” retirement village”. Many will not challenge this and so they tend to do what they want; they make up many of these rules to suit themselves. Some allow pets others do not but by law they cannot discriminate, but they will just not sell to you or sign you up to a contract as they have the power.

Other important checks for pre owned homes

Pre-purchase inspections for pests and building condition are always strongly advised. If you are purchasing from the park owner, you need to ensure the park owner will, prior to your moving in, rectify any defects. If you are purchasing from an existing owner, the park owner must agree to the assignment of the Site  Agreement and cannot unreasonably refuse to do so. You should check the current rental agreement thoroughly as you will be signing a new site agreement and there may be differences between the previous owners and the new one.

Utility costs may be included in your Site Agreement. Whatever the metering arrangement is you are entitled to see the relevant utility billing and how it is calculated. If you do pay, then you need to know the full disclosure of how, when, where and the costings.

Park owners are responsible for the maintenance and access to common areas and facilities and likewise as a homeowner you are responsible to keep your building and immediate surrounds well maintained and safe. There may be strict rules regarding your maintenance obligations.

Will there be rules about your garden at your new home? Probably yes, so even though you have an enclosed yard it is not your land  and they can have a  say on what you do with it and  also anything that can be seen from the exterior may have restrictions, such as outdoor blinds.

One of the key areas with some Manufactured Home Parks is that they may have exit fees and even if you hold a freehold title, it is not the same as owning your own home.

MH Parks vary considerably between promised lifestyle expectations and facilities, as do the options to reside in them and the associated financial implications. If you are considering this option as a couple, it is worth noting that if either or both of you need to go into care, the financial burden of the initial decision may impact your capacity in that regard. Even if the Village has an associated Aged Care Facility, there may be no guarantee that you will be able to access that facility; there can be different institutions, with different access rules.

Again, being thoroughly cognisant of the nature of the legal interest you will buy in a MH Park is essential. Read every word and seek legal advice from a solicitor with experience in this area. Consider just as carefully what happens when you leave as well as when you enter, including the implications for those managing your estate.

Residence Agreements for MH Parks

A Public Information Document forms part of the Residence Agreement and will spell out:

  • exit fees
  • communal facilities available
  • resident age limits
  • contributions for general service charges and the basis of service charge increases
    • these charges are payable throughout your tenure
    • many increases are limited to CPI, but may be varied when a set percentage of residents agree to those changes. Increases over which the operator has no control e.g. rates insurance, taxes, are not limited to CPI.
  • individual residents are responsible for personal consumption costs such as personal liability & contents insurance, electricity, gas, water & phone.
  • fees for maintenance and capital reserve /replacement funds are payable throughout your tenure – additional costs may be incurred where residents request capital improvements or if damage is caused by a particular resident
  • repair or replacement of assets of any items in your home will be at your expense unless covered by a warranty. This will include hot water, solar, wiring, structure wear and tear, garage door, windows painting etc
  • the agreement should also specify operator insurances and your insurance liabilities as a resident, you will have to take out home owner and contents in most places
  • the dispute resolution process – make sure you understand this and this is defined in the Act and you will have to do due process on any issues you want to have dealt with including the Park Owner or Management
  • process for terminating residential agreement – actual resale arrangements will vary between Villages and Parks and should be well understood on entry. This can be critical as there are many stories about owners not being able to dispose of a property due to park rules regarding who can sell the property and under what conditions. The site agreement sets this out and you must be sure you understand that this is not the same as a private sale and has a different process and requires agents and solicitors that understand the requirements. You will be more controlled by the Park Owners rules and do not have the same freedom as private sellers.

In addition to details above, the Residence Agreement will contain information on your resale rights, exit fees, payment from the operator of the exit entitlement, and termination of the agreement.

Whether you plan to leave your Village investment in your estate,  it is imperative that you know exactly what the Termination / Exit provisions are, and any variables that may impact your ability to exercise your options.

General obligations on your behalf as a resident relate to:

  • ensuring the peace, comfort and privacy of other residents
  • the ability of park workers to fulfil their duties free of intimidation bullying or harassment
  • not negatively impacting the health and safety of park workers

Village operators are similarly obligated to residents including, most importantly, not interfering with the autonomy of residents exercising their rights over personal, financial or other matters and their personal possessions. They are also obliged to respond to residents’ correspondence within a defined time frame of thirty days.

Understand the legal issues so you can enjoy your new home. Be aware that operators do have the discretion to act in an emergency where residents may be at risk or to effect urgent maintenance.

Park operators are free to set the in going contribution payable by residents; similarly operators are free to set the basis and amount of exit fees. Both incoming and outgoing fees vary extensively between facilities. Again, gaining a clear understanding of how this will affect you is very important.

The resale process has many of the same elements as the usual real estate selling processes. How this process occurs can vary widely in a Residential Park is based on terms and conditions such as who is entitled to sell, time and limitations and offsetting exit fees legitimately chargeable by the park operator. Herein lies a potential minefield that cannot be explained by any generalisations, but which needs to be sorted out before that time arrives, and preferably before any commitment to buy into a particular MH Park.

Final thoughts on retirement villages and manufactured home communities

Assuming that you have taken good care to fully apprise yourself of the rules and regulations that apply to your imminent purchase, do make sure you also attend to your personal legal responsibilities. Make sure your will is updated to reflect your new purchase and yes do update Centrelink if applicable to your situation.

If you are considering pooling your resources to purchase your new home, make sure you fully document any agreed joint ownership arrangements and clarify those through your will.

At a time in our lives when we’d really like things to become more simple, this option definitely isn't, it can be a good option if you have done your homework.

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