Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Welch v ZW2 Pty Ltd t/as Lake Munmorah Residential Resort [2019] NSWCATCD 33 Hearing dates: 18 February 2019 Date of orders: 29 March 2019 Decision date: 29 March 2019 Jurisdiction: Consumer and Commercial Division Before: K Ross, Senior Member Decision: The orders sent to you on 29 March 2019 have been amended under Section 63 of the NSW Civil and Administrative Tribunal Act 2013 and should read as follows: (1) ZW2 Pty Ltd trading as Lake Munmorah Residential Resort is not to interfere in the sale of the home belonging to Beverley Welch and Brian Welch and erected on site 114. (2) ZW2 Pty Ltd trading as Lake Munmorah Residential Resort is, on or before 14 April 2019 to pay to Beverley Welch and Brian Welch the sum of $6671.71 being a refund of site fees for the period 21 June 2018 to 18 February 2019. (3) Site fees for site 114 are to abate from 19 February 2019 to the date of completion of a sale of the home on site 114. (4) ZW2 Pty Ltd trading as Lake Munmorah Residential Resort is, on or before 14 April 2019 to pay to Beverley Welch and Brian Welch the sum of $7585.00 being compensation for interest foregone on the balance proceeds of sale to 18 February 2019, and continuing from 19 February 2019 at a rate of $31.214 per day up until the date of completion of a sale of the home on site 114. (5) The applicants may at any time up until 30 June 2019 request the relisting of this application to quantify the amount of compensation payable pursuant to order 4, and to quantify any other losses arising from the respondent's interference in the sale of the home on site 114. Catchwords: RESIDENTIAL (LAND LEASE) COMMUNITIES ACT: Interference in sale, compliance with Local Government Act, compensation Legislation Cited: Local Government Act 1993 Residential (Land Lease) Communities Act 2013 Category: Principal judgment Parties: Beverley Welch and Brian Welch (Applicants) ZW2 Pty Ltd t/as Lake Munmorah Residential Resort (Respondents) Representation: Dianna Evans (Tenants advocate) (Applicants) Belinda Lees (Respondent) File Number(s): RC 18/42134 Publication restriction: Unrestricted REASONS FOR DECISION Application 1. The applicants are home owners in a residential community operated by the respondent at Lake Munmorah. They entered into a residential site agreement on 26 September 2006 and lived in their home on the site until about 12 July 2018 when they moved out of the home for health reasons. They placed the home on the market with an outside agent. They claim that the respondent has interfered in the sale of the home, and as a consequence, two potential purchasers have withdrawn and they have suffered loss and damage. They seek orders: 1. Under s 115 (1) of the Residential (Land Lease) Communities Act 2013 ("the Act") to resolve the dispute 2. Under s 115 (2) (d) of the Act to prevent interference in the sale 3. Under s 115 (2) (f) of the Act for compensation in the sum of $6671.71 for the site fees from 20/06/2018 to 18/02/2019 4. Under s 115 (2) (g) of the Act for abatement of the site fees until completion of the sale 5. Under s 115 (2) (f) of the Act for compensation in the sum of $8379.21 for interest foregone, and 6. Under s 115 (2) (g) of the Act for an order to enable the application to be relisted to quantify any further compensation payable. 1. The respondent opposes the orders sought. The respondent denies interfering in the sale of the home. The respondent says that it was entitled to raise issues with the applicants and with the proposed purchasers in respect of an alleged non- compliance of the awning erected by the applicants in about December 2006 without the written consent of the respondent. Jurisdiction 1. The Tribunal is satisfied that the applicants are home owners in a residential community pursuant to a site agreement to which the provisions of the Residential (Land Lease) Communities Act 2013 apply. The Tribunal has jurisdiction to hear and determine the dispute. The law 1. Section 107 of the Act provides as follows: 107 INTERFERENCE WITH RIGHT TO SELL HOME (1) The operator of a community must not cause or permit any interference with, or any attempt to interfere with: (a) a home owner's right to sell a home, or (b) a home owner's right to display a "for sale" sign in or on a home. Maximum penalty: 100 penalty units. (2) Without limiting subsection (1): (a) interference with a home owner's right includes hindering the exercise of the right, and (b) interference with a home owner's right to sell a home includes unreasonably restricting prospective home owners from inspecting the home or any common area of the community, and (c) interference includes making false or misleading statements about the community that affect or may affect either right, and (d) interference includes taking any action to require the home owner to comply with any requirement made by or under the Local Government Act 1993 after becoming aware that the home owner is seeking to sell his or her home (unless the matter has been the subject of previous action). (3) An operator does not interfere with the right to sell the home if the operator declines to enter into a site agreement with a prospective home owner and does so on reasonable grounds. (4) Without limiting subsection (3), reasonable grounds can be established on: (a) the basis of unfavourable information about the prospective home owner contained in a residential tenancy database referred to in the Residential Tenancies Act 2010 , other than a database referred to in section 210 of that Act, or (b) the basis that the prospective home owner has been evicted from the community or another community within the past 5 years for a breach of a site agreement by the prospective home owner. 1. The Tribunal's powers are found in section 115: 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. The facts 1. The Tribunal makes the following findings of fact: 1. The applicants as home owners are parties to a site agreement with the respondent dated 26 September 2006. 2. The applicants obtained verbal consent for the erection of the awning from the respondent in mid- December 2006. The Tribunal accepts the applicants' evidence that they were told to provide a copy of the plans to the office and that they did so. The Tribunal accepts that they were told that the awning was approved. In coming to this finding the Tribunal has had regard to the statements provided from other residents which confirmed that the practice of the respondent was to give verbal consent. In addition the evidence of the respondent to the effect that there are many noncomplying awnings and structures in the community is consistent with a finding that the respondent was lax in its enforcement of provisions around this issue. 3. The applicants did not obtain the written consent of the respondent as required by the Act and by the site agreement. 4. The respondent did not lodge a Notice of Completion with Council as required by clause 68 of the Local Government Regulation. 5. The home owners lived in the residential community operated by the respondent at Lake Munmorah from September 2006 until about 12 July 2018 when they moved out of the home for health reasons. 6. In December 2016 Wyong Council advised the Operator that there were numerous homes with awnings or paradise rooms where no notice of completion had been lodged with Council. The Operator agreed with Wyong Shire Council to submit Notices of completion prior to issuing new site agreements (respondent's submissions paragraph 4). 7. In September 2017 the Community Rules were amended to insert provisions requiring the homeowner to ensure that all necessary consents were obtained before construction, and requiring home owners immediately after construction to provide documentation to enable the Notice of completion to be forwarded to Council. 8. The Operator says that a letter was sent to all residents on 29 July 2017 stating that Council required all improvements in the resort to comply and advising that an application must be submitted to Council before the Operator would issue any new leases. The applicants say they did not receive the letter. Other residents have also stated that they did not receive the letter. There is no evidence supplied from any resident confirming receipt of the letter. The Tribunal concludes that the letter was not distributed to residents. 9. On 21 April 2018 the applicants advised the respondent that they had placed the home on the market with an outside agent. 10. On 2 May 2018 the home owners accepted an offer from Rob and Vicki Thompson ('the first purchasers") for an amount of $446,000. 11. On 8 May 2018 the Operator's manager inspected the home. The fact that there was an awning for which there was no notice of completion was identified by the respondent (respondent's submissions paragraph 3). 12. By email dated 8 May 2018 the respondent advised the applicants that a new site agreement would not be entered into until Local Government compliance issues were attended to. These included removal of the awning, removal of garden beds, removal of items hanging on the fence, removal of concrete pad, pavers and pebbles in the buffer zone, and the buffer zone to be replanted with native shrubs and mulched. 13. On 9 May 2018 the Operator issued a disclosure statement to the first purchasers. 14. On 11 May 2018 the first purchasers paid a deposit. 15. By letter dated 17 May 2018 the Operator's onsite manager advised the applicants that the Operator would be prepared to enter into a site agreement with a purchaser on condition that the purchaser agreed to rectify the non- compliance issues, including removing the awning if it was found not to comply with the Local Government Regulations. 16. On 21 May 2018 the first purchasers met with the Operator's representatives Kylie Basford and Debbie Cork. 17. On 22 May 2018 the first purchasers withdrew their offer to purchase the home. 18. By statement dated 24 November 2018 the first purchaser Vicki Thompson says that the offer was withdrawn because they did not like the way they were treated by the Operator's representatives at the meeting. She says they felt uncomfortable with what they considered to be a condescending and patronising attitude towards them, and an unbending position in respect of the compliance issues. She states: "We weren't concerned about following Council regulations but the way this message was continually told to us was very patronising and there'd be no discussions on the subject." 1. Kylie Basford and Debbie Cork deny the first purchasers' allegations in respect of the meeting. 2. On 19 October 2018 the applicants received an offer from Christine and Brian Dennis ("the second purchasers"). The offer was withdrawn following a meeting with the Operator's representative. Did the Operator interfere in the sale of the applicants' home? 1. It is to be noted that interference in a sale includes taking any action to require the home owners to comply with any requirement made by or under the Local Government Act 1993 after becoming aware that the home owner is seeking to sell his or her home (unless the matter has been the subject of previous action. There is no evidence to support a finding that the Operator had taken any previous action in respect of the alleged non-compliance of the home before the applicants placed the home on the market and advised the Operator on 21 April 2018. The Tribunal is not satisfied that the letter dated 29 September 2017 was sent to all residents but even if it was it did not identify any issues with the home owned by the applicants. The letter incorrectly implied that it was the obligation of residents to apply to Council in respect of awnings and associated structures and stated that an application to Council must be submitted before the Operator could issue any new leases. The letter indicates the Operator's misunderstanding of its obligations under the Act. 2. It is also clear that the Operator stated to the applicants, in the email dated 8 May, 2018, that it would be unable to finalise a new lease agreement until the Local Government compliance issues were addressed. This email was consistent with the Operator's position outlined in the September 2017 letter. The refusal to enter into a new site agreement is prohibited by s 107 of the Act and amounts to interference in the sale. 3. The Tribunal does not accept that, in these circumstances, the Operator was entitled to require the prospective home owners to address the compliance issues, by making the new agreement conditional upon the prospective home owners addressing those issues within a defined period of time. This may have been appropriate had the issues been raised with the applicants before the home was put on the market, but in all the circumstances (including where the non- compliance issues result from practices adopted by the Operator over a period of time) the Tribunal is not satisfied that it is reasonable to include compliance as a condition of the new agreement. 4. The Tribunal concludes that in threatening not to enter into a new site agreement until non- compliance issues were addressed, and in insisting that the prospective home owners address the non- compliance issues as a condition of any new agreement the Operator interfered in the sale of the applicants' home. Did the Operator's interference cause the loss and damage claimed? 1. The Tribunal accepts that, but for the Operator's insistence on including a requirement for the first purchasers to address the non- compliance issues, the first purchasers would on the balance of probabilities have proceeded to purchase the home. In addition, it is clear that the second purchasers withdrew because they did not have time to wait for the compliance issues to be resolved and needed the certainty of purchasing a home without those issues. Had the first purchasers not withdrawn, the sale would on the balance of probabilities have been settled on or about 20 June 2018.The applicants would have been free to vacate the property and invest the proceeds of sale. In respect of each of the claims: An order under s 115 (2) (d) of the Act to prevent interference in the sale 1. The Tribunal is satisfied that it is appropriate to order that the respondent not interfere in the sale of the applicants' home, including by requiring a condition in any new site agreement in respect of compliance with Local Government issues. Compensation in the sum of $6671.71 for the site fees from 20/06/2018 to 18/02/2019 1. The Tribunal is satisfied that this loss flows from the breach of s 107. The Tribunal is satisfied that these fees have been paid by the applicants to the respondent, and on this basis this amount should be refunded to the applicants. Abatement of the site fees until completion of the sale 1. The Tribunal is satisfied that further site fees should abate pending completion of a sale of the home. Compensation in the sum of $8379.21 for interest foregone 1. The Tribunal accepts that but for the interference the home would have been sold and the home owners would have been able to invest the balance proceeds of sale. The home owners gave evidence that they agreed to pay a commission of 1.75%, amounting to $7805.00. The balance proceeds of sale would have been $446,000 - $7805. Interest at 2.6% amounts to $31.214 per day. From 20 June 2018 to the date of the hearing is $7585.00, and the loss continues at $31.214 to the date of completion of a sale. Relist request 1. The applicants seek to relist the application in the event that the home is not sold, or to quantify any further losses which might be incurred. The Tribunal will allow the application to be relisted up until 30 June 2019. Orders 1. ZW2 Pty Ltd trading as Lake Munmorah Residential Resort is not to interfere in the sale of the home belonging to Beverley Welch and Brian Welch and erected on site 114. 2. ZW2 Pty Ltd trading as Lake Munmorah Residential Resort is, on or before 14 April 2019 to pay to Beverley Welch and Brian Welch the sum of $6671.71 being a refund of site fees for the period 21 June 2018 to 18 February 2019. 1. Site fees for site 114 are to abate from 19 February 2019 to the date of completion of a sale of the home on site 114. 2. ZW2 Pty Ltd trading as Lake Munmorah Residential Resort is, on or before 14 April 2019 to pay to Beverley Welch and Brian Welch the sum of $7585.00 being compensation for interest foregone on the balance proceeds of sale to 18 February 2019, and continuing from 19 February 2019 at a rate of $31.214 per day up until the date of completion of a sale of the home on site 114. 3. The applicants may at any time up until 30 June 2019 request the relisting of this application to quantify the amount of compensation payable pursuant to order 4, and to quantify any other losses arising from the respondent's interference in the sale of the home on site 114. ********* 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: 02 July 2019