First Reading

Bill introduced on motion by Mr Anoulack Chanthivong, read a first time and printed.

Second Reading Speech

Mr ANOULACK CHANTHIVONG (Macquarie Fields—Minister for Better Regulation and Fair Trading, Minister for Industry and Trade, Minister for Innovation, Science and Technology, Minister for Building, and Minister for Corrections) (15:25): I move:

That this bill be now read a second time.

I am pleased to introduce the Residential (Land Lease) Communities Amendment Bill 2024. The bill amends the Residential (Land Lease) Communities Act 2013 to improve the regulatory framework for residential land lease communities. The Act sets out the rights and obligations of operators of those communities and the people who live in them. In a residential land lease community, residents generally own the home they live in, such as a caravan, and pay rent to community operators in the form of site fees for the land on which their home sits. Residents may also be tenants who, for example, rent the home directly from the home owner. Operators of residential land lease communities range from small businesses to large corporations. Many communities only have permanent home owners, but some are a mix of home owners, tourists, tenants and long-term casual occupants.

Residential land lease communities play an important part in New South Wales housing diversity. Many communities provide lower-cost and affordable homes for vulnerable people, especially older Australians. They also offer an alternative housing option for people who wish to live in more communal environments and are often marketed as offering a resort lifestyle at a fraction of the cost. There are more than 500 residential land lease communities in New South Wales, with more than 40,000 people living in them. Ninety-five per cent of communities are in regional and rural New South Wales, so the bill will have significant positive impacts on those areas, including the Central Coast, Port Macquarie and Ballina. A statutory review of the Residential (Land Lease) Communities Act was completed in 2021. The review involved extensive consultation with key industry stakeholders and the public. More than 350 submissions and 100 survey responses were received during two rounds of public consultation. The review found the Act remains relevant and effective but also identified opportunities to improve the Act.

In finding opportunities for change, the review made a total of 48 recommendations. Those recommendations were generally aimed at making home owners', operators' and other residents' rights and obligations clearer; increasing certainty for consumers; improving the law in relation to electricity pricing; reducing disputes between operators and home owners; and improving life in communities for all parties. The bill is a first step in the long journey to improve residential land lease community laws. It is disappointing the former Government sat on its hands for years while those communities and industry stakeholders were crying out for action. This Government is taking action. The bill implements 21 of the 48 recommendations the review made. The legislative reforms in the bill will address some of the most pressing issues in residential land lease communities. The Government will continue to continue to engage with stakeholders on the remaining proposals. By bringing the bill to the House, we are making some important changes now, but we recognise that more time is needed to consult on the remaining reform proposals so that we get those changes right.

The bill will benefit operators and residents in residential land lease communities as it will make site fee increases using the fixed method easier to understand and predict for home owners and require site fee increases made using the "by notice" method to include more information about the reason for the increase. It will improve home owners' enjoyment of their home by, for example, allowing them to make certain minor changes to their homes without operator consent.

It will introduce a new price cap for electricity charges in communities with embedded networks for electricity so that residents and operators have more certainty about energy prices. It will bring greater transparency to communities by, for example, requiring operators to give information to residents about proposed developments in the community that may impact them. It will reform voluntary sharing arrangements so that they continue to provide a flexible way to buy a home while minimising any potential exploitation of vulnerable home buyers. It will ensure fair outcomes for home owners who face termination due to reasons outside of their control.

I now turn to the provisions of the bill. Under the Act, operators may increase site fees using one of two methods—the by-notice method or the fixed method. When entering into a site agreement, the operator and home owner will agree to use one of these two methods to increase site fees. One of the biggest issues that stakeholders raised during the statutory review was about site fee increases using the fixed method. There were concerns about how some operators are using complex calculations with multiple components to increase site fees under this method. For example, calculations have been seen to include any positive change in the consumer price index, plus a fixed percentage amount, plus percentage increases in operator costs since the last fee increase, plus a fixed dollar amount. This makes it somewhat difficult for home owners to understand how much their site fees will increase in the future, putting increased uncertainty and pressure on household budgets.

The New South Wales Labor Government has been clear that its top priority is helping people across New South Wales with cost-of-living pressures. The bill makes an important change to ease the burden on residential land lease community home owners and improve transparency so that they know exactly what they must pay when their site fee increases. The bill will limit operators to using a single element to calculate a site fee increase under the fixed method. This change will improve clarity and certainty about such fee increases. It will allow home owners to more accurately predict and plan for their site fee increases. The single element could be, for example, a percentage of the aged pension, a fixed percentage amount or an increase in proportion to variations in the consumer price index.

The bill will also require operators to review and update all existing agreements that use more than one element to calculate a fixed method site fee increase within three years of the commencement of the amendments. This means that home owners who now face complex fixed method calculations for site fee increases will benefit from the bill's reforms. Updating existing site agreements will need home owners and operators to agree on a new way to increase site fees. If a variation agreement or new compliant agreement is not entered into within the three years, the bill provides that the by-notice method of site fee increase will become the default method.

The by-notice method of site fee increase can be challenged at the NSW Civil and Administrative Tribunal, providing further protections and recourse for residents. I know what a difference this change is going to be for residents in certain communities. My esteemed colleague the member for Gosford, who is present in the Chamber, has been actively advocating for this change for constituents who have directly experienced the difficulties caused by complex calculations using the fixed method of site fee increase. I thank the member for Gosford for her ongoing advocacy on behalf of her community.

I also recognise the importance of the operators who run residential land lease communities. The New South Wales Government wants operators to thrive as they are a fundamental part of flourishing communities. The Government understands that operators will need time to implement the changes to the fixed method of site fee increases. As such, the bill gives operators a three-year transition period. The bill also limits the number of times site fees can increase under the fixed method to once per year. This limit does not extend to increases tied to the age pension. Site fee increases tied to the age pension will be limited to twice per year. This change aligns with the existing 12-month limit for by-notice site fee increases. It gives certainty to home owners about how often their site fees can increase.

Further, the bill will require that a site fee increase using the by-notice method include more information about the reason for an increase. Where a site fee increase is due to higher costs for specific items, the operator will need to provide information in the notice, including the item details, how much these costs have gone up since the last fee increase and details of how the operator has apportioned the costs for these items when calculating the increased site fees. The bill also implements recommendation 18 of the statutory review to stop the NSW Civil and Administrative Tribunal from considering the value of the land on which the community is located when deciding if a site fee increase is excessive. The value of such land is not relevant to site fee increases and should not be a factor the tribunal can consider when deciding these matters.

Another critical reform in the bill addresses a key issue about electricity charging in communities with electricity embedded networks. The sector has been appealing for a solution to this issue for many years. Embedded networks are private energy networks for services such as electricity, hot and chilled water, and gas. Many residential land lease communities use an embedded network for their electricity needs. The community operator is usually responsible for the supply of electricity through the network. Residents generally cannot choose to get their electricity from someone else. Given this lack of consumer choice, it is critical that these consumers are protected from excessive prices and understand the pricing in a clear and transparent manner.

Electricity charging in communities with embedded networks is complex, time consuming and uncertain for operators and home owners. Currently, the Act limits the utility charges an operator may charge home owners. In 2018 the New South Wales Supreme Court in the case of Silva Portfolios Pty Ltd trading as Ballina Waterfront Village & Tourist Park v Reckless held that an operator cannot charge a home owner more than the operator has been charged for the electricity that the home owner consumes. This has meant that operators cannot recover their administrative and maintenance costs for their embedded networks as they can only pass on electricity usage charges to residents.

It has also meant that the way electricity bills are worked out has become complex, time consuming for operators to administer, and hard for home owners to plan for and understand. To make matters worse, these issues have led some operators to outsource the operation of their electricity embedded network to third-party electricity retailers. Due to a current gap in the law, such third-party providers can charge residents as much as they want for electricity and are not bound by the current Act's limits on utility charges. The statutory review recommended that further work should be undertaken to look at introducing a new price cap for what operators or third parties can charge residents for the supply and use of electricity in communities with embedded networks.

The bill implements this price cap with the support of all key stakeholders consulted on the bill. This approach will ensure that residents in communities with embedded networks are not paying excessive electricity charges compared with residents in communities without an embedded network. It will also have numerous other benefits. These include reducing the complexity of billing for operators, allowing operators to recover the costs of maintaining their embedded networks and giving residents much needed clarity and certainty about how much they can expect to pay for their electricity.

The Independent Pricing and Regulatory Tribunal NSW will set the median market price. The supporting regulation will require IPART to determine this price every 12 months and give notice of this to the Commissioner for Fair Trading. The commissioner will then have to publish the required information on a publicly available website, making it accessible for operators and third parties. This reform may impact the existing low rates some residents pay. As such, the statutory review also recommended considering measures to address any pricing impacts on customers due to the new cap. The bill sets out two such measures. Firstly, at least once a year, the electricity supplier for the community must give written notice of the charges they pay for their electricity supply to residents. Secondly, at least once every two years, the electricity supplier will need to review and compare their electricity supply contract with at least one other comparable offer from another electricity retailer. If the contract is more than two years, then the supplier will need to review the contract after its expiry before a new one is entered into. The supplier will also need to give each resident written notice of their review.

I recognise that IPART has recently considered the regulation of embedded networks in New South Wales. It made several recommendations about electricity charging in embedded networks in the report it published in April. IPART's recommendations overlap with the electricity charging provisions in the bill to some degree. Some may ask why the Government is introducing the electricity reforms now. The electricity pricing reforms in the bill are a stopgap measure until broader industry regulation for electricity pricing is implemented. It is necessary to proceed with the reforms now as stakeholders have been calling for change for several years, thanks to the inaction of the former government.

The reforms are needed to address the difficulties operators and residents face. The situation has now become urgent. They cannot wait any longer. It has been made clear to stakeholders that the measures in the bill related to the electricity pricing of embedded networks are temporary until the Government implements broader industry regulation for electricity pricing. Stakeholders understand and support the Government's approach. My colleague in the other place, the Minister for Climate Change, and Minister for Energy, will lead the Government's response to IPART's recommendations and their subsequent implementation. I look forward to working with Minister Sharpe to progress that important work.

I turn to the new utility billing provisions in the bill. The provisions are in line with recommendations 24 and 25 of the statutory review. Currently, the Act does not have any specific requirements about what information an operator must include on a resident's utility bill or how often such bills are to be issued. Feedback to the review suggested that the lack of rules has led to inconsistent billing arrangements across communities. That has created uncertainty for residents, which again impacts their ability to properly budget. For electricity and gas billing, the bill introduces provisions so that the entity issuing the bill, such as an operator, must comply with the relevant national energy rules. The rules are the National Energy Retail Rules for retailers and the Australian Energy Regulator's retail exempt selling guidelines for exempt sellers. For billing for all other utility types, the bill details the minimum information to be set out in bills and requires that bills must be issued to home owners and tenants at least once every three months. Those requirements are consistent with those that apply to electricity and gas billing. The changes will give home owners and tenants more clarity and certainty about their utility bills.

A key benefit of living in residential land lease communities is the communal environment. Residents can get to know each other and support each other. They can share the benefits of facilities that they may not otherwise have access to on their own—for example, pools, tennis courts or libraries. However, due to the shared nature of communities, the Act needs to strike a balance between individual home owners' rights and those of the community and operator. The review of the Act identified opportunities to give home owners more freedom to enjoy their home without detriment to the community or operators. An example of that is home owners being able to make certain minor alterations and additions to their homes without the operator's consent. Section 42 of the Act currently generally restricts a home owner from changing the exterior of the home except with the operator's written consent, or as allowed under their site agreement. The bill will mean home owners can now add window locks, screens, shutters and door screens without the operator's consent. That seems sensible and streamlines the process for home owners and reduces operators' administrative burden having to approve minor changes.

The bill also provides a regulation-making power to allow other minor alterations to be included in the regulation. Any such change will only be made if it strikes a good balance between the rights of home owners, other residents and also the operators. The Government will closely consult with key stakeholders on any such proposed change. The bill strengthens residents' freedom to enjoy their home by clarifying that operators are only to enter a home in certain situations, such as with the resident's consent or in an emergency if necessary to avert danger to life. It will also clarify that operators can only ask home owners to fix significant dilapidation of a residential site if the home owner has caused it. That is in line with recommendation 33 of the statutory review.

It is important that residential land lease community laws properly protect home owners and enable them to make informed decisions. At the same time I acknowledge the key role that operators play in the growing residential land lease communities sector. Flexibility and minimising unnecessary red tape are important to support the viability and growth of those communities in New South Wales. There are a number of reforms in the bill that balance those different considerations and aim to improve overall outcomes for home owners and operators. Increased transparency between home owners and operators encourages cooperative relationships and reduces the number of disputes.

In line with the statutory review recommendations, the bill introduces small changes to operators' obligations relating to information sharing. Those added obligations are proportionate and aim to limit impacts on operators as much as possible. For example, the statutory review found that communities will benefit from more transparency from operators about development proposals and applications that operators are pursuing. As such, the bill will require an operator who is seeking to lodge a development application or planning proposal that may affect the residential land lease community to give written notice to all potentially affected residents. Operators must give written notice to potentially affected residents at least 30 days before lodging their proposal. The notice is required to also have a brief summary of the proposal. Residents deserve to know of any changes proposed to the community that may impact them not only because the changes might affect existing features and amenities of the community but also because they may impact on day‑to‑day living—for example, construction in a community. However, to limit an operator's administrative burden, the provision only makes operators give notice of proposals they actually intend to lodge.

The bill also makes changes to the voluntary sharing arrangement provisions of the Act. Currently, the Act allows voluntary sharing arrangements if a prospective home owner can agree to pay the operator an entry fee, an exit fee, a deferred site fee or a portion of the capital gain or sale amount when the home is sold. Those arrangements give flexibility to operators and prospective home owners to negotiate agreements to buy a home that can be tailored to the prospective home owner's individual financial situation. However, the statutory review found that the ability of operators to charge entry and exit fees could be excessive and act as a barrier to the uptake of voluntary sharing arrangements. The bill removes the ability of operators to charge entry and exit fees under those arrangements.

The bill also introduces a measure to improve transparency for prospective home owners entering voluntary sharing arrangements and the cost of a rent-only agreement. Rent-only site agreements only require homeowners to pay site fees to the operator for the site. In contrast, voluntary sharing arrangements allow homeowners to pay operators in other ways. For example, under such an arrangement a homeowner could pay a smaller site fee and part of any capital gain they get when they sell their home. That will mean that prospective home buyers can better understand the options that they have and their financial implications to make fully informed decisions.

Another aspect of the bill that I want to draw to members' attention is a key protection for communities in light of our State's most recent experiences with extreme flooding and fire. As members are aware, those events have been devastating for the people of New South Wales in affected communities. The bill strengthens the emergency procedure requirements to ensure communities can properly respond to extreme weather events and other emergencies. Section 37 of the Act currently requires operators to have emergency evacuation procedures in place and to take reasonable steps to ensure that all residents are aware of the procedures. The bill will require operators to test the procedures at least once a year and to keep records of the tests. I understand that many community operators already test their emergency procedures. The introduction of this requirement only formalises the obligation for many operators. This will ensure that all communities have emergency procedures that are up to date and ready to be deployed when needed. The amendments will also ensure residents are aware of the procedures.

As I have said consistently, the Government is committed to properly balancing the rights and responsibilities of home owners and operators. The Act clearly sets out when an operator can end a site agreement. The restrictions on when an operator can do so are important because an operator ending a site agreement has considerable consequences for a home owner. If an operator ends an agreement, the home owner will need to move, which is highly disruptive. But operators must be able to end agreements where needed so they can operate their communities effectively. The statutory review generally found that the termination provisions in the Act are working well, but the review sets out some changes to ensure fairness to home owners.

Section 127 of the Act allows an operator to terminate a site agreement because the site is not allowed to be used as a residential site under relevant laws, such as planning law. But the operator has to pay the home owner compensation if the home owner did not know this at the time they entered the site agreement with the operator. The review found that there are situations where an operator has taken action that resulted in a residential site not being allowed to be used, but because this happened after the agreement was entered, operators do not have to pay compensation to home owners. The bill fixes this loophole to ensure operators are held responsible for their actions and have to compensate affected home owners, irrespective of when the site agreement was entered.

The bill also amends section 127 of the Act to extend the period to vacate a residential site from 90 days to 120 days after home owners receive a termination notice. This applies where the termination notice is due to the residential site not being lawfully useable for the purposes of residing. This supports home owners to find a different place to live by giving them more time to search. Lastly, the bill removes section 128 of the Act. Currently, section 128 allows an operator to end a site agreement if the residential site has not been used for at least three years as the place of residence of the home owner or another person permitted to live there. This change is in line with review recommendation 48 and means home owners will not be pushed out of a community where they have met their actual obligations.

The Residential (Land Lease) Communities Amendment Bill before the House will implement some of the key recommendations of the statutory review of the Act. I thank all key industry and community stakeholders and members of the public who have made valuable contributions to these reforms. In particular, I want to thank and acknowledge the Caravan and Camping Industry Association, the Affiliated Residential Park Residents Association, the Tenants' Union of New South Wales, the Independent Park Residents Action Group, and the Energy and Water Ombudsman NSW.

The bill is the first step in delivering changes to improve residential land lease community laws for the benefit of all parties involved—operators, home owners and other residents. It will support the continued growth of residential land lease communities in New South Wales by ensuring that the regulatory framework is modern and has the flexibility and balance needed to operate effectively. I look forward to continuing to work with stakeholders to progress the remaining statutory review recommendations. I commend the bill to the House.

Debate adjourned.