Payment of commission to the park owner by the homeowner on the sale of a park home has been part of agreements since the Mobile Homes Act 1975. However payment of what was 15%, reduced to 10% commission in 1983 has been a point of contention for many years.
Recently, a public consultation took place in Wales on the 10% commission. As part of the consultation process, a report was commissioned from a firm of accountants on the effect the abolition of the commission would have on park owners. The report said: “In the event that the ability to raise income from the commission were removed, then in order to remain viable an increase in pitch fee is likely to be required”. In response to the consultation by the Welsh Government, there was a short section at the end which recommended a reduction to the 10% rate of commission over a period of time so as to allow park owners to make “adjustments to their business model”. In a subsequent oral statement from the Minister, she announced that the rate of commission would reduce by a percentage each year to a maximum rate of 5%.
In a question posed to the Housing Minister by a Welsh Assembly Member, and in support of the park owner, confirmation was sought that “provision will be made for the pitch fee to be increased over and above the Consumer Prices Index” (which is the relevant index to have regard to when reviewing the pitch fee each year in Wales).
The Minister responded at the end of June 2018 to say that the Mobile Homes (Wales) Act 2013 already provides for the pitch fee to be changed in circumstances where it is reasonable to do so (and for the Tribunal to adjudicate on this) and that “no change is anticipated to the law in this regard”.
Assuming that new laws are drawn up so that the statutory 10% is reduced in each year to a maximum of 5%, as it stands there will not be an express change to the pitch fee review criteria to allow an increase arising from the impact of this loss of income. This leaves operators in Wales with the potentially difficult task of:
- establishing their loss
- seeking to agree a pitch fee review with residents to take into account this loss, and
- persuading the tribunal that it is reasonable to change the pitch fee to the new level sought in the absence of an agreed pitch fee review
The report from the accountants expressly said that whilst they had not been instructed to consider whether there was any margin in the park owners operating costs to absorb the knock on impacts of abolishing the commission, the report said that there was little room to absorb any additional costs. Potentially the park owner is facing an uphill battle and a drain on resources (both in terms of their own time and the cost of professional advice) to try and secure an increase.
Of course if pitch fee reviews are agreed or decisions made by the tribunal for the pitch fees to be changed this could leave some residents worrying about how they will pay any increase over and above the change in inflation.
In England questions have been posed by MPs as to when the Housing Minister will “follow suit” and propose a reduction in the rate of commission. The Government is in the process of responding to the Part 2 Consultation on the review of the Mobile Homes Act 2013, due to be published in Autumn 2018. It has been announced that commission will be dealt with separately and not as part of the 2013 Act review, which did not include questions about the rate of commission in the consultation paper. We will have to wait and see.
Of course, in the holiday park industry it is open for park owners and potential purchasers of static caravans and lodges to agree as part of their contract the rate of commission (or transfer fee) to apply on a sale and it will be interesting to see how holiday park operators react.
On 26 September the Welsh Assembly announced the start of a consultation on how the law should be changed to implement the Minister’s decision including when the reduction of a percentage in year should start from and if any guidance should be issued. The deadline to respond is 14 December 2018.
Kirstie Apps has been working for park owners for over 16 years and recently set up her own law firm Apps Legal Limited.