The development of Manufactured Homes, and the residential parks they are situated in, is increasingly becoming a lucrative venture for Queensland property developers. What is a Manufactured Home you may ask? Manufactured Homes are a house/dwelling structure used for residential purposes, designed to be moveable from one position to another, does not include a caravan or tent, and from a property ownership point of view Manufactured Homes are not attached to the land they are situated on and therefore are owned as personal property, as opposed to a residential home which is attached to the title of the land and owned as real property.
Investing in a Residential Park and Manufactured Homes
Manufactured Homes can be found in various types of residential parks, including mixed use developments where the park has a combination of Manufactured Homes, caravans, tent sites and cabins that offer short and long term accommodation options, and then there are purpose built residential parks made up entirely of Manufactured Homes and often targeted at over 50’s community and resort style living and include a number of additional amenities for the use and enjoyment of such residents.
In Manufactured Homes residential parks, the homes are situated on a designated site within the development and the home owners pay a weekly site rent to the park owner under a Queensland Government prescribed document called a “Form 2 Site Agreement”, which is signed by both parties and allows the home owners to legally reside on that land under specific terms and to receive a continuous license to utilise the common areas and facilities that are provided and maintained by the park owner. The executed site agreements attach to the land and bind successive land owners which helps protect residents from being forcibly removed from such a development in the event of land ownership transfer. The park owners may or may not be the registered land owner and both parties benefit from payment of the weekly site fees from each Home; making this form of development a multi-faceted option for the astute property developer.
A notable complexity around purchasing a Manufactured Home is in regards to financing such a purchase as financiers are very reluctant, if not completely adverse, to lending on these investments. This is essentially due to the fact that without land ownership being attached to the Manufactured Home a financier cannot register a first mortgage over the property and are only left with the option of registration of interest on the Australian Personal Property and Securities Register, which is generally not deemed sufficient for the extent of the capital investment required. Accordingly the benefit of purchasing within these residential parks and enjoying such community living is left to the over 50’s who are cashed up for such a purchase and can hold the Manufactured Home as their personal property outright and can sell the Home in due course with only commission to the selling agent being lost in the disposal process; similar to the sale of real property.
Residency in a Manufactured Homes Residential Park
For many purchasers of a Manufactured Home in a residential park it is also a desirable lifestyle choice as the common areas and community facilities offered are often extensive and provided by the park owner for the general convenience and enjoyment of the park residents; and this is increasingly becoming a popular choice for over 50’s heading towards retirement. The over 50’s community interest in the Manufactured Homes residential parks has also been fueled by the distinct difference from retirement villages where on-going fees and exit fees are generally quite extensive and can result in a substantial loss to a residents capital investment when terminating residency in the retirement village.
There has been recent discussion in the Queensland sector around the government setting up some of these Manufactured Homes residential parks for housing commission purposes and pensioners, where government approved residents would pay a weekly fee to reside in the residential park in a particular Manufactured Home and payment of such site fees may be connected to social welfare entitlements of individuals in those categories. This will be an interesting area of development to watch in years to come, not only in Queensland but in the other states of Australia as further consideration is given to better management of housing arrangements connected with the demands of our social welfare system.
Manufactured Homes Legislation and Recent Changes
Manufactured Homes and residential parks have been fairly well regulated in Queensland since the commencement of the Manufactured Homes (Residential Parks) Act 2003 with prescribed forms, on-going reviews and proposed amendments by the Queensland Government since its inception. 1 October 2017 signified the commencement of the new Manufactured Homes (Residential Parks) Regulation 2017 (Qld). Section 3 of the new Manufactured Homes Regulation is a significant change to previous regulations because it now sets out 19 categories of “special terms” applied in part 3 of a Form 2: Site Agreement which are considered “prohibited special terms” for the purposes of section 25B of the Manufactured Homes (Residential Parks) Act 2003 (Qld).
Previously regulations in this area had not specified prohibited special terms to this extent, but further regulation was deemed necessary to ensure that owners of Manufactured Homes are not subjected to particularly onerous terms and that transparency and further obligations are imposed on park owners so that Manufactured Home owners are not mislead or taken advantage of under these specific terms which are imposed on their residency within the development.
The categories of “prohibited special terms” cover things such as; a special term that states that a rental increase is calculated in accordance with the consumer price index but the rental increase effectively includes additional charges, terms that require a home owner to gain the consent of the park owner before the home owner complies with a requirement under law, terms that restrict or prohibit an alteration to a home that is not visible from the outside of the home, terms that state that the park owner does not warrant that the site is suitable for use as the site of a manufactured home, or a term that states that the park owner may exclude a person from being approved to reside in the residential park without having reasonable grounds for the exclusion, amongst a number of other specific regulations. Park owners will now need to ensure that if such terms exist in their Form 2: Site Agreements that they do not attempt to enforce such terms moving forward, as well as reviewing the terms in any new site agreements being executed to ensure that these do not include such terms. Should Park Owners contravene this regulation it is an offence under Section 25B of the Manufactured Homes (Residential Parks) Act 2003 and penalties are imposed. Home Owners now have greater protection under this new regulation, which will be welcomed by many investing in this type of property and residing within these residential parks.
The Housing Legislation (Building Better Futures) Amendment Act 2017 was also passed by the Queensland Parliament on 25 October 2017 and assented to on 10 November 2017 and contains amendments to the Manufactured Homes (Residential Parks) Act 2003 to increase transparency in the relationships between park owners and their staff and home owners, and to strengthen consumer protections and provide more security to home owners of Manufactured Homes. The amendments are currently in review and due to take effect in the coming months with a commencement date to be confirmed shortly.
Key changes to the Manufactured Homes (Residential Parks) Act 2003 will include new behavioral standards that guide how park owners, their staff and home owners interact with each other and prescribe clear, enforceable behavior and management standards for park owners and home owners, ensuring respect for the rights and obligations of all parties and the quality of life of home owners within a development. The changes will also result in improved pre-contractual disclosure processes when purchasing a Manufactured Home which will introduce a 21-day waiting period to ensure prospective home owners have time to consider information provided by park owners and will receive documents in stages, have time to shop around and seek expert legal and financial advice before they sign the contract, and will also sign a site agreement that contains a no-fault cooling-off period that may be used to terminate the agreement if required. Amendments will impose a limit of rent increases under the site agreement to one per year, and increase the transparency of market rent review calculations, and prohibit administrative fees for provision of utilities, including meter reading. A more specified process for in-park dispute resolution will also be included, prescribing how these matters may be handled internally before being escalated to the Queensland Civil and Administrative Tribunal. Importantly, for the safety of residents within these residential parks, upcoming changes in the provisions of the Manufactured Homes (Residential Parks) Act 2003 will help ensure that emergency services and health care workers have access to residential parks at all times, with specific emergency management plans are in place.
As with the changes instigated recently under the Manufactured Homes (Residential Parks) Regulation 2017 (Qld), the amendments to the Manufactured Homes (Residential Parks) Act 2003 will be welcomed by new purchasers of Manufactured Homes, and those home owners already residing in these residential parks, providing further security in their investment and in the on-going lifestyle benefits offered by these ventures.
Manufactured Homes and the development of purpose built residential parks is certainly gaining increased momentum in Queensland, with key developers in this space currently having multiple sites under construction. The impact of increasing popularity and consumer demand for these Manufactured Homes will certainly make this area of property investment one to watch in the coming years! Astute buyers of Manufactured Homes should ensure they seek legal advice in the early stages of considerations to purchase, and these should be sought from a lawyer well versed in these matters given the complexities and increased regulations in this niche area of property investment. MBA Lawyers offer extensive expertise in this area and would be happy to assist upon further enquiry; please phone 07) 5539 9688.
Article by Ruth Nean; Associate of MBA Lawyers, Varsity Lakes, Queensland, February 2018