Rent increases at residential parks
Long-stay agreements will often include provisions allowing for rent to be increased or varied during the term of the agreement.
Different rules apply depending on the type of long-stay agreement and when it was entered into.
The following types of review methods might be included:
- review based on change in the Consumer Price Index (CPI) – this means that the rent will change in line with any changes to the CPI, for example, if the CPI increases by 1.5%, the rent will increase by 1.5%;
- a percentage increase – for example, 3% per annum; or
- an increase by a specific amount – such as $10 per annum.
In all cases, a park operator must give at least 60 days’ written notice of a proposed rent increase, setting out details of the proposed rent and when it will begin.
There must be a minimum period between rent variations or increases of;
- 12 months for site-only agreements; and
- 6 months for on-site home agreements.
A shorter period can apply for the first rent variation if the park operator reviews rent in accordance with a set schedule and has given the tenant notice of the schedule before the agreement was entered into.
New long-stay agreements entered into from 31 January 2022
Rent can only be increased if the long-stay agreement includes a clause allowing for rent variation. A rent variation clause must:
- set out a single basis for calculating the rent on the review date – for example, a set amount, a percentage increase or a change based on any change to the CPI – different methods can be used for different dates;
- not prevent rent from decreasing if the method of calculating rent results in lower rent (for example, if the CPI decreases); and
- not provide for calculation of rent based on current market rent.
The Parks Act prohibits a review method based on market rent for agreements entered into from 31 January 2022.
Existing long-stay agreements entered into before 31 January 2022
On-site home agreement:
- fixed term - the rent can only be increased during the term if the agreement provides for an increase; and
- periodic - does not need to include a rent variation clause, the park operator can simply give notice of a rent increase (unless the agreement limits this right).
- fixed term and periodic - rent can only be increased if the long-stay agreement includes a clause allowing for rent variation;
- a rent variation clause must set out a single basis for calculating the rent on the review date – for example, a set amount, a percentage increase or a change based on any change to the CPI – different methods can be used for different dates;
- rent variation clause must not prevent rent from decreasing if the method of calculating rent results in lower rent (for example, if the CPI decreases).
Calculation of rent variation based on current market rent is permitted for long-stay agreements entered into before 31 January 2022. When reviewing the rent the park operator must take into account a report from a licensed land valuer.
Disclosure about rent variation
The disclosure statement provided sets out examples of how the rent review provisions (if any) will apply. These examples are intended to show how rent may change in the future.
Tenants can check the details in the disclosure statement and ask the park operator for further information if needed.
Tenants should make sure they understand how much rent is payable under the long-stay agreement, as well as when and how rent may be increased. Tenants need to be certain they will be able to afford the rent in the future.