Welcome to the first article in our series, an initiative of HopgoodGanim Lawyers’ Manufactured Homes team designed to provide operators and developers with information about the requirements for establishing and operating a park, from its acquisition and development, through to its sale. The series will also provide information about the employment, discrimination, and privacy laws particular to the operation of a manufactured home park.
The current manufactured home park model has come a long way from its humble mobile or relocatable home park beginnings. Now, home owners want to be part of a lifestyle community, whether that be within a park with basic amenities or those with luxury resort-style facilities, and manufactured home parks provide a solution, at various levels, for that demand. Home owner demand and attractive potential returns for park owners are driving increasing interest from established and new operators in the development and operation of manufactured home parks across Queensland.
Part 1: Acquiring an established manufactured home park – what you need to know
The acquisition of an established manufactured home, caravan or mixed use park is a significant transaction, and one that should be the subject of a thorough due diligence investigation.
Whether the buyer intends to continue park operations unchanged, or undertake changes or expansion, this article, authored by Special Counsel Anthony Pitt, Partner Tracey Rundle and Associate Janelle Metcalf, details some of the matters that should be considered in any potential acquisition.
4 things you need to think about:
In any transaction, it can be difficult to renegotiate terms once a contract has been signed and, as such, the terms of the purchase contract should be the subject of specialist advice from the outset.
The specific issues to be addressed will vary depending on the characteristics of each transaction, but advice may be required in relation to property, planning and environment, employment, structuring, financial and tax matters, as well as specialist manufactured homes advice.
There are a variety of searches that are able to be undertaken with the Council, as well as other government agencies in respect of the land, and also the business being undertaken on the land.
Examples of some of the searches that may be undertaken include:
- Land titling matters
All aspects of land title should be carefully investigated.
- Planning approvals
- A search of current planning approvals should be undertaken to reveal what conditions have been imposed, including any ongoing restrictions or requirements for the operation of the approved use, or any outstanding obligations.
- Any planning approvals also need to be considered in light of other planning instruments, including State environmental planning policies, and other Council overlays and policies.
- Building approvals and certifications
- Searches should be undertaken to ascertain what building and plumbing approvals and certifications exist.
- The consideration of building approvals can be a complex matter, as the age and character of each structure can affect a number of matters, including:
- whether or not approval or certification is required;
- whether the correct type of approval and certification has been obtained for each structure; and
- whether the physical structure, or the use of any area within the structure, has changed over time, and if so, whether these changes have also been the subject of further approval or certification (where required).
- Other approvals or permits
- It is important to check that an accommodation permit is current, and to confirm exactly what type of accommodation is approved and what conditions apply.
- Recreational and other facilities on the site may also require approvals or permits, such as a pool safety certificate for all pools, and registration of plant and plant designs under the Work Health and Safety Regulation 2011 (Qld) for specified plant and equipment etc.
- Searches should also be undertaken to ascertain if there are any environmentally relevant activities being undertaken on the property, and if so, what conditions attach to those.
- Physical inspections of the property and structures
- Physical inspections of the property and any improvements are very important, and should be undertaken and considered in conjunction with the results of the above ‘paper’ searches.
- Physical inspections, as best as possible, of each of the structures subject to a tenancy within the park are very important so as to ascertain their correct legal classification in terms of whether they are a “manufactured home”, a “caravan”, a “converted caravan” or something else. Generally speaking, this classification dictates what legislation applies to each tenancy arrangement, regardless of what form of agreement has been entered into to document the tenancy. This is important to ascertain exactly what form of tenancy arrangements and liabilities will be taken over upon purchase.
Site Agreements and other tenancy documents
Depending on the mix of accommodation types in the park, there may be a range of agreements in place for site occupation at the park, including site agreements under the Manufactured Homes (Residential Parks) Act 2003 (Qld), tenancy agreements under the Residential Tenancies and Rooming Accommodation Act 2008 (Qld), as well as short term or holiday rentals.
A thorough review of the existing agreements, and a cross-check of those against the physical structures (as discussed above), is essential as these can significantly impact a number of matters in the ongoing operation of the park, including:
- Site rent – the amount payable, how and when reviews may be undertaken, and whether reviews have been regularly undertaken to date.
- Outgoings and financial contributions – whether home owners/residents are liable to contribute to outgoings (e.g. water, electricity etc), or pay additional costs or charges for extra services or in specific circumstances.
- Repair and maintenance obligations – whether home owners/residents are required to repair and maintain items, and if so, in what circumstances and to what standard.
- Other rights and obligations of both the park owner, and home owners/residents in various circumstances.
Any Park Rules and Home Owners Information Document (HOID) should also be reviewed to provide a complete picture.
Other matters that should be considered include the following:
- Unregistered agreements
These agreements can relate to any aspect of the property or business, and generally are unable to be searched in any public record. Therefore, it is essential that the purchase contract oblige the seller to fully disclose all such agreements and include suitable warranties relating to such disclosure.
- Land tax and age discrimination exemptions
The buyer should investigate whether the vendor park owner currently holds exemptions for:
- land tax, and whether the new park owner is likely to qualify for an exemption following acquisition; and
- age discrimination under the relevant State or Federal legislation.
- Financial documentsand matters
An accountant or other suitably qualified person should review the financial performance of the business, including any employment contracts and entitlements if employees are also being transferred.
- Structuring of acquisition
The buyer should carefully consider the best way to structure the acquisition to achieve the best possible outcome in terms of tax, liability and asset protection, etc.