Essential information for anyone contemplating buying into a manufactured home park
A land lease community, more commonly known as a manufactured home park, is one of the accommodation options retiring Australians may consider for their future. According to the Department of Fair Trading, there are some 500 manufactured home parks in NSW housing about 34,000 residents.
Manufactured home parks may be an attractive option – you’ll live in a community setting in close proximity to others, the purchase or entry price is usually less than traditional real estate, there are usually no exit fees (unlike many retirement villages) and you get to enjoy the services and facilities onsite.
However, like all major financial transactions, it is vital to obtain financial and legal advice before you sign on the dotted line so you understand exactly what you are buying. What are the ongoing costs and financial consequences? And what happens when you want to sell up and leave?
What is a manufactured home park?
It contains a number of manufactured or moveable dwellings. There may also be facilities for residents, such as community centres and swimming pools.
When you buy into a manufactured home park, you own the home (the structure) but you do not own the land it stands on. Normally you would buy the home from an outgoing owner or the park operator, and lease the land from the park operator.
What’s involved in buying into a manufactured home park?
There are two main agreements you will need to consider and sign if you decide to proceed:
- a contract to purchase the home from the outgoing owner (or the park operator)
- a site agreement setting out the terms on which you are leasing or renting the land.
Before you sign the site agreement, the park operator must give you a disclosure statement at least 14 days before you sign. The disclosure statement sets out key information to help you make an informed decision about whether you wish to proceed. It covers details of the facilities and services available in the community, and the fees and charges associated with leasing the site.
Before you proceed, make sure you discuss the disclosure statement, the site agreement and contract with your legal advisor. There are many aspects of the documentation that need to be carefully considered and steps you should take to protect yourself, before proceeding. For example, a pest and building report. That’s why it is vital to obtain legal advice!
What are the costs of buying into and living in a manufactured home park?
- The major upfront cost is the price you pay for the home. It’s normally less than buying traditional real estate (house and land, or a unit) in a comparable area and this is because you are buying only the structure – not the land.
- The major ongoing expense is the site fees, which are listed in the site agreement and payable on a regular basis such as weekly or fortnightly. You may be eligible to receive some rental assistance from Centrelink depending on your circumstances. Keep in mind that site fees will increase as time goes by. However, there are rules and procedures set by legislation regarding how and when any increases may be introduced.
- You may be asked to pay a small refundable deposit for an access device to the park.
- You’ll be responsible for your own telephone and utility expenses.
It is important to review the disclosure documentation and the site agreement carefully, so you know exactly which expenses you’ll be responsible for.
How secure is your tenure?
A site agreement does not have to be for a fixed period of time – it can be ongoing. If it is for a fixed period of time, the legislation provides that it must be at least 3 years.
There are legislative protections in place so the park operator can only terminate the site agreement in certain circumstances. Some of these circumstances are if you have done the wrong thing, such as persistently or seriously breaching the terms of your site agreement or being 30 days or more behind in your site fees.
The operator can also terminate in limited circumstances where you are not at fault. For example, where repairs or upgrades have been ordered by the local council or another authority, or the site is being compulsorily acquired.
What happens when you want to sell and move on?
Under the legislation you have a right to sell your home onsite. If you pass away, your executor or administrator can exercise this right. If you wish you can look after the sale yourself, or you can appoint a real estate agent or the park operator. Whichever way you go, you should have a contract for sale drawn up by your legal representative to make sure you are protected.
Before you commit to selling your home to any particular person, you must refer them to the park operator so the operator can comply with their disclosure obligations to the prospective buyer. This also enables the operator to ensure the prospective buyer meets any specific requirements, for example a minimum age.
What’s the first step? Talk to our Elder Law team on 02 4929 3995
This article covers just some of the aspects to consider if you plan to become a resident in a manufactured home park. Keep in mind that the first step you should take is speaking to your lawyer and accountant/financial planner to discuss the financial implications and legal risks — before deciding if this is the best arrangement for you.
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