New VCAT decision on deferred management fees for moveable dwellings

In the recent VCAT decision of Bik v Peninsula Parklands Pty Ltd (Residential Tenancies) [2018] VCAT 1606 (Bik Case), the Tribunal held that the deferred management fee in the Site Lease was void pursuant to the Residential Tenancies Act 1997 (Act).

The Bik Case is the first decision on the enforceability of deferred management fees for moveable dwelling as regulated under Part 4A of the Act.

The terms of the deferred management fee in the Bik Case is set out below:

“5.1 Payment of Deferred Management Fee

Subject clause 5.2 the Tenant must pay the Deferred Management Fee to the Landlord:

• Upon the transfer of this Lease by the Tenant… to a purchaser of the Park Home to remain on the Site;
• Upon the Landlord approving the Tenant subletting the Site;
• Upon a deemed sale pursuant to clause 10.2(b) of this Site Lease; or
• Upon the expiration or earlier termination of this Lease.”

The Bik Case held that the deferred management was drafted as a fee for giving consent to the assignment of a site agreement and as this is in breach of s 206ZZG of the Act (which specifically prohibits charging such a fee).

Whilst the Bik Case did turn on s 206ZZG, the Senior Member seemed to suggest that if s 206ZZG had not applied, he would have examined the deferred management fee under the requirements of s 206S of the Act. Section 206S sets out the details that site agreements must include. Amongst other things there is a requirement that the amount of rent, fees and other charges must be detailed. We think it is arguable that the deferred management fee may not satisfy s 206S in circumstances where its calculation is depended on the value of the dwelling at the conclusion of the lease, a value which is presently unknown.

Further, whilst not referred to in the Bik Case, it also seems arguable that a deferred management fee may be held to be unconscionable pursuant to s 206G of the Act, if it cannot be associated and/or linked to either the value of a service or opportunity given to a resident.

We are informed that the decision in the Bik Case has been appealed.

Should you have any queries in relation to your deferred management fee please do not hesitate to contact us.

This article was written by Rebecca Jaffe, Partner.