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/Factsheet_print/Tenants_and_home_owners/Residential_land_lease_community_operators/Starting_an_agreement/_Voluntary_sharing_arrangements.pdf
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Standard fact sheet.
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Large print fact sheet.

Voluntary sharing arrangements 

Voluntary sharing arrangements are an alternative to a resident buying a home outright and only paying site fees. Reasons for the agreements may include:

  • making land lease community living accessible to more people 
  • encouraging both home owners and the operator to contribute to the upkeep and appearance of the community
  • allowing financial benefit from the sale of a home onsite to be shared (recognising that some of its value may be due to it being located in the wider community)
  • providing another income source for operators, which may take pressure off closures or rising site fees.

As they are voluntary, an operator does not have to offer these sharing arrangements. If you do offer them, the home owner does not have to accept the arrangement.

The home owner can negotiate any aspect of a voluntary sharing arrangement with you. You decide what incentive or benefit to offer in exchange for the home owner accepting the voluntary sharing arrangement.

Home owners have a right to seek independent advice before agreeing to any voluntary sharing arrangement.

What types of voluntary sharing arrangements can be offered? 

The following types of voluntary sharing arrangements can be offered:

  • Share of capital gain: A voluntary sharing arrangement could specify that the home owner agrees to pay a percentage of any capital gain (for example, 20%). The ‘capital gain’ is the difference between the original price paid for the home and the price received for the home when it is later sold on site. If the price received for the home when sold is less than what was originally paid, there is no capital gain and no fee is payable. If a home owner agrees to share any capital gain, you cannot require them to also pay an on-site sale premium.
  • Onsite sale premium: An onsite sale premium is an alternative to sharing capital gain. Under such an arrangement a home owner can agree to pay an agreed percentage (for example, 10%) of whatever the home sells for when it is sold onsite.
  • Entry fee: An entry fee is an amount that a home owner agrees to pay when they sign the site agreement, or at another time specified in the agreement, such as when they move in. For example, the home owner may agree to pay an entry fee of $3,000. This fee is separate and in addition to the price paid for the home. An entry fee is not refundable.
  • Exit fee: An exit fee is a fixed amount (for example, $5,000) set out in the site agreement that a home owner agrees to pay when the home is sold onsite or removed from the site.
  • Deferred site fees: This arrangement allows a home owner to put off paying some or all of the site fees to a later date specified in the site agreement. This may be useful if a home owner has a limited income or if most of their money is tied up in an asset, such as their previous home.

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Who can be offered a voluntary sharing arrangement? 

Voluntary sharing arrangements can be offered to prospective home owners before they enter into a site agreement. Details of the proposed arrangement must be set out in the disclosure statement. Voluntary sharing arrangements can also be offered to existing home owners if they want to enter into a new site agreement. The same disclosure requirements apply in this situation.

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What should I offer in return for a voluntary sharing arrangement? 

You decide what incentives to offer to encourage a home owner to agree to a voluntary sharing arrangement. This could be a reduction or freeze in the site fees or a discount on the home price if they are buying it from you. If site fees will be reduced, make sure you set out and explain how long this will last.

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Must I offer a choice? 

Yes. You must offer a ‘rent only’ site agreement as an option:

  • if a prospective home owner is buying a home from an existing home owner 
  • to any existing home owner who wants to sign a new site agreement.

The rent only option is a standard site agreement that does not contain any voluntary sharing arrangements. The site fees under this agreement must be no higher than the fees being paid by the current home owner, unless they have been discounted for some reason (in which case they cannot be higher than those sites of a similar size and location in the community).

A site agreement with a voluntary sharing arrangement must contain a written declaration (signed by both you and home owner) that a ‘rent only’ agreement was offered and declined. The declaration must also state that the home owner received independent advice about the voluntary sharing arrangement or waived this right. If this doesn't happen, the voluntary sharing arrangement will be considered null and void.

When you are selling a new home (or re-selling an existing home that you have purchased from a former home owner) you do not have to offer the option of a ‘rent only’ agreement.

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When and how is a voluntary sharing arrangement paid? 

Most voluntary sharing arrangements will become payable once the home is sold onsite. If you are acting as the selling agent you can deduct the amounts owing from the sale proceeds. Otherwise, the home owner has 14 days from the date the sale is finalised in which to pay. Any agreement to share capital gain or to pay an on-site premium is not enforceable if the home is removed and sold off-site or is bought by you.

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Can a home owner challenge the arrangement? 

If a site agreement has a voluntary sharing arrangement the home owner generally has a 14 day cooling-off period if they change their mind.

If at a later time the home owner believes the arrangement entered into is harsh or unfair, they may have remedies under the Australian Consumer Law or the Contacts Review Act.

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Voluntary sharing arrangement scenarios 

Below we explore different situations that involve voluntary sharing arrangements to help show how these work and are negotiated between the resident and operator.

Sue and Daryl

Sue wants to sell her home to Daryl who has offered to pay $200,000 for it.

When Daryl approaches the operator he is offered two site agreements. Under the first agreement Daryl is offered lower site fees than currently exist for the site, in return for agreeing to enter a fully disclosed sharing arrangement with the operator.

Under the second agreement Daryl is offered a ‘rent only’ arrangement whereby he continues to pay the site fees as per the existing arrangement with Sue. He is told that he has an absolute right under the law to accept the second agreement should he wish to do so.

Daryl decides that he can afford the existing site fees and wants to obtain maximum value for the property when he sells it. As such he takes up the second ‘rent only’ agreement.

Brian and Madeleine

Brian is looking to sell his home to Madeleine. Both agree that the home is worth $200,000. However, Madeleine is concerned she may not have enough money upfront to pay for the home as she can only afford to pay $180,000.

Instead of walking away from the deal Madeleine approaches the operator to see if an alternative arrangement can be struck. The operator informs Madeleine that by law she has the right to a ‘rent only’ agreement, paying the same site fees as Brian is paying.

However, the operator is also willing to put forward $20,000 to help pay for the house in return for an agreement stating that they will receive 10% of the sale price when the house is later sold by Madeleine.

Madeleine agrees to this arrangement and purchases the house from Brian. Without the possibility of a sharing arrangement this sale may not have occurred.

Joe and Roger

Joe is interested in selling his home to Roger for $200,000. Roger has the money upfront to pay for the house from his savings. However, Roger is on a fixed income and is worried that he may not be able to afford the site fees on an ongoing basis.

He may have to walk away from the deal if he cannot negotiate lower site fees, so Roger approaches the operator with this issue. The operator informs Roger that he has an absolute right to a ‘rent only’ arrangement, but that there is also the possibility that the operator can lower the site fees if a sharing arrangement can be agreed upon.

The two parties proceed to negotiate and come to an agreement beneficial to both parties. Roger informs Joe that he can now proceed with the sale.

Mollie

Mollie has put her property on the market. After showing her house to several prospective residents the highest offer she has obtained is $200,000. However, the operator of the park also learns that Mollie is interested in selling.

The operator is interested in the property knowing that if they own it they can sell it to a future resident under a sharing arrangement. After learning that the highest offer was $200,000, the operator offers to beat this by $10,000, to which Mollie agrees.

Because a new bidder was introduced to the market Mollie has been able to sell her home at a higher price than previously would have been possible.

Greg

Greg is an existing resident who has resided in the same land lease community for 10 years. Greg has a fixed income and is worried that his site fees are starting to become unaffordable.

Greg likes the community lifestyle and does not want to be forced to move out, so he approaches the operator to see if they can reach a sharing arrangement that will lower Greg’s site fees to a level he can afford.

After negotiating with the operator the two reach an agreement. Greg can now afford the site fees on an ongoing basis meaning that he can continue to live in his home.
 

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