Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Meatheringham v Gateway Redhead Operations [2019] NSWCATCD 34 Hearing dates: 16 January 2019 Date of orders: 11 March 2019 Decision date: 11 March 2019 Jurisdiction: Consumer and Commercial Division Before: K Ross, Senior Member Decision: (1) Where the claimed increase in site fees exceeds $4.50 per week it is excessive. (2) The site fees for each affected home owner must not exceed the amount of the existing site fees plus $4.50, from 7 September 2018 until 6 September 2019. (3) 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: Civil and Administrative Tribunal Act 2013 Residential (Land Lease) Communities Act 2013 Category: Principal judgment Parties: Pam Meatheringham and Anne Davy (Applicants) Gateway Redhead Operations (Respondent) Representation: Applicants (self-represented) Jamie Brown and Angela Sweetman (Respondent) File Number(s): RC 18/40701 Publication restriction: Unrestricted Reasons for decision Application 1. By notice dated 21 June 2018 given to each of the home owners in the respondent's park, the respondent gave notice of an intended increase in site fees for each site, to commence from 07 September 2018. The increase sought from each resident varied between $4.50 and $7.40 per week. The home owners who are participants in these proceedings objected to the increase. Mediation was attempted but was unsuccessful. The applicants ("home owners") seek an order that the rent increase is excessive. The respondent ("operator") opposes the order sought. Rent increase notice 1. Section 67 of the Residential (Land Lease) Communities Act 2013 ("the RLLCA") 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 in these proceedings to support the contention that costs have increased as claimed, 2. Because the increase is not consistent across the community. If $4.50 is adequate for some sites then the applicants argue that it must be adequate for all sites, 3. Because some of the costs claimed are capital amounts or costs for delayed repairs and maintenance. 4. Because some of the costs listed are said to relate to tourist accommodation, but there has been no tourist accommodation in the recent past or at present, 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 of expenditure and an auditor's certificate in respect of that statement. The Operator argues that the figures support an increase of $16.03 per week and submits : On the basis that the proposed site fee is less than the site fee increase needed to cover the actual outgoings and operating expenses, the respondent submits that the only order that the Tribunal can make is for an increase in site fees of $16.03 per site per week. In accordance with s 73(3) of the Act this increase should apply for all affected home owners in the community." 1. However during the hearing the respondent was unable to explain the increases in some of those categories. In respect of the operating expenses the respondent was unable to explain what was included under the heading "tourist accommodation", nor provide any clarity about what was behind the claimed figures. In respect of the electricity, the respondent could not say whether the figure was gross or net (that is whether amounts recouped from residents had been allowed for). In respect of repairs and maintenance the respondent said that the amount claimed included repairs which had been ordered by the Tribunal, but could provide no details. The respondent could give no information about the alleged increase in salaries and wages. The respondent offered to "strike out" these categories. 2. The respondent's representatives could not explain what the capital expenditure related to, and in particular could not explain the categories used ("infrastructure, investment property, park assets, others"). In another statement the respondent had claimed amounts for the tennis court upgrade, painting common buildings, security cameras and repainting road markings, but whilst it was close the total did not correspond to the figures in the audited statement. Discussion 1. The orders which the Tribunal may make are set out in s 73 of the RLLCA: 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 RLLCA: 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. 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. Site fees have been increased annually for some years. The site fees were last increased in September 2017. That increase was challenged in the Tribunal and the Tribunal ordered that it could not exceed the CPI. (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. The Operator provided a statement of operating expenses and a statement of capital expenditure for the year 1 July 2017 to 30 June 2018 together with an auditor's certificate. However the Operator could not explain the statements and did not call the auditor to give evidence. Some of the categories were particularly opaque. No evidence was supplied of any projected increases. 2. In respect of the operating expense increases, if the figures are to be accepted as accurate and without further analysis, they amount to an amount of $4.45 per site. 3. In respect of the capital expenditure, and on the basis of the evidence before the Tribunal, it was not possible to understand whether and to what extent the claimed capital expenditure could be said to be an "outgoing" or "operating expense". The respondent said that all capital expenditure is an operating expense, but without further detail of how the amount is comprised the Tribunal is not satisfied that it is. For example, if the Operator builds new dwellings in the community that expenditure would presumably fall under the banner of capital expenditure, but it is not an operating expense to which home owners should be required to contribute through their site fees. The RLLCA provides a procedure for home owners to contribute to upgrades in community facilities (see ss 50 and 51). Although it may be true that residents get an indirect benefit from capital expenditure, the Operator is able to recover that amount on sale of the Park. For all these reasons the Tribunal is not satisfied that the capital expenditure has been proven to be an outgoing or operating expense contemplated by s 74. (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. Since the date of the last increase the respondent has attended to some repairs, including repairs ordered by the Tribunal in December 2017. The respondent claims to have spent $41550 on the tennis court upgrade, $23133 on painting common buildings, $3067 on security cameras and $4950 repainting road markings. No invoices or other supporting material are supplied. It seems that these amounts may be included in the capital expenditure statement but that is not entirely clear. 2. There is no evidence of what repairs or maintenance is planned for the year covered by the increase being reviewed. (d) the general condition of the community including its common areas, 1. The Operator's photos show that generally the common areas are tidy, and have had the benefit of recent repairs referred to above. (e) the range and average level of site fees within the community, 1. Prior to the increase, the site fees range from $154.60 to $166.50 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, improvements to the community, and increases in outgoings and operating expenses including government rates 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. The audited statement indicates a decrease in rates and taxes. There is no explanation provided for the discrepancy. (i) variations in the Consumer Price Index (All Groups Index) for Sydney, 1. The CPI increase for the relevant period was 2.1%. This amounts to an increase of between $3.25 and $3.56 for each site. It follows that an increase of $3 per week, proposed by the home owners in this matter, is less than CPI and should not be entertained. (j) whether the increase is fair and equitable in the operation of the community, 1. The respondent has sought differential increases in order to address the fact that site fees across the community vary, largely as a result of historical factors. The respondent argues that in order for there to be equity between sites there needs to be inequity in the increases for different sites. The home owners argue that all residents should pay the same increase because it is the increase which is before the Tribunal and not the site fee itself. They argue that it is not fair and equitable for one resident to be asked to pay an increase of $4.50 whilst others are asked to pay up to $7.40 per week. 2. The Tribunal notes that even if differential site fee increases are allowed, there will be inequity between sites as soon as a new site agreement is entered into at a higher site fee. The Tribunal is persuaded that it should look at equity in the increase rather than attempting to achieve uniform site fees across 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 an amount of not more than $4.50 for each affected home owner. The Tribunal accepts that overall the respondent has shown an entitlement to an increase which exceeds CPI. In coming to this decision the Tribunal has considered each of the matters above. 2. The Tribunal is not satisfied that the evidence supports a finding that the Operator's actual increase in outgoings and operating expenses amounts to $16.05 as submitted. Section 73 (4) requires that the increase in those expenses be established to the satisfaction of the Tribunal. Bearing in mind that the respondent's representatives could not explain the statements relied upon, the Tribunal is not satisfied that the Operator has established those expenses. 3. The Tribunal makes the following orders: 1. Where the claimed increase in site fees exceeds $4.50 per week it is excessive. 2. The site fees for each affected home owner must not exceed the amount of the existing site fees plus $4.50, from 7 September 2018 until 6 September 2019. 3. This order applies to all affected home owners in the community (other than those who opt out). ********** 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