Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Meatheringham v Gateway Redhead Operations Pty Ltd [2018] NSWCATCD 13 Hearing dates: 19 January 2018 Date of orders: 11 April 2018 Decision date: 11 April 2018 Jurisdiction: Consumer and Commercial Division Before: K Ross, Senior Member Decision: (1) The claimed increase in site fees of $6.50 per week is excessive. (2) The amount of the increase is reduced to the amount determined by application of the following formula: (a) Increase equals site fee at date of notice x 2.4% (3) The site fees for each affected home owner must not exceed the amount calculated by application of the formula in order 2, from 1 September 2017 until 31 August 2018. (4) This order applies to all affected home owners in the community (other than those who opt out). Catchwords: RESIDENTIAL (LAND LEASE) COMMUNITIES – rent increase – excessive rent increase Legislation Cited: Residential (Land Lease) Communities Act 2013 Category: Principal judgment Parties: Pam Meatheringham (Applicant) Gateway Redhead Operations Pty Ltd (Respondent) Representation: The applicant in person Ben O'Brien for the respondent File Number(s): RC 17/34626 Publication restriction: unrestricted Reasons for decision 1. By notice dated 29 June 2017 given to each of the home owners in the respondent's park, the respondent gave notice of an intended increase in site fees of $6.50 for each site, to commence from 1 September 2017. The home owners who are participants in these proceedings objected to the increase. Mediation was attempted but was unsuccessful and this application was lodged pursuant to s 71 of the Act. The applicants ("home owners") seek an order that the rent increase is excessive. The respondent ("operator") opposes the order sought. 2. Section 67 of the Residential (Land Lease) Communities Act 2013 ("the Act") provides as follows: 67 INCREASE OF SITE FEES BY NOTICE (1) This section applies to a site agreement that provides for the increase of the site fees by notice (otherwise than by a fixed method). (2) An increase in the site fees is not payable unless the fees are increased in accordance with this section. (3) The site fees must not be increased except by notice in writing given to all the home owners in the same community at the same time under site agreements to which this section applies. (4) The notice must: (a) specify the amount of the increased site fees, and (b) specify the day (the "effective day" ) on and from which the increased site fees are payable, and (c) include an explanation for the increase, and (d) include such other information as may be prescribed by the regulations, and (e) be in the approved form (if any). (5) The day specified as the effective day must not be earlier than 60 days after the day on which the notice was given. (6) Site fees must not be increased more than once in any 12-month period under this section. This is calculated by reference to the day from which the increased site fees are payable. (7) Increases under this section in site fees payable by home owners in the same community under site agreements to which this section applies must take effect on the same day (and not on different days). (8) A notice under this section may be cancelled. (9) A later notice may provide for a lesser increase than that specified in an earlier notice under this section. A later notice has effect instead of the earlier notice and takes effect from the date on which the earlier notice was to take effect. (10) If the site fees payable under a site agreement are increased under this section, the terms of the agreement are varied accordingly. (11) If a person becomes a home owner after a notice has been given under this section to other home owners in the community but before the date the increase takes effect: (a) the operator must notify the home owner of the notice and its contents and effect, and (b) the increase applies as if the notice had been given to the home owner at the same time as it was given to other home owners. 1. Notices were given to all home owners at the same time as required by s 67 (3). The Tribunal is satisfied that the notices complied with the provisions of s 67 (4). There has been no other site fee increase in the relevant 12 month period. (s 67(6). Home Owners' evidence and submissions 1. The applicants submit that the increase is excessive for a number of reasons: 1. Because the operator has not provided evidence of the actual costs in the rent increase notice, nor sufficient evidence to support the contention that costs have increased as claimed, 2. Because the only information provided by the operator of the alleged increase in costs is an extract from the company's accounts for a 2 month period in 2016 compared to the same period in 2017. The company did not purchase the Park until 22 April 2016, 3. Because the operator has not carried out any repairs or maintenance in the Park, other than replacing some signage, since the date of the last increase, 4. Because maintenance has been inadequate, and the conditions in the community have deteriorated. In particular, there is a fire hazard around the Park, continual infestation of rabbits, the tennis court is dilapidated, concerns about electricity supply have not been addressed, water builds up at the entrance to the Park when it rains, and there is no regular maintenance of gardens and plants. 5. Because a CPI increase would be an increase of 1.9%. 1. The applicants provide photos of the community areas in the Park. The photos show that there is some maintenance required. 2. In addition, in separate proceedings between other home owners and the operator, the operator consented to orders for certain work to be carried out as follows: On 04-Dec-2017 the following orders were made: 1. By consent, the Tribunal orders that the respondent(s): Gateway Redhead Operations Pty Ltd 81 Kalaroo Road REDHEAD NSW 2290 Australia is to carry out the following work on or before 04-Mar-2018 in a proper and workmanlike manner. Details of Work order: repairs to the tennis court surface and fencing repairs to the small toddlers pool, specifically the repair of tiling painting of all external buildings in the common area in accordance with quotation road markings to be repainted . 2. By consent, the respondent will replace the light globes in the common area on or before 11 December 2017. 3. By consent the parties agree that no work is required for the pool and the fans are to remain. Operator's evidence and submissions 1. The operator submits that the increase is not excessive because its costs have increased. It supplies in support a statement from its Chief Financial Officer and an extract from its accounting software package, comparing the costs for May and June 2016 to those for May and June 2017. The operator gave evidence that each community within the Gateway Group is operated by a separate legal entity. However, because the Park was only purchased by the respondent in May 2016, the respondent said that it did not have comparable figures for the whole financial year. 2. Based upon the figures for two months only, the respondent claims to have had an increase in operating expenses of 16%. 3. The respondent conceded that the tennis court requires repairs and stated that, if residents voted to have it repaired rather than having an alternative facility provided, the respondent would accept the quote received (dated 4 February 2016) and have the work carried out. The respondent also conceded that it had agreed to carry out the work detailed in the Tribunal's order dated 4 December 2017. Some of the work had been completed whilst other of it is underway. Findings and decision 1. The orders which the Tribunal may make are set out in s 73 of the Act: 73 ORDERS AS TO EXCESSIVE INCREASES IN SITE FEES (1) The Tribunal may, on application under section 71 or 72, make any of the following orders: (a) an order declaring that an increase in site fees is excessive, (b) an order reducing the amount of the increase by a specified amount, (c) an order setting aside the increase, (d) an order that the site fees must not exceed a specified amount or specified amounts, either: (i) from a specified day, not being earlier than the day from which the increased site fees were payable, or (ii) during a specified period, (e) an order confirming the increase on the conditions (if any) that the Tribunal considers appropriate, (f) any ancillary order that the Tribunal, in the circumstances, thinks appropriate. (2) The Tribunal may make orders applying to individual participating home owners, groups of participating home owners or all participating home owners. (3) An order applies to all affected home owners in the community (other than those who opt out), unless the Tribunal is satisfied there is a strong reason for making separate orders for different home owners or groups of home owners. (4) The Tribunal cannot make an order that would result in an increase lower than that needed to cover any actual or projected increase (established to the satisfaction of the Tribunal) in the outgoings and operating expenses for the community since the previous increase (if any) in site fees for the community. 1. The matters for consideration by the Tribunal are set out in s 74 of the Act: 74 MATTERS TO BE CONSIDERED ABOUT EXCESSIVE INCREASES (1) The Tribunal may have regard to any or all of the following factors when deciding whether to make an order under section 73: (a) the frequency and amount of past increases in site fees for the community, (b) any actual or projected increase in the outgoings and operating expenses for the community as provided by the operator since the previous increase (if any) in site fees for the community, (c) any repairs or improvements to the community: (i) carried out by the operator since the previous increase (if any), or (ii) planned by the operator for the period covered by the increase being reviewed, (d) the general condition of the community including its common areas, (e) the range and average level of site fees within the community, (f) the value of the land comprising the community, as determined by the Valuer-General, (g) the value of any improvements to the community (including common areas) paid for or carried out by home owners, (h) any explanation for the increase provided by the operator by notice in writing to the affected home owners, (i) variations in the Consumer Price Index (All Groups Index) for Sydney, (j) whether the increase is fair and equitable in the operation of the community, (k) any other matters prescribed by the regulations. (2) The regulations may require the Tribunal to disregard any specified matters (not being a matter referred to in subsection (1)), in any specified circumstances, when deciding whether to make an order under section 73. 1. The respondent argued that the Tribunal could not make an order for less than the amount of the claimed increase, because its outgoings had increased by more than that amount (see s 73 (4).) However the Tribunal is not satisfied that the information provided by the respondent supports a finding to that effect. The respondent stated that it could provide comparative figures for only two months. It is not possible to conclude that because the expenses in two months showed a 16 % increase, expenses for 12 months would increase by the same margin. The Tribunal is not satisfied that the respondent has established that contention to the Tribunal's satisfaction. 2. Taking each of the matters for consideration in s 74: (a) the frequency and amount of past increases in site fees for the community, 1. The site fees were last increased on 26 August 2016. The Tribunal accepts the uncontested evidence of the applicants that the increase averaged $4.50 across the Park (b) any actual or projected increase in the outgoings and operating expenses for the community as provided by the operator since the previous increase (if any) in site fees for the community, 1. For the reasons discussed above, the Tribunal is not satisfied that there is sufficient evidence to support a finding as to the actual or projected increase in the outgoings and operating expenses of the Community. (c) any repairs or improvements to the community: (i) carried out by the operator since the previous increase (if any), or (ii) planned by the operator for the period covered by the increase being reviewed, 1. The Tribunal finds that the respondent has maintained cleaning and some gardening services, but it has not carried out any significant repairs or improvements to the community since the previous increase. The need for repairs and maintenance is reflected in the order made by consent on 4 December 2017 (see paragraph 5 above). 2. The Tribunal accepts that maintenance and repairs required by the Tribunal's order dated 4 December 2017 is to be carried out in the period covered by the increase. However, the cost of that work is not in evidence in these proceedings. (d) the general condition of the community including its common areas, 1. The photos show that generally the common areas are tidy, but as stated above, require maintenance and repair. (e) the range and average level of site fees within the community, 1. The information lodged by the residents with the application in respect of the site fees was challenged by the operator at the hearing and was found to be unreliable as some home owners had stated the rent at the figure after the increase instead of before it. The Tribunal accepts the operator's evidence that the site fees range from $151.00 to $162.50 per week. (f) the value of the land comprising the community, as determined by the Valuer-General, 1. Neither party provided any evidence of the value of the land. (g) the value of any improvements to the community (including common areas) paid for or carried out by home owners, 1. There was no evidence of any improvements to common areas paid for by residents. Residents are responsible for the maintenance of their own homes. (h) any explanation for the increase provided by the operator by notice in writing to the affected home owners, 1. In the site fee increase notice, the operator claimed that there had been an increase in CPI as well as increases in outgoings and operating expenses including government fees and charges, sewerage and drainage, electricity, water, communications, insurance premiums, landscaping and gardening, accounting and audit fees, legal fees and professional fees, site management and supervision, waste disposal and removal maintenance, wages including superannuation contributions, payroll processing and payroll tax, maintenance program to continue upgrades to the community and OH&S and fire safety protection. However no evidence was supplied which would enable the amount of the claimed increases to be quantified. (i) variations in the Consumer Price Index (All Groups Index) for Sydney, 1. The Tribunal finds that CPI increase for the relevant period was 2.4%, not 1.9% as alleged by the applicants. (j) whether the increase is fair and equitable in the operation of the community, 1. The Tribunal is satisfied that an increase is necessary to take account of the CPI increase, but is not satisfied that the respondent has shown an entitlement to an increase which exceeds CPI. Accordingly the Tribunal finds that the claimed increase is not fair and equitable in the operation of the community. (k) any other matters prescribed by the regulations. 1. There are no other matters prescribed by the regulations. Decision 1. The Tribunal is satisfied that the site fees should be increased by the amount of the CPI, an increase of 2.4% for each of the home owners in the Park. The amount of the increase will vary depending upon the site fee being paid at the date of the increase. In coming to this decision the Tribunal has considered each of the matters above. As the operator has not provided sufficient evidence to support the claimed increase in costs and outgoings, and has not carried out required maintenance and repairs until proceedings were taken and an order obtained, the Tribunal is satisfied that it would not be just and equitable for the site fees to be increased by any greater amount. Any amount expended by the operator in complying with the Tribunal's order dated 4 December 2017 can be taken into account when the next increase is considered. 2. The Tribunal makes the following orders: 1. The claimed increase in site fees of $6.50 per week is excessive. 2. The amount of the increase is reduced to the amount determined by application of the following formula: 1. Increase equals site fee at date of notice x 2.4% 1. The site fees for each affected home owner must not exceed the amount calculated by application of the formula in order 2, from 1 September 2017 until 31 August 2018. 2. This order applies to all affected home owners in the community (other than those who opt out). K. Ross Senior Member Civil and Administrative Tribunal of New South Wales 11 April 2018 ********* 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 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 03 August 2018