What is a serious defect?

When Olga Moore (Olga) purchased her house in 1991 for $38,000 with a promised 99-year lease, she could not possibly have imagined what battle would lie ahead for her son and grandchildren.

Buying from what was then Walter Elliott Holdings Discovery Park at Bangholme, Olga, lived out the rest of her days there.  When she passed in October 2012, her son Jeffry Moore (Jeffry) took over, and lived there until he died in October 2020.  At all times, the rental was paid.

Miraculously, nothing was documented, by either party, and some 33 years later, Olga’s grandchildren find themselves in VCAT fighting for the right to sell her house and the leasehold interest that comes with it.

The owner of the park is now known as Palm Lake Resort Pty Ltd (Palm Lake Resort).  Palm Lake own residential and holiday parks up and down the east coast of Australia.  Walter Eliott is still the managing director of the company.

The Residential Tenancies Act 1997 (RTA) deals with movable dwellings under Part 4A.

Generally, the house or dwelling is bought in a private sale, between purchaser and vendor.  With the sale, there is an assignment of the leasehold interest with the park owner, in this case Palm Lake Resort.

When a vendor wants to sell the dwelling and land interest, it needs the consent of the park owner to the assignment of the land interest.

Under the RTA they are called “site owner” and “site agreements”.

In this case, Palm Lake Resort refused to consent to any assignment by the Moores on the basis that no lease existed between Olga and Palm Lake Resort and therefore it was not capable of assignment. Palm Lake Resort further alleged that even if a lease were to exist between the parties, the property is not capable of assignment as it has “serious defects” (defined under the RTA).  Palm Lake Resort refused to buy the dwelling back off the Moores, so without being able to fund the extensive “serious defects” identified by Palm Lake Resort, the Moores were left with no option but to go to VCAT to fight for the right to sell the dwelling.

VCAT Proceedings

Preliminary issue

VCAT held an initial hearing in relation to the question of whether or note the Moores had a site agreement.  It was considered that if they did not, the rest of their claim would fall away.

VCAT determined was that there is insufficient evidence that a 99-year lease exists as the only evidence of a 99-year lease was that Olga frequently and repeatedly referred to a 99-year lease.  As she is deceased, this evidence was hearsay.

The only evidence that existed between the parties (which was simply not enough) was a Deed of Sale from when Olga purchased the Part 4A dwelling. However, the Deed of Sale did not contain any provisions which granted transfer or assignment of any contractual rights held or enforceable by the vendor.

VCAT further submitted that even if Olga’s evidence was accepted in relation to the 99-year lease, ‘it is equally possible that Olga was a victim of misrepresentation or simply misunderstood or assumed that there was a 99-year lease’.[1]

The Tribunal determined that a site agreement does exist between the parties, and therefore Palm Lake Resort’s argument that the site agreement expired upon the death of Olga and/or death of Jeffry, failed.

The Tribunal’s reasoning was as follows:

• Section 206E(3) of the RTA states that if a site agreement is not in writing it does not make the site agreement illegal, invalid or unenforceable or affect the application of the RTA to the site agreement;[2]
• Section 3 of the RTA provides a definition for site agreements which is “an agreement under which a person lets land as a Part 4A site for the purposes of the occupation of a Part 4A dwelling on that land by the Part 4A dwelling owner as a residence”;[3]
• the RTA does not contain a provision which explicitly states that a site agreement in Part 4A parks is terminated upon the death of a sole tenant;[4] and therefore
• the Tribunal applied the general law to this matter whereby upon the death of Olga, the site agreement formed part of her personal estate and therefore must vest in her executor or administrator.[5]

Consideration of serious defects

The second limb of the matter that had to be determined by the Tribunal, in order for the Moores to to be able to assign and sell the leasehold interest, was whether the Part 4A dwelling contained “serious defects” as claimed by Palm Lake Resorts.  There is very little case  law available in relation judicial consideration of the definition of  “serious defects” pursuant to the RTA.

Under section 3 of the RTA, serious defects are defined as:

1. the caravan or dwelling, including the exterior of the caravan or dwelling, is not in a reasonable state of cleanliness or repair; and
2. the condition of the caravan or dwelling poses a significant health or safety risk.[6]

Both parties obtained expert reports. Palm Lake Resort’s expert had an extensive list of what he considered were “serious defects” and opined that the Part 4A dwelling was not in a good state considering the age of the dwelling.   This list included:

1. Concrete driveway;
   1. Dwelling located on dry packed blocks with no storm tie downs;
   1. External stairs to the rear of the property to the laundry back door will need to be changed;
   1. All gas appliances need to be updated and changed to natural gas;
   1. Hot water unit in the kitchen will need to be changed to a gas unit;
   1. Bathroom vanity is not serviceable;
   1. Kitchen cupboards are not serviceable;
   1. Range hood in the kitchen is not serviceable;
   1. Major wood decay to fascias and eaves;
   1. All electrical appliances and fittings will need to be checked and certified by licensed electrician;
   1. External cladding to be tested and certified clear;
   1. Front porch and steps;
   1. Front right hand side structural past contains severe wood decay;
   1. All of the above ground plumbing to the rear left hand side corner, that is current and above ground will need to be relocated; and
   1. Smoke detectors need to be re-installed.

Whereas, the Moore’s expert only had two “serious defects”:

1. the driveway as it contained cracking to the slab which may pose as a tripping hazard;  and
2. the external stairs to the rear of the property from the laundry door.  

The expert further opined that the overall condition of the Part 4A dwelling is average.

After extensive cross-examination and evidence in chief of both experts, the Tribunal found that there were two serious defects that needed to be rectified by the Moores prior to any sale:

1) the external stairs to the rear of the property as they were not safe, and needed to be replaced and brought up to the Building Code of Australia; and

2) the placement of bottled gas at the site was dangerous, and needed to be replace by mains gas being connected to the property.

The Tribunal ordered that the Moores fix both of those defects, and then the dwelling can be sold, and Palm Lake is not to unreasonably without consent to any transfer proposed.

The Moores have appointed an agent and the property is on the market.

It is understood that there may be some residents still living at the Bangholme park who are in the same position as the late Olga Moore and her family, believing they have a 99-year lease, but with nothing documented.  It is extraordinary to think that a huge corporate like Palm Lake has kept very little relevant records from the time that Olga Moore purchased the property and over the years she lived there.

It is hard to believe people administering deceased estates have to go to the lengths the Moores have had to go to, to administer their loves ones’ estates.

Link to judgment: Moore v Palm Lake Resort Pty Ltd (Residential Tenancies) [2022] VCAT 448 (26 April 2022) (austlii.edu.au)

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[1] Donna Moore v Palm Lake Resort Pty Ltd [2022] VCAT 448, 25(b).

[2] [2022] VCAT 448, 30.

[3] [2022] VCAT 448, 31.

[4] [2022] VCAT 448, 36.

[5] [2022] VCAT 448, 38.

[6] Residential Tenancies Act 1997