Voluntary sharing arrangements in a residential land lease community

When you move into a land lease community, the operator can offer you a voluntary sharing arrangement. Voluntary sharing arrangements mean you don’t have to buy a home outright and pay only site fees, instead you can agree to another financial arrangement.

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What to expect from a voluntary sharing arrangement

Before a voluntary sharing arrangement can start, the operator must:

offer you the option of a ‘rent only’ site agreement, which is where you pay the operator rent for the site your home is on
give you written information about the costs of the proposed voluntary sharing arrangement compared to a ‘rent only’ site agreement, and
tell you to seek independent advice about the voluntary sharing arrangement.

The operator must not charge you an entry and/or exit fee.

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.

A site agreement with a voluntary sharing arrangement must also include declarations signed:

by the operator and you that says the operator offered to enter a rent only site agreement with you and you declined the offer, and
by you that says you got independent advice about the voluntary sharing arrangement before entering into it or waived your right to do so.

Be aware that only certain types of voluntary sharing arrangements can be legally offered to you and before accepting it, we strongly recommend 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.
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 examples

Sue and Daryl

Sue wants to sell her home to Daryl who has offered to pay $275,000 for it. When Daryl contacts the operator, he is offered 2 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.

The operator also gives Daryl a comparison of the costs he will pay under the two agreements.

He is told that he has a 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 get 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.

Madeleine approaches the operator to see if an alternative arrangement can be made. The operator tells 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 Madeleine sells the home later on.

The operator gives Madeleine a written comparison of the costs Madeleine will pay under the two agreements.

Madeleine agrees to this arrangement and purchases the house from Brian.

Joe and Roger

Joe is interested in selling his home to Roger for $350,000. 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.

The operator informs Roger that he has a right to a 'rent only' agreement, but that there is also the possibility that the operator can lower the site fees if they agree to a sharing arrangement.

Roger and the operator come to an agreement that benefits them both. This includes the operator giving Roger written information about the costs Roger will pay under a ‘rent-only’ agreement compared to the alternative agreement with a sharing arrangement.

FAQ

Who can be offered a voluntary sharing arrangement?

Voluntary sharing arrangements can be offered to prospective homeowners 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 homeowners 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.

Do I have a choice?

If you are buying a home from an existing homeowner and ask for a new site agreement from the operator of the community, the operator must offer you the option of a 'rent only' site agreement. This is a standard site agreement that does not contain any voluntary sharing arrangements. The site fees under this agreement must be no higher than fair market value, which is the higher of:

the site fee the current homeowner pays, or
the site fees currently payable for a site of a similar size and location within the community.

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 and how is a voluntary sharing arrangement paid?

Most voluntary sharing arrangements will be 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 ends if you are a new homeowner and you move into the home. If later on you believe the arrangement is harsh or unfair, you should seek legal advice.

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