Anderson & Ors v Tenbury P/L (Residential Parks) [2007] NSWCTTT 149 (22 March 2007)

CONSUMER, TRADER AND TENANCY TRIBUNAL
Residential Parks Division

APPLICATION NOS:	
RP 06/30442 and the further 25 applications in the Schedule attached to these reasons	

APPLICANTS:	
Patricia Anderson & the other applicants as shown in the Schedule to these reasons	

RESPONDENT:	
Tenbury Pty Ltd (to each application)	

APPEARANCES:	
Ms Urquhart and Ms Ward on behalf of the applicants; 
Mr Norton Whitmont and Mr Theo Whitmont on behalf of the respondent	

APPLICATION:	
That the rent increase proposed by the park owner is excessive.

That the park owner be prohibited from recovering any amount by way of a rent increase to compensate for loss of all or part of the service availability charge.	

HEARINGS:	
25 July 2006 and 1 September 2006 at Coffs Harbour	

LEGISLATION:	
Residential Parks Act 1998 (“the Act”) 	

ISSUES:	 
Is the rent increase, notice of which was given to the applicants, excessive having regard to the matters enumerated in section 57 of the Act?	

ORDERS

On 20 November 2006 the Tribunal made the following orders in each application:

1.	The rent increase of $10.75 per week, notice of which was given on 20 June 2006 and which would have increased the rent on the applicant’s site to $115.00 per week, is excessive.

2.	The Tribunal orders that rent payable under the residential site agreement is not to exceed $108.50 per week from 31 August 2006 for a period of 12 months.

3.	Any amount paid in excess of the rent stipulated in order 2 is to be credited to rent payments due after the date of these orders.

The applicants have sought written reasons for the above determination.

REASONS FOR DECISION

The applicants sought orders that the rent increase to $111.90 per week, proposed in the notice of 18 May 2006, was excessive. Further, the applicants sought orders that the park owner was not entitled to require the applicants to pay additional rent to compensate it for the reduction in the amount the park owner was now entitled to recover from residents in respect to the supply of electricity to their sites. 

There were in fact, two notices of increase of rent given to the applicants. The first, dated 18 May 2006, was given to all permanent residents of Darlington Beach Resort (“Darlington”) and gave notice of an increase in rent from $104.25 per week to $111.90 per week from 27 July 2006.  

The notice of 18 May 2006 contained additional terms. These sought to bind the residents to a three year agreement as to the manner in which rent would be increased. Residents would be required to accept annual rent increases based on the percentage increase in the CPI Increase plus an additional $4.00. 

The park owner claimed that a predictable rental income over the three years would avoid the necessity to increase the rent by an even greater amount annually.

It should be noted that such an agreement does not alter the rights and obligations under the Act. These are the requirement for the park owner to give a separate 60 day notice for each and every rent increase and the right of residents to apply to the Tribunal for an order that the proposed increase is excessive. 

The additional terms also recorded that the resident would pay the park owner an amount representing that portion of the Service Availability Charge the park owner could no longer recover from residents as a result of changes to the Customer Service Standards for the Supply of Electricity to Permanent Residents of Residential Parks (“the Code”) which came into effect on 10 April 2006. This amount the park owner calculated at 80 cents per week, and it was added to the rent increase of $6.85 (to $111.10 pw) to make the increase specified in the notice $111.90 pw.

The Tribunal has previously found that a park owner is not entitled to that increase in rent being solely to recover an amount equivalent to the lost Service Availability Charge under the amended Code. 

It was the notice of 18 May 2006 which was the subject of the present applications. There were thirty applications, all lodged within time. Four applications were subsequently withdrawn.

In these proceedings it was unnecessary to make any findings in respect of the orders sought in regard to the Service Availability Charge, as the applicants were issued with a second notice of increase of rent and which formed the subject of the present proceedings.  

A large number of the residents of Darlington did not object to the increase set out in the notice of 18 May 2006.The applicants had not done so and received a second notice of increase dated 20 June 2006.  This notice sought to increase the rent payable by each applicant from $104.25 per week to $115.00 per week.  This represented an increase of $10.75 per week and was $4.10 per week more than the increase contained in the notice of 18 May 2006.

The Tribunal has an obligation to deal with the merits of the case without regard to technicalities. Rather than require the applicants to commence fresh proceedings in respect of a notice of increase which had not been given at the time the applications were lodged, the proceedings were conducted as if they had been objections to the increase embodied in the notice of 20 June 2006.    

The Tribunal took the view that in relation to the second notice of increase, the issue of the park owner recovering the lost Service Availability Charge did not arise. Accordingly, the application, insofar as it sought orders in relation to this matter, was dismissed.   

The applications were listed for conciliation and hearing on 1 September 2006.  Tribunal Member Mr Butler, acting as conciliator, attempted to assist the parties resolve the proceedings.  Ultimately this was unsuccessful and the hearing of the applications then commenced before the Tribunal, differently constituted. 

Upon the commencement of the hearing on 1 September 2006 leave was given for the applicants to be collectively represented by Ms Urquhart, one of the applicants and Ms Ward from the Mid-Coast Tenants’ Advice Service.  Mr Norton Whitmont and Mr Theo Whitmont were granted leave to represent the park owner.

There had been no previous directions as to the filing of documents.  The applicants produced copies of the written evidence upon which they intended to rely.  The park owner stated that it needed an opportunity to consider the material now produced by the applicants and respond within any reasonable time permitted by the Tribunal. 

The Tribunal made directions as to the filing of documents and adjourned the proceedings for further hearing.

The applications were then listed for further hearing on 29 September 2006. The parties took part in further conciliation with Mr Butler. This was also unsuccessful and the hearing of the applications before the Tribunal then commenced.  Evidence was given by Ms Urquhart and Ms Ward.  Mr Norton Whitmont replied on behalf of the park owner.  The parties were given time to make written submissions.  

Written submissions were made by both applicants and respondent.  These have been considered by the Tribunal in the course of making its determination.  

FINDINGS

All applicants occupy sites within Darlington, upon which their homes are located.  As such they are “residential site agreements” under the Act.  

The applicants do not dispute that the notice of increase dated 20 June 2006 complies with the requirements of section 53 of the Act. Accordingly, the Tribunal finds the notice given to each of the applicants to be valid. 

The parties relied upon a number of the matters enumerated in section 57 of the Act.  I shall deal with each of those in turn.  

Section 57 (a) – Comparable premises

Darlington is a large residential park on 115 acres of land adjacent to Arrawarra Beach. It is situated 33 kms to the north of Coffs Harbour and 8 kms from the town of Woolgoolga. Darlington has a 9 hole golf course, bowling green, tennis courts and community facilities.  Site sizes vary but can be generally described as large.  

There are 183 permanent sites and an extensive tourist section.  

The applicants submitted that Valla Beach Village, Oyster Cove Residential Resort, Ballina Lake Side Holiday Park and Ballina Headland Leisure Park are all comparable to Darlington.

Oyster Cove is at Yamba, not far from Ballina. Oyster Cove, Ballina Lake Side and Ballina Headland are approximately 150 kms to the north of Darlington. These residential parks are located in what is known as the north coast of the State. There is no geographical nexus between them and Darlington, other than their proximity to the coast. The two residential parks at Ballina are situated within a large coastal centre, quite different from the semi-rural setting of Darlington. Whilst Yamba is a small coastal town, the same distinction holds true, albeit to a lesser extent.

The Tribunal accepts the park owner’s argument that Oyster Cove, Ballina Headlands and Ballina Lakeside are not in a similar locality to Darlington. 

These residential parks are thus disregarded.

The applicants relied upon Valla Beach as comparable to Darlington. This is also a large residential parks set on 95 acres having waterfrontage to an estuary lagoon and connected to Ocean Beach by a footbridge across the tidal lagoon. Valla Beach is located 40 kilometres to the south of Coffs Harbour and 8 kilometres from Nambucca Heads.  Overall, site sizes at Valla Beach are smaller than Darlington, but are also what can be classified as large sites.  Photographs of homes on sites within Valla Beach, taken in June and July 2006 by Ms Urquhart, show homes of similar size and style on similar sites to Darlington.

The park owner asserts that Valla Beach is not in a similar location to Darlington.  I disagree.  Both enjoy immediate proximity to the water,
are in semi-rural settings, near to small coastal towns and are equidistant from the regional centre of Coffs Harbour. 

The applicants claim rents vary from $75.00 per week to $98.00 per week in the ‘newer’ section at Valla Beach.  Records for the lower rents payable at Valla Beach were produced by the applicants. The park owner has provided a letter from Mr Terry Fulton, the general manager of Valla Beach, dated 21 August 2006, stating rents range from $75.00 per week to $104.00 per week.

The park owner has adopted $104.00 per week as its reference point for comparable rents at Valla Beach.  Given the wide range of site rentals at Valla Beach, the evidence does not support a finding that the general market level of rents at Valla Beach is necessarily of that magnitude.   Given the wide disparity in the rents payable, the Tribunal finds it more likely that the general market  level of rents within Valla Beach is less than $104.00 per week.  Doing the best it can upon the evidence, the Tribunal adopts $98.00 per week as the appropriate representation of the general market level of rents within Valla Beach.

The Tribunal finds that the range of the facilities offered to residents at Darlington far exceeds those available to residents at Valla Beach.

The applicants argue that the pre-eminence of the facilities offered by Darlington has been recognised in past Tribunal determinations as to rent increases.  Accordingly, the applicants argue, no further premium should be allowed in rent increase applications unless existing facilities are improved or new ones added.  

In these proceedings the Tribunal disregards previous determinations and confines itself to the evidence on the matters enumerated in section 57 of the Act.  

The Tribunal observes that the proposed rent increase to $115.00 per week is considerably higher than the general market level of site fees at Valla Beach. 

It is open to the Tribunal to have regard to the rent being paid by other residents within Darlington. Some 157 of the permanent residents have not objected to the first notice of increase with its purported agreement as to the method of calculating the increases to apply in 2007 and 2008. The rent being paid by these residents was increased to $111.90 per week from 27 July 2006.

The park owner has submitted that the Tribunal should not have regard to this agreement as representing the general market level of rents within Darlington.  

The Tribunal accepts that there are likely to be a number of considerations prompting both residents and park owner to enter into such an arrangement. The Tribunal has consistently said that residents living in their own homes within residential parks are not free to simply relocate to another site within a different residential park. Considerable cost is involved. An increase in rent may reflect this circumstance. If so, it distorts what the Tribunal understands to be the meaning of the expression “market level”, namely, the price negotiated by parties with equal bargaining power. Thus it is necessary in each case to give close consideration as to whether an increase in rent, accepted by a majority of residents, represents the general market level of rent for sites within that residential park.

In this case the park owner submits that the increase accepted by most residents contains a ‘discount’ in anticipation of their acceptance of future increases. In effect, the park owner says, the rental being paid should be regarded as less than the general market level. 

The Tribunal does not accept this approach.  All the circumstances of the case warrant the Tribunal disregarding the rent being paid by the bulk of residents as representing the general market level of rents within Darlington. If it does not represent the general market level, it cannot be relied upon as representing some other level from which the general market level of rent can be deduced.  

Section 57 (b) – The value of the residential premises

The park owner argues that there is evidence of significant capital gain being obtained by residents upon the sale of their homes on the site at Darlington. The information provided by the park owner does not give a clear picture as to the extent of any such gains.

The park owner says that any capital gain is a product of an increase in the value of the residential premises as the location of the home is the most important component. Further, the park owner argues, this capital gain would be absent if site fees were excessive. If that were the case, prospective purchasers would be discouraged from purchasing a resident’s home.

The Tribunal accepts location and the cost of renting the site in order to maintain that location, are significant factors in the value obtained on any sale of a resident’s home.  However, it does not follow that evidence of past capital gains means that the present proposed increase in rent is not excessive.

As to land value the park owner gave evidence that there had been an increase of 3.63% in the land value as assessed in 2006 compared to that assessment made in 2005.  The Tribunal is unable to make any finding on that evidence as to the significance of this increase in the value of the residential premises insofar as the rent increase is concerned.

Section 57 (c) – Frequency and amount of past increases in rent

The parties agree that there have been annual increases since 2001/2002 which have exceeded the CPI increase for each year in question.

This history of past increases is not of significant weight in these proceedings other than to establish that the present rent increase cannot be regarded as a ‘catch-up’ increase.

Section 57 (d) – CPI 

The proposed increase in rent of $10.75 represents a 10.33% increase in the current rental.  The CPI increase for the 12 months to the March 2006 quarter is 2.7%. An increase in rent in accordance with the CPI would be $2.80 per week.

The park owner is correct in stating that this is but one of the factors to be considered and cannot, in isolation, be sufficient to warrant a finding that the proposed increase is excessive.  Nevertheless, it is necessary to look to the other paragraphs enumerated in section 57 to support such an increase.  This is not to reverse the onus of proof which rests on the applicants.  The evidence as to the magnitude of the increase relative to the CPI could lead to a finding that the rent increase is excessive in the absence of evidence to show otherwise.

Section 57 (e) – Conduct of the parties

The applicants take exception to the manner in which the park owner was said to have conducted negotiations regarding the ‘three year agreement’. The Tribunal is of the view that none of the matters raised by the applicants as to those negotiations has any bearing on determining whether the present increase is excessive.

Section 57 (f) – Outgoings

The park owner has given details as to increases in costs associated with tree maintenance, waste disposal, sewerage treatment and vehicle running costs.  The cost increases for these outgoings in 2006 relative to 2005 exceeds the CPI increase by a very substantial amount.  

The difficulty in assessing what weight should be given to this evidence arises from the park owner not providing details as to all outgoings. This would enable the Tribunal to make findings as to the extent of the increase in operating the residential park for the year. It is also necessary to have some means of distinguishing those costs which are attributable to operating the tourist section of the residential park.

The park owner has not provided sufficient details for the Tribunal to be satisfied that the increases which have been the subject of evidence, are representative of the increases in all outgoings in operating the permanent residents’ section of Darlington. 

The Tribunal accepts that there have been cost increases in regard to the items referred to above and takes those matters into account. Not a great deal of weight is given to the magnitude of these increases as it is not clear as to how much of the cost is attributable to repairs and maintenance for the permanent section of Darlington.

Section 57 (g) – Estimated costs of any services provided by the park owner or resident

The applicants said permanent residents pay water usage and are required to take out their own public liability insurance.  The Tribunal is of the view that these matters do not arise for consideration under this paragraph. There was no other evidence given as to this matter.  

Section 57 (h) – The value and nature of any fittings, appliances, goods or services provided with the residential premises

The applicants provided evidence as to the condition of roads and other facilities within Darlington. The applicants said some of the roads were in poor condition. Photographs were provided. 

The Tribunal is satisfied that the overall condition of the roads and the facilities provided does not compromise a finding that Darlington is an outstanding residential park in terms of its internal amenity and range of facilities provided.

There was no other evidence provided by the parties relevant to this paragraph.

Section 57 (i) – Accommodation and amenities provided … and the state of repair and general condition of the premises

There was no evidence given, other than previously recorded, relevant to this paragraph.

Section 57 (j) – Work done to the premises by the resident … with park owner’s consent 

There was no evidence as to this paragraph.

Section 57 (k) – Any other relevant matter

The Tribunal is satisfied that there are no circumstances arising in the applications requiring consideration under this paragraph.

Having regard to all the evidence under section 57 of the Act, the Tribunal is satisfied that the proposed increase is excessive. The amount of the increase is considerably in excess of past increases obtained since 2001/2002. It is far in excess of the CPI increase over the twelve months. 

A rent of $115.00 per week would be some $17.00 per week above the general market level of rent at Valla Beach.  As has been stated, Darlington provides a far greater range of facilities for residents than does Valla Beach.  Whilst this should be reflected in the rent, the size of that differential cannot be justified having regard to the other similarities between the two residential parks.  

The limited evidence as to increases in outgoings does not outweigh the considerations referred to in the preceding paragraphs.

The Tribunal is satisfied that the park owner is entitled to an increase in the rent payable by the applicants. The amount allowed is slightly in excess of the CPI increase. This takes into account increases in outgoings to the extent previously stated. An increase of $4.25 to make the rent payable by the applicants $108.50 per week, is also justified having regard to the applicable rent at the comparable Valla Beach and allowing for the superior facilities provided at Darlington.  

For all these reasons the Tribunal determines that the increase in rent to $115.00 per week, notice of which was given to the applicants by letter dated 20 June 2006, is excessive. 

The Tribunal makes an order under section 58(2) of the Act that the rent payable by the applicants under their respective residential tenancy agreements with the park owner is not to exceed an amount of $108.50 per week for a period of 12 months commencing 31 August 2006.

A further ancillary order is made as set out at the commencement of these reasons. 

H E Moore
Member
Consumer, Trader and Tenancy Tribunal

22 March 2007

Schedule 26

File No	Applicant Name	Site Number	
06/30442	Patricia Anderson	“…”	
06/30455	Mr J Franklin & Mrs Franklin	“…”	
06/30465	Maureen Elanour Clift	“…”	
06/30476	Jim Donaldson & Fay Donaldson	“…”	
06/30486	David Easthope	“…”	
06/30493	Grace Fletcher	“…”	
06/30503	Helen Willetts	“…”	
06/30513	Graham Wood & Heather Ann Wood	“…”	
06/30517	Brian John Webb	“…”	
06/30520	Sylvia Waters	“…”	
06/30523	Carl Urquhart & Faye Urquhart	“…”	
06/30527	Lionel Stanhope	“…”	
06/30531	Lesley Patricia Shields	“…”	

Schedule 27

File No	Applicant Name	Site Number	
06/30534	Alex Santa & Shirley Santa	“…”	
06/30542	Elizabeth Anna Rose 	“…”	
06/30547	L J Patrick & P A Trevenna 	“…”	
06/30550	John Nunn & Yvonne Nunn	“…”	
06/30551	June Newitt & Tony Newitt 	“…”	
06/30553	Joan Luskey 	“…”	
06/30590	Rita Karlson & Ray Karlson	“…”	
06/30595	Barrie James & Carol James	“…”	
06/30597	Alexander Hunter & Janet Hunter	“…”	
06/32632	Wolfgang Horst Stephen Lange	“…”	
06/32633	Carol Sinnett	“…”