Manufactured Homes (Residential Parks) Amendment Act 2024 set to shake up the land lease environment

With Australia’s aging population and low-income retirees flocking to downsize their retirement homes, the manufactured homes sector is a growing industry that has now received its first tranche of major reforms and park owners will take the brunt of these changes.

In Queensland, the partnership between manufactured park owners and homeowners was regulated by the Manufactured Homes (Residential Parks) Act 2003 (QLD) but recently the Queensland parliament assented to the Manufactured Homes (Residential Parks) Amendment Act 2024 (QLD) (Amendment Act), which re-balances this partnership to provide what seems like greater cost benefits and certainty for homeowners.

We will highlight the key amendments to the manufactured homes landscape brought in by the Amendment Act which are of note to park owners and investors:

• limitations on how park owners can increase site rent across their residential parks;
• the creation of a buyback and site rent reduction scheme which will force park owners to buyback vacant manufactured homes that remain unsold after twelve (12) months; and
• a requirement for park owners to produce a ‘park comparison document’ and ‘maintenance and capital replacement plan’ for homeowners to access which will force competitive downward pressure on site rents between park owners.

Limitation on site rent increase

Already in commencement since the date of assent on 6 June 2024, the Amendment Act prohibits market rent reviews in any new site rent agreements and voids current market rent review-based clauses in existing site rent agreements. This is an attempt at reducing disputes caused by unclear formulas used in site agreements and creates an alternative framework for park owners to increase site rent more fairly and predictably for homeowners.

Unless existing site agreements have an alternative basis of increasing rent, which is not market-review based, annual general site rent increases must be at either the higher of the Consumer Price Index or 3.5 percent.

Buyback and rent reduction scheme

Also already in commencement since the date of assent is this new rent reduction regime, whereby homeowners with eligible homes (those that were built on site or transported to site as part of the development of the park) may opt in to this scheme six months after appointing the park owner to sell their home, the home still has not sold and the home is vacant.

The park owner must reduce the site rent by twenty-five (25) percent if after another six months have passed, since the homeowner has opted in to the scheme, and the vacant home still has not been sold.

By the twelfth (12) month since the homeowner has opted into the scheme and eighteen (18) months since the park owner has been provided with the opportunity to sell the home, and the home remains unsold, the park owner must purchase the home from the homeowner at an agreed buyback amount.

Both parties are to agree on a buyback amount on the resale value of the home within fourteen (14) days from the homeowner opting in to the regime and if the home does not sell within these periods or the park owner does not enter into a buyback agreement with the homeowner, they must agree again on the buyback amount within six (6) months and fourteen (14) days, and then nine (9) months and fourteen (14) days from when the homeowner opted into the regime. Otherwise, both parties must jointly appoint a registered valuer to value the resale value of the eligible home within seven (7) days from each of those points in time.

This will unfortunately mean that park owners will be forced to acquire homes where they have limited control over the quality and condition of the home, which may directly impact on the re-saleability of the home. Park owners will be exposed to market forces during buyback periods and the snowball effect of multiple buybacks in a short period could cause significant financial pressures on park owners and investors.

Production of documents for cost transparency

Both the following changes will commence by proclamation, which has not yet occurred.

In an attempt to provide greater consumer confidence and re-balance market forces to incite competitive downward pressure on site rents and upward pressure on quality, the Amendment Act will require park owners to maintain website for their parks and make available a ‘comparison document’ accessible on the website so that when homeowners conduct park comparisons, they can make informed and objective decisions as to the costs and services of different parks. Failure to do so will see the park owner incur fifty (50) penalty units.

In addition, the Amendment Act will also require park owners to prepare and provide homeowners with a ‘maintenance and capital replacement plan’ which will provide transparency and clarity as to how the capital received from site rent by park owners will be distributed across what facilities and services in the park that the homeowner has invested in.

Both these requirements may create added administrative burdens on park owners and will undoubtedly force park owners to implement price matching mechanisms to maintain competitiveness in the market.

Moving forward

It is recommended that park owners review their site agreements and any template agreements they will enter into with homeowners in case it breaches any of the new requirements under the Amendment Act.

If you would like to know how the Amendment Act could further affect your land lease portfolio please contact us.

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Authored by:

Shanna Kruger, Partner
John Soueid, Senior Associate
Teresa Zhang, Lawyer