PHRAA’s In Depth Review of the Government

Decision Announced 27th March 2007.

Back ground.  For the benefit of any new, prospective or existing park homeowners not aware of the 10% requirement the following paragraph is a quote from the above government document.

PHRAA is frequently asked by disgruntled park homeowners who have,  on informing their park owner that they wish to sell their home, found that they have by law to pay the park owner 10% of the sale price, which, to put it mildly, has come as a shock to many, what is this payment for? And why does it have to be paid?  The truth is there appears to be no satisfactory answer for this unwarranted and archaic charge unique to park homes, holiday caravan and lodges, which benefits no one other than the park owner. Not even the government benefit as it is tax free income to the park owner.

Unlike conventional bricks and mortar homes, park homes are classed as caravans therefore chattel and purchased exactly the same as a car or TV etc.  Would a car owner react favourably to being told that when he sells his car he will be obliged by law to pay the dealer he first purchased the car from, 10% of the money he receives when he sells it? One can well imagine the national uproar there would be if the owners of conventional housing were forced to pay 10% of the sale price of their home to the original builder from whom the home was purchased?

The government document states that 141 out of the 146 park owners consulted and their trade organisations claim that the loss of the income generated by extracting 10% or even the rejected option of a reduced rate of 7.5 % commission payment from homeowners who sell their homes,  would result in them losing a significant amount of their income and would cause some to go out of business and possibly leading some into bankruptcy.  They also claim that many park owners would be made so poor,  that they would be forced to sell their parks to unethical park owners, who finding their incomes had been reduced would look for other ways of harassing residents into leaving their homes and selling to the owners for pittance.  Is this not happening already?

If as claimed those 141 park owners consulted, bearing in mind that many of them will be multiple park owners, are operating so close to the breadline that they have to rely on the occasional 10% from a residents sale in order to survive. How then do they account for the brand new 4x4s, the top of the range Bentley and/or Mercedes plus in some cases the million pound plus mansion surrounded with high walls complete with guard dogs and electronic entry devices.?  Who are they kidding?  When did you last see a park owner on a bike?  If operating park home sites produces the poor return claimed by park owners then how is it that they are clambering to buy them?

Another argument against abolishing or reducing the current level of the commission rate put forward by park owners and their trade organisations is that pitch fees would have to be increased to compensate for their claimed substantial loss of income. They state that they use the present income generated by the 10% commission rate to keep pitch fees at their present low level. They also state that any reduction in the current 10% rate would lead to a corresponding reduction in the amount invested on park infrastructure and improvements, laying off employees, thus increasing the strain on the public purse, the general running down of parks leading to parks being sold off to unscrupulous park owners.

But how is this alleged substantial loss of income calculated? For this source of income to have any significant impact on the park owners income, homes would need to change hands on a regular and frequent basis, which has to act as an incentive to unscrupulous park owners to make the lives of his residents as miserable as possible,  thus ensuring that homes are sold as often as possible.   On parks with good owners where residents are happy and contented homes very rarely change hands. Most such park owners make a good living and keep their parks well maintained without relying on a regular 10% from sales.

Most of the complaints regarding the commission payment PHRAA receives from park homeowners express outrage over the fact that until they were informed by the park owner when they put their home up for sale,  they were not aware that they were obliged to pay the park owner 10% of the sale price of their home. This is hardly surprising as none of the park home advertising, glowing write ups or even most park owners divulge this information when extolling the virtues of park home life to prospective buyers. It is highly unlikely also that a homeowner selling his home would be likely to volunteer such information knowing that it would be likely to cause his buyer to back out.

As the government have acceded to the industry’s demand that the 10% commission payment remains then it must ensure that it be made a legal requirement that notices to this effect must be predominately displayed in all park home advertising literature, not left tucked away deep inside the Written Agreement (contract),  which may or may not be given to any prospective purchaser 28 days before they buy as the law requires.

The Commission Document states that it is the aim of the government in reaching the decision to retain the 10% payment that it will aid the growth of the industry and put an end to incidences of harassment of residents by unscrupulous park owners. In PHRAA’s view neither of these statements will prove to be true.  Many prospective purchasers of park homes will be put off buying when they realise that if in a few months or years time they wish to sell their home for any reason, they immediately lose 10% of any money they receive from the sale to the park owner, very often,  in the case of an unscrupulous park owner, as a reward to him for making their lives unbearable during their time on the park. To put it into context, the moment the buyer pays for the home, the home immediately loses 10% of its value. As for reducing the incidences of harassment of residents on parks, as mentioned earlier in this report, it will only encourage unscrupulous park owners to continue to harass their residents,  until they can stand it no longer and sell up just to get away, paying him many thousands of pounds of their assets in commission as a parting gift.

Has it not occurred to park owners, their trade organisations or government that the reason for this may be that many park homeowners, especially those purchasing brand new homes, know nothing about the commission when they buy? As already mentioned no mention of the commission is contained in the park home industries promotional material. Indeed not even the fact that pitch fees and other charges are payable to the park owner are mentioned in most advertising.

In PHRAA’s opinion it is obvious that the park owners and their trade organisations have used their combined power and influence to persuade the government that the current 10% commission rate should remain unchanged or not even be reduced to a proposed 7.5%. This, together with changes to park home law which came into force on October 1st 2006,  has done nothing to improve the failing credibility of the park homes industry or to improve park homeowners rights. All that has been achieved is to knock yet another nail in the coffin of the helpless park homeowner or rather caravan dweller as the government insist park homes remain classed as.

The governments consultation document put forward 3 options for consideration…..

Option 1…. Retaining the 10%.

Option 2….. Reduce commission rate to 7.5% with a prohibition on a compensatory increase in pitch fees.

Option 3…..Reducing the maximum rate of commission on the sale of a park home for new agreements only, to 0%, without limitation on a compensatory increase in pitch fees.

The number of responses to the consultation document were…others  14.

                                                               Residents…………………….988.

                                                             Residents Associations………..102.

                                                               Park Owners………………… 146.

Supporting Option 1   16 residents, 1 Residents Association, 141 Park Owners and 3 others.

Supporting Option 2… 753 Residents, 78 Residents Associations, 1 Park Owner and 2 others.

Option 3 …A none starter anyway due to the obvious repercussions on residents if this were adopted.….. 5 Residents and 3 others. 

Finally the Act states that the Commission Rate is set at a maximum of 10% which implies that this is negotiable, but in most cases the full 10% will be demanded.

Note.  For Government read Department of Communities and Local Government. DCLG. Formally The Office of the Deputy Prime Minister. ODPM.