When you move into a land lease community, the operator can offer you a voluntary sharing arrangement. Voluntary sharing arrangements means you don’t have to buy a home outright and pay only site fees, instead you can agree to another financial arrangement.
As the sharing arrangement is voluntary, you have the right to:
- choose not to accept the arrangement
- negotiate any aspects of the arrangement with the operator
Be aware that only certain types of voluntary sharing arrangements can be legally offered to you and before accepting it, we strongly recommended that you get independent advice.
Types of voluntary sharing arrangements
The following types of voluntary sharing arrangements can be offered to you:
- Share of capital gain: A voluntary sharing arrangement could specify that you agree to pay a percentage of any capital gain to the operator (for example, 20 percent). The ‘capital gain’ is the difference between the price you pay for your home and the price you receive for your home when you later sell it on site. If the price you receive for your home when you move out is less than what you paid, there is no capital gain and no fee would be payable. If you agree to share the capital gain, you cannot be required to pay an on-site sale premium.
- On-site sale premium: An on-site sale premium is an alternative to sharing capital gain. Under such an arrangement you agree to pay the operator an agreed percentage (for example, 10 percent) of whatever your home sells for when it is sold onsite.
- Entry fee: An entry fee is an amount that you agree to pay to the operator when you sign your site agreement, or at another time specified in your agreement such as when you move in. For example, you may agree to pay the operator an entry fee of $3,000. This fee is separate and in addition to the price you pay for your home. An entry fee is not refundable.
- Exit fee: An exit fee is a fixed amount (for example $5,000) set out in your site agreement that you agree to pay the operator when your home is sold onsite or removed from the site.
- Deferred site fees: This arrangement allows you to put off paying some or all of the site fees to a later date specified in your site agreement. This may be useful where you have a limited income or where most of your money is tied up in an asset, such as your former home.
Voluntary sharing arrangement scenarios
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 where 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 so he accepts 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. 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 percent of the sale price when the house is later sold by Madeleine.
Madeleine agrees to this arrangement and purchases the house from Brian.
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 negotiate and come to an agreement beneficial to both parties.
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.
What should I get in return for a voluntary sharing arrangement?
The operator can decide on the incentives to encourage you to agree to a voluntary sharing arrangement. This could be reduced site fees or a discount on the home price if you are purchasing it from the operator. If a reduction in site fees is offered make sure you know how long this will last for.
Must I be offered a choice?
If you are buying a home from an existing home owner the operator must offer you the option of a 'rent only' site agreement. This is simply 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.
A site agreement with a voluntary sharing arrangement must contain a written declaration signed by both you and operator that a 'rent only' agreement was offered and declined. The declaration must also state that you received independent advice about the voluntary sharing arrangement or waived this right. If this doesn’t occur the voluntary sharing arrangement will be considered null and void.
When an operator/owner is selling a new home or re-selling an existing home they purchased from a former home owner they do not have to offer you the option of a ‘rent only’ agreement.
When and how is a voluntary sharing arrangement paid?
Most voluntary sharing arrangements will become payable once you sell your home onsite. If the operator is acting as your selling agent they can deduct the amounts owing from the sale proceeds. Otherwise you have 14 days from the date the sale is finalised 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 the operator.
What if I change my mind or later think the arrangement is unfair?
If you enter into a site agreement that has a voluntary sharing arrangement remember there is a 14 day cooling-off period. You just need to let the operator know in writing that you no longer want to go ahead with the agreement. This right ceases if you are a new homeowner and you move into the home. If at a later time you believe the arrangement is harsh or unfair, you should seek legal advice.