Consultation Paper on

Park Home Commission Rate

 Consultation Paper on
Park Home Commission Rate

May 2006

Department for Communities and Local Government: London

Department for Communities and Local Government
Eland House
Bressenden Place
London
SW1E 5DU
Telephone: 020 7944 4400
Website: www.odpm.gov.uk

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May 2006

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CONTENTS

CHAPTER 1
Executive Summary & Proposals 5

ANNEX A
Partial Regulatory Impact Assessment 7

ANNEX B
Methodology Behind the £82.8m Figure 20

ANNEX C
List of key organisations to be consulted 22

ANNEX D
Consultation criteria 23

This consultation paper covers England and Wales.

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Consultation Paper on Park Home Commission Rate

4
CHAPTER 1
Executive Summary & Proposals
The Mobile Homes Act 1983 provides that where a resident sells their park home,
and assigns their agreement with the park owner, the park owner is entitled to
receive a commission on the sale not exceeding a rate specified by the Secretary of
State, currently 10%.

We set out in this document possible options for reforming the commission payable
on the sale of a park home. The options, on which we would welcome your
comments, are:

1. No change to the current maximum rate of 10%.

2. A reduction in the maximum commission rate payable for new and existing
agreements from 10% to 7.5% with a prohibition on a compensatory
increase in pitch fees.

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

1. Which, if any, of the options do you think is the correct way forward and why?

2. Are there any other options we should consider and why?

3. We would welcome thoughts on whether you agree with our rationale for
limiting the reduction to 7.5% in option 2? (See paragraphs 43-45)

4. Do you have any further comments on the proposals in this paper?

The Government invites comments on the proposals. Please send your response, no
later than 2nd August 2006 (12 weeks). It should be noted that there can be no
extension given to this deadline. All responses should be sent to:-
Mark Coram
Zone 2/H10 Eland House
Bressenden Place
London SW1E 5DU

E-mail responses are welcome. If you are replying by e-mail please include the
words, ‘Commission consultation paper’ in the subject or title. These and any
relevant enquires may be sent to: Mark.coram@odpm.gsi.gov.uk

Telephone number for enquires is 0207 944 6226

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Consultation Paper on Park Home Commission Rate

Representative groups are asked to include a summary of the people and

organisations they represent in their reply.

A summary of responses to this consultation will be published by 23rd October

2006 (date 12 weeks after end of consultation) at the address:
http://www.odpm.gov.uk

Paper copies will be available on request.

Information provided in response to this consultation, including personal

information, may be published or disclosed in accordance with the access to
information regimes (these are primarily the Freedom of Information Act 2000
(FOIA), the Data Protection Act 1998 (DPA) and the Environmental Information
Regulations 2004).

If you want the information that you provide to be treated as confidential, please be
aware that, under the FOIA, there is a statutory Code of Practice with which public
authorities must comply and which deals, amongst other things, with obligations of
confidence. In view of this it would be helpful if you could explain to us why you
regard the information you have provided as confidential. If we receive a request
for disclosure of the information we will take full account of your explanation, but
we cannot give an assurance that confidentiality can be maintained in all
circumstances. An automatic confidentiality disclaimer generated by your IT system
will not, of itself, be regarded as binding on the Department.

The Department will process your personal data in accordance with the DPA and in
the majority of circumstances; this will mean that your personal data will not be
disclosed to third parties.

6
ANNEX A
Partial Regulatory Impact
Assessment

Purpose and Intended Effect of Measure

OBJECTIVE

To achieve a more transparent payment system for park homes, with less
opportunity for harassment of residents, while promoting the future growth of the
industry.

BACKGROUND

Park homes are mobile homes which are occupied as a person’s only or main
residence. Except where a park home is rented from the park owner, the home
belongs to the resident but the park owner owns the land upon which it is sited.
Typically, the park owner and resident enter an agreement, in the form of the
written statement given in accordance with Mobile Homes Act 1983 (“the Act”). The
Act guarantees certain rights for both the resident and park owner, including
security of tenure for the resident, with only specified grounds upon which the
agreement between the parties can be terminated.

The payment system is as follows:

• Residents make an initial payment to move onto the park and enter an
agreement with the park owner. This agreement provides for further payments
to be made to the park owner. These include:

• Pitch fees and utility charges.

• On the sale of their home and the assignment of the agreement, the resident
agrees to pay the park owner a percentage of the sale value, which currently
cannot exceed 10%. This is known as the commission payment.

The commission payment on the resale of a park home has been with us for as
long as people have used caravans as a permanent residence. In the 1960s, the
going rate was about 20%. The Mobiles Homes Act 1975, introduced statutory
regulation of this payment, which was initially capped at 15%. Later an order was
made under the Mobile Homes Act 1983 reducing the maximum payment to 10%.

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Consultation Paper on Park Home Commission Rate

Now, over twenty years later, there are strong calls from residents for it to be
reduced again. There is no evidence as to why previous reductions have taken
place or the effect it had on the market.

The Government set up the Park Homes Working Party in 1998 with an aim to
consider the operation of the existing controls on residential park homes and make
recommendations on what changes, if any, were felt to be desirable to achieve a
fair and workable balance between the needs and interests of park owners and
residents.

The Working Party Report, and its recommendations, was published in July 2000.
These covered a wide range of issues, including changes to the rules on the sale of
homes, the ending of agreements, harassment, site licensing and the economics of
the industry.

THE ECONOMICS OF THE PARK HOMES INDUSTRY REPORT

The Working Party Report recommended that an independent study of the

Economics of the Park Homes Industry be undertaken. This was commissioned in
January 2001 by the Office of the Deputy Prime Minister and the Welsh Assembly
Government. The remit was:

• To provide a comprehensive and independent examination of the economics of

the industry, including rates of return, the range of income sources available to
park owners and expenditures incurred.

• To produce a series of alternative options for remunerating park owners,

including variations in the levels, and method of calculation, of the commission
and pitch fees.

The consultants’ report (“the Report”) was published in October 2002. A full copy of
the Report is available on the Department’s website at www.odpm.gov.uk.

THE REPORT’S FINDINGS

The report’s main findings about the economics of the industry were:

• The payment mechanisms are not transparent but the tripartite payments are
primarily for the use of the land and facilities and for keeping land in that use.

• While certain features of the payment mechanism do provide an incentive to

pressurise residents to leave or sell their home, this structure also characterises
the product that is demanded by the current resident profile.

• Removing the commission might partially reduce this problem but to do so

without compensation (higher pitch fees) does not appear justified on the
evidence from this study about the profits of owners.

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 Annex A: Partial Regulatory Impact Assessment

• To remove the commission with compensating pitch fee increases may bear
heavily on many residents but, in changing the system of payments, the type of
people demanding park homes would alter in sympathy over the long term.

The Report found that the commission payment formed 7% of the park owners’
income, with 51% from sales and 42% from pitch fees. Although representing on
average only 7% of a park owners total park income, the Report found that the
commission payment was by far the most controversial factor in the industry’s cost
structure.

The Report found no clear, defined economic rationale for the commission
payment. Neither was there anything in the legislation which said what the 10%
commission was for. The Report did find that the commission payment could be
considered to be for the resident’s interest in the land (i.e. that on which the home
was sited) which accumulated during their residency.

On the other hand, the Report also found that residents may perceive that they had
paid for the interest in the land through pitch fees etc., and were effectively being
made to pay again when they sold their home.

In accordance with their terms of reference, the consultants investigated the

commission payment and what, if anything, might replace it. They put forward
three options –

i. Introduce a sliding scale of commission related to the length of stay.

ii. Base the commission in some way on the value of the land.

iii. Reduce or eliminate the commission.

Introduce a sliding scale of commission related to length of stay. Although the

Report acknowledged that the current structure of commission could provide an
incentive for park owners to ‘encourage’ residents to leave, the Report did not
calculate in detail the option of relating the rate of commission to the resident’s
length of stay. Such an approach would benefit people residing on the park for a
short time, although it could also result in those selling after a very long stay paying
far more than 10%. The Report also found that this mechanism would undermine
the assumed relationship of commission to the value of the land.

Base the commission in some way on the value of the land. The contribution
of the owners’ land to the value of the home could alternatively be acknowledged
explicitly in the commission, either by applying commission to the land proportion
of the home’s value, or to the increase in the value of the land component. The
percentage of land value payable as commission would have to maintain existing
actual income from commission; alternatively, if the percentage remained at 10%,
the lower actual amount payable would mean that prices elsewhere would have to
rise (from pitch fees or owner-sold units – as for the first option). Although the
Report did not specifically address this point, a mechanism assuming an increase in
land values would of course function only as long as land values did indeed
continue to rise.

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Consultation Paper on Park Home Commission Rate

Reduce or eliminate the commission. The Report found that simply decreasing
or eliminating the maximum commission outright would mean that owners would
have to increase prices elsewhere. Although the Report assumed that this would
come wholly from an increase in pitch fees, some or the entire shortfall could be
met through the price of new units (assuming that the trend for the value of park
homes relative to bricks and mortar housing to rise over time would continue).

However, the Department have been made aware of some discrepancies in the
findings. Whilst we have used the Report as the basis for this consultation paper,
we have been careful not to rely solely on the Report’s findings in considering the
issues as they are today. The reasons for this include:

i. the response rate to the Report was only 11% of those canvassed, which makes
its findings much less representative than they might have been;

ii. the Report is five years old; and

iii. current selling prices are averaging many thousands, if not tens of thousands,
more than in 2000;

In addition several responses from park owners to the Implied Terms and Written
Statement consultation paper, published in July 2004, gave detailed breakdowns of
their parks’ finances that seemed to provide significantly different expenditure
patterns to those outlined in the report. In particular, they showed a greater
emphasis on new sales as opposed to commission. The responses also highlighted
significantly higher turnovers than those found by the Report. Therefore the
Department has carried out further work in the last year to ensure that the
conclusions reached still apply to the market in 2006.

The research highlighted significantly higher revenue streams than the economic
report indicated, although the work did not examine any changes in costs.

This research also allowed the value of the commission payment to the industry to
be established and likely costs of a reduction in it to be examined. This work
suggests the industry could handle a small reduction in the commission without a
corresponding increase in pitch fees.

In considering the commission payment in this consultation paper, we are not doing
so in isolation from other changes. Our consideration very much complements the
measures we have put in place, through the Housing Act 2004; or shall be putting
in place through further reform of the sector that we are undertaking. The aim is
that residents are clear as to what they are paying for and when they are paying for
it.

The Report suggested a number of other options that would help improve the
transparency of the approach to charging and redress imbalances in the negotiating
strengths of owners and residents. We believe that the reform process to date, as
shown below, deals fully with the other issues raised.

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 Annex A: Partial Regulatory Impact Assessment

• The report said transparency could be better served by owners quoting a capital
sum for siting a unit independently and acquiring an agreement so that residents
could, if they wish, contract with a park home manufacturer independently.
This is dealt with partially by the reform of the implied terms currently being
finalised, as residents have a greater knowledge of what they are paying for and
when they are expected to pay it. Residents also now have a greater
understanding of the costs involved to the park owner in siting new homes.

• The report also stated a possible option for addressing the issue of the removal
of the homes would be for the National Caravan Council to establish standards
for approved workshops to carry out refurbishments. On refurbishment again
the reform process has tightened the system up to the necessary degree. Firstly,
the Housing Act 2004 states that if a home is detrimental to the park, the park
owner must allow the resident time to carry out repairs. Also the secondary
legislation will state, the park owner or his agents shall not do or cause to be
done anything to obstruct the residents right to maintain, repair or refurbish the
home.

• Thirdly the report recommended that transparency and confidence would be

further served by the creation and operation of a sinking fund for the repair
and maintenance of the park. We believe that this is not necessary as the
statutory instrument on implied terms will increase the transparency to a
sufficient degree.

• The report also recommended the establishment of formally recognised

residents’ associations on parks as appropriate means for the successful
facilitation of a number of the measures suggested in this report. Recognition of
residents’ associations is to be implemented through secondary legislation.

As this shows steps have been taken to deal with the other issues raised in the
report about other aspects of the reform process. We therefore propose no further
action on these areas in this consultation paper.

RATIONALE FOR GOVERNMENT INTERVENTION

According to a Mobile Homes Survey carried out in 19921, some 55% of residents
who replied believed that commission fees were unfair or ‘disgusting.’ The residents
perceived that owners did not provide any service for this source of income and
this view is supported by the Economic Report.

Residents’ concerns about these payments as expressed through residents’

associations and the technical press are:

i. The absence of clarity – “what are they for?”

ii. That they encourage owners to harass residents.

iii. That they are excessive.

1 Final Report of the Department of the Environment – Pat Niner with Alan Hedges – London:HMSO

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Consultation Paper on Park Home Commission Rate

All three complaints coalesce around commission payments.

Owners on the whole support the status quo. The Report found that the main
justification for the commission payment – both today and historically – is the
‘interest in the land’.

The commission payment is the biggest area on which correspondence is received

on park home issues. Additionally nearly 20% of responses to the Implied Terms
and Written Statement consultation paper wanted the commission payment looked
at again. Similar demands were made in responses to recent consultations on Site
Licensing and the Definition of a Caravan. The Report highlighted, that the
commission does promote bad management practices.

Additionally the Report said that, of residents arriving on parks since 1995, 14%
were not made aware that they would have to pay commission to the park owner.
We propose to publicise the commission payment more prominently in the
Department’s booklet “Mobile Homes – A guide for residents and park owners”,
which we are currently revising and expect to issue later this year. This would
further aid the transparency that we have dealt with in the Implied Terms and
Written Statement consultation paper. We also believe this consultation paper will
highlight what the commission payment is for and will ensure clarity.

Consultation

WITHIN GOVERNMENT

Small Business Service, National Assembly of Wales.

PUBLIC CONSULTATION

We have already extensively consulted informally with resident and trade

organisations in the development of the consultation paper. We have also engaged
with local authorities and other interested parties. This is the full, formal, twelve-
week consultation and we also have a consultation day planned to allow for the
views of small businesses to be heard.

Options
3 options have been identified for consultation:

1. No change to the current maximum rate of 10%.

2. A reduction in the maximum commission rate payable for new and existing
agreements from 10% to 7.5% with a prohibition on a compensatory increase in
pitch fees. The pitch fee increase would be limited by the pitch fee review
clauses in the implied terms statutory instrument, which could preclude an
increase due to changes in commission.

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 Annex A: Partial Regulatory Impact Assessment

3. Prohibit the charging of a commission on the sale of a park home for new
agreements only, without a limitation on a compensatory increase in pitch fees.
This would allow the incoming resident to be aware of the higher fees and let
the market decide what that level should be.

ALTERNATIVE OPTIONS CONSIDERED

1. Lower commission rate with higher pitch fees.

2. Prohibit the charging of a commission on the sale of a park home for new and
existing agreements, without a limitation on a compensatory increase in pitch
fees.

These options, although the report suggests them as solutions, would partially deal
with the harassment issues around commission, but would unfairly affect the ability
of residents on parks to pay the increased pitch fees. National resident groups have
resoundingly stated that they would not accept a higher pitch fee for any reduction
in commission.

3. Sliding commission rate (related to the length of stay).

4. Altered base (applying commission either to land component in the value of the
home or increase in the value of the land component).

These options have been discarded as they do not sufficiently deal with either the
issue of harassment or greater transparency.

We are also issuing clearer guidance which will improve transparency around the
issue and inform residents of their rights and responsibilities and so lessen the
impact of harassment.

Costs and Benefits

SECTORS AND GROUPS AFFECTED

• Residents

• Park Owners

• Local Authorities (will receive less calls to become involved in harassment

cases)

Race equality assessment

None. This will affect all groups in the sector equally. Anecdotal evidence suggests
that the population is mainly elderly and white but there are an increasing number
of residents who are Gypsy and Travellers and therefore any change could have an
advantageous effect on them.

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Consultation Paper on Park Home Commission Rate

Health impact assessment

Positive. Except for option 1, all of the options are likely to lead to less harassment
of residents. This will mean that they will suffer less stress related illness.

Rural considerations

Negligible. Although parks are often in rural locations the proposed changes will be
at most a transfer of monies between park owners and residents who are both
likely to spend in the local area.

BREAKDOWN OF COSTS AND BENEFITS

Administrative Burdens

None of the proposed options will affect the administrative burdens that
Government places on Park home owners.

Option 1 – No change to the current maximum rate payable

Economic
Benefits
• No change to revenue streams for park owners.
Costs
• No change to revenue streams for residents.
• Barriers to entry remain for new park owners.

Environmental
Benefits
• None.
Costs
• None.

Social
Benefits
• No change to revenue streams for park owners.
Costs
• Residents see harassment continuing at significant cost2. This could equate up to
£724,500 that park owners could receive through harassment per year.

2 If we take the reports figures that 7% of residents have received undue pressure to sell and that 6% of
park homes are sold yearly, along with the calculated price of home sales in 1999-2000 being £25,000.
This entails £2,500 commission per sale. On the basis of the economics report, we estimate that 69,000
homes are on parks. That means that 6% of 69,000 are sold at £2,500 (commission) with at least 7%
being harassed. = £724,500 a year

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 Annex A: Partial Regulatory Impact Assessment

• Residents see perceived unfairness continuing through lack of transparency.

• Resident dissatisfaction remains higher than other housing markets (75%
satisfied on parks versus 92% in all tenure types).
• Bad park owners still have incentive to remove residents.

Option 2 – A reduction in the maximum commission rate payable for new and
existing agreements from 10% to 7.5% with a prohibition on a compensatory
increase in pitch fees

Economic
Benefits
• Lower amount of commission is paid by resident.
• More incentive for people to try park homes lifestyle.
• Increase in demand for park homes, as the commission rate reduction is a
reduction in the cost of a park home. This increased demand could also push
up the price of a unit in the short term.3
• Enhanced mobility for resident to sell the home by reducing barrier to exit.
• Short term higher levels from commission as unhappy residents leave.
• Less barriers to entry for new park owners as income streams would be more in
line with existing owners.
Costs
• Transfer of revenue from park owner to resident of £82.8million over 30 years.

Environmental
Benefits
• Encourage residents to maintain and improve their homes without the fear of
park owners receiving monies for their assets.
Costs
• None.

Social
Benefits
• Less incentive and thus pressure from owners on residents to leave the park.

3 We estimate that the current rate of sale could double to 12% (slightly higher than 11% for all
households).4 This is because resident dissatisfaction with park home living is 18%. Although
commission is not the only source of dissatisfaction, letters received indicate that such dissatisfaction is
at least 40% of people’s unhappiness. So 7.2% of people are unhappy because of the commission. If all
of these people then sold the rate of sale would more than double to 13.2%. By cutting the commission
by a quarter to 7.5% it would mean a greater than proportionate increase in such resident’s willingness
to sell. A conservative estimate would then be that the rate of sale would go up to the 12% average. Or
increase the dissatisfied people selling by a third. This would involve [(12% of 69,000) *£2500 -(6% of
69,000) *£2500 ]* 5 years. = £51,750,000 saving. Taking account of the Treasury discount rate of 3.5%
this is reduced to £48,100,000.

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Consultation Paper on Park Home Commission Rate

• A fairer system for people who sell their homes after short period of time of
purchase from the previous sale.
• Park homes promote mixed communities. Prospective first-time buyers will find
park homes a more attractive proposition if there is a reduced commission.
• Perceived to be in line with the rest of the housing market.4
Costs
• None.

We have calculated that this proposal, if we reduce the commission to 7.5%, will
cause a transfer of £82.8 million over a 30 year period from park owners to
residents. We feel this is offset by the benefits to park owners of a growth in the
industry medium term and an increase in sales short term. Taking our estimates,
outlined above, this shows that park owners can recoup the transfer in revenue
over the same period.

We feel that the market cannot take a larger percentage reduction because a fall to
5% will cause a transfer of £165.5million over a 30 year period from park
owners to residents, which would be more difficult for park owners to get back
through new business. Our figures do not highlight that this is justified.

Abolishing the commission with no increase in pitch fees, would cause a transfer
of £331 million over a 30 year period from park owners to residents, which is
economically unjustified.

We would welcome views on whether our thoughts on the above transfer are
sustainable for the market.

Option 3 – Prohibit the charging of a commission on the sale of a park home for
new agreements only without a limitation on a compensatory increase in pitch
fees.

Economic
Benefits
• No commission is paid by new residents when they come to leave the park.
• More incentive for people to try park homes lifestyle.
• Increase in demand for park homes. This increased demand could also push up
the price of a unit in the short term.
• Less barriers to entry for new park owners.
• Market can decide a fair pitch fee for new residents to compensate park
owners.5

4 Longer term it is likely that the reduction of commission will bring park turnover more into line with
other tenure types and a conservative estimate of an increase in sales per year by 1% to 7% is not
unlikely. Therefore over the remaining 25 years * 1% of 69,000 * 2500 = £43,125,000 Taking account of
the Treasury discount rate of 3.5% this is reduced to £36,700,000.

5 The report suggests that the park owner would increase the pitch fee by 22% in this circumstance.

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 Annex A: Partial Regulatory Impact Assessment

Costs
• Higher pitches fees for incoming residents creating a two tiered system and
more confusion when pitch fees are reviewed.

Environmental
Benefits
• None.
Costs
• None.

Social
Benefits
• A fairer system for people who sell their homes after short period of time of
purchase from the previous sale.
• Perceived to be in line with the rest of the housing market.6
• Park homes promote mixed communities. Prospective first-time buyers will find
park homes a more attractive proposition if there is no commission on sale.
• The owners income would depend on only two main sources (pitch fees and
sales) thus increasing transparency.
Costs
• Pressure remains from owners on existing residents to leave the park.
• No enhanced mobility for existing residents to sell the home by reducing barrier
to exit.
• Two systems running concurrently could limit benefits from transparency.

Recommendation
The 2 options we favour taking forward, due to the reasons above are:

• Lower commission rate (7.5%) and no increase in pitch fees; and

• Prohibit the charging of a commission on the sale of a park home for new
agreements only without a limitation on a compensatory increase in pitch fees.

The report found no clear defined economic rationale for the commission payment.
The best it could do was to find that the commission payment could be considered
to be for the resident’s ‘interest in the land’ – an ‘interest’ that was once deemed to

6 Longer term it is likely that the reduction of commission will bring park turnover more into line with
other tenure types and a conservative estimate of an increase in sales per year by 1% to 7% is not
unlikely. Therefore over the remaining 25 years * 1% of 69,000 * 2500 = £43,125,000 Taking account of
the Treasury discount rate of 3.5% this is reduced to £36,700,000.

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Consultation Paper on Park Home Commission Rate

be worth 20% of the sale price of a home, then 15% and now 10%. So, even if we
accept that such an ‘interest’ exists, and has a monetary value, it is clear that that
value is purely arbitrary.

Small Firms’ Impact Test (SFIT)

The Park Home industry is dominated by small businesses. As part of the process of
formulating this policy proposal we have had a number of meetings with
representatives of the industry including both the British Holiday and Home Park
Association and the National Park Home Council, who between them represent 60%
of pitches. Initial soundings from these small firm trade/representative bodies
indicated that the industry is in favour of maintaining the status quo and that as
previously phrased the paper could be misleading. The paper has undergone
extensive revision to address their concerns and complex options, such as the
altered base and sliding scale have been removed because of the implementation
burden they could place on their businesses. We have revised the draft proposals to
take into account their concerns and to reduce the impact where possible, by
revisiting the paper generally and especially by revising the benefits and costs
sections.

However, we are anxious to discuss these proposals with as many owners as

possible, in particular smaller owners. We plan to hold a consultation day to which
both members and non-members will be invited. The purpose of the meeting will
be to address their concerns and questions and to further consider the revised
options/proposals and explore how any significant impact on small business might
be reduced or removed.

We would also be very pleased to receive in writing the views of smaller owners in
response to the formal consultation. We have consulted the Small Business Service
who are happy with our approach.

Competition Assessment
The Department has completed the competition filter. This requires that policy
makers consider the market that will be affected: i.e. the firms that compete against
one another to sell the same or similar products or services.

No site owner owns more than 10% of the 1600+ parks in England and Wales. The
report, Economics of the Park Homes Industry, concluded in 2002 that ‘…there is
very little ownership concentration at the national level that would appear to inhibit
market competition. It is probable that this is also true at the county level.’

None of the options will affect some firms more than others. The proposed
legislation should not result in higher set-up or running costs for new firms that
existing firms do not have to meet and the market is not characterised by rapid
technological change.

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 Annex A: Partial Regulatory Impact Assessment

Cabinet Office advises that if policy-makers answer ‘yes’ to fewer than half the
questions asked in the filter, there is unlikely to be a negative competitive impact
from the new regulation. Therefore no detailed competition assessment would be
required.

This is the case so no detailed assessment is required.

Enforcement, Sanctions and Monitoring

ENFORCEMENT

This already forms part of the written statement and therefore it remains the
responsibility of the individual residents to go to the Courts to enforce.

SANCTIONS

Whatever option is chosen the sanctions will remain the same – that the resident
must go to the County Court to ensure they are not over charged. If the park owner
is restricting a sale due to the resident’s refusal to pay a higher than specified
commission then the resident could also claim damages in the court against the
park owner for unreasonably withholding consent.

MONITORING AND REVIEW

• Analyse correspondence – This will enable the Department for Communities

and Local Government / WAG to be aware of issues in the park home industry
from all that are involved.

• Stakeholder Meetings – We regularly engage with stakeholders on a personal

level while extracting feedback, comments and suggestions. This is seen as an
on-going review.

19
 ANNEX B
Methodology behind the £82.8m
Figure
The ODPM carried out further work in order to estimate the national size of the
transfer in revenue and, hence, the cost imposed on the park owners as a result of
the change in commission rate and an analysis of how park home prices have
changed relative to general house prices.

Cost to all park owners is believed to be £82.8m over a period of 30 years. This is a
direct transfer to residents. Although this figure could be interpreted as £82.8m less
for park owners to invest in parks over this period, we feel we have outlined within
Annex A the benefits will greatly enhance park owners’ income in the medium to
long term. The methodology behind the £82.8m figure is explained below. The Raw
Data used is available on request.

The Report identified the amount of extra income required, through pitch fees, in
order to maintain the income of the park owners at a constant level when faced
with a reduction of the commission rate from 10% to 7.5%. In this case the pitch
fees are not allowed to rise, so these figures were taken to be the cost to the park
owner per pitch of the commission change each year. They were £37 for a small
park owner, £76 for a medium park owner and £52 for a large park owner. These
figures would grow over time in line with house price inflation as the commission
represents a proportion of the sale price, so the long-run Barker rate of 2.4% per
annum was used.7

It was assumed that the number of pitches would remain constant over time, so the
cost per pitch figures for each park owner outlined above were used to calculate
the cost to park owners each year for the next 30 years. These costs were converted
into real terms based on the assumption that RPI grows at 2.5% per annum, and
were then converted into present terms using the Treasury discount rate of 3.5%.
This reflects the fact that as a society we value costs and benefits that occur in the
future less than those which occur in the present, and therefore £82.8m represents
the value which park owners place on all the future costs imposed by the
commission reduction.

These results assume that the park owners and residents will not change their
actions as a result of the commission rate change, and, hence, the result is just a
transfer of revenue from the park owners to the residents. It is quite possible that
there could be a number of possible outcomes, which may impact on the size of
the cost to the park owners, for example:

7 Review of Housing Supply – Delivering Stability: Securing our Future Housing Needs, Kate Barker,
2004

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 Annex B: Methodology behind the £82.8m Figure

• Increased demand for park homes, as the commission rate reduction is a

reduction in the cost of a park home. This increased demand could also push
up the price of a unit.

• As the profitability of the parks is reduced the supply of pitches may be

reduced, leading to excess demand above the supply. Waiting lists could result,
and the price of a unit could also increase as well.

• Reduced quality of the parks, due to reduced revenue to the park owners.

The Report found general concurrences that pitch fees covered repairs and
maintenance. We believe a reduction of the commission payment will not affect the
overall appearance and standards of the parks – which, in any event, are governed
by park licence conditions enforced by local authorities.

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 ANNEX C
List of Key Organisations to be
consulted
British Holiday and Home Park Association

British Park Home Residents Association

Chartered Institute of Environmental Health

Independent Park Home Advisory Service

National Association for Park Home Residents

National Park Home Council

Park Home Legal Services

Park Home Resident Action Alliance

The above list (in alphabetical order) is not a definitive list of groups and
organisations that have been consulted. If there are other organisations
which ought to see a copy of this paper, but which are not on the above list,
please contact us with details.

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ANNEX D
Consultation Criteria
The Government has adopted a code of practice on consultations. The criteria
below apply to all UK national public consultations on the basis of a document in
electronic or printed form. They will often be relevant to other sorts of consultation.

Though they have no legal force, and cannot prevail over statutory or other
mandatory external requirements (e.g. under European Community Law), they
should otherwise generally be regarded as binding on UK departments and their
agencies, unless Ministers conclude that exceptional circumstances require a
departure.

1. Consult widely throughout the process, allowing a minimum of 12 weeks

for written consultation at least once during the development of the
policy.

2. Be clear about what your proposals are, who may be affected, what
questions are being asked and the timescale for responses.

3. Ensure that your consultation is clear, concise and widely accessible.

4. Give feedback regarding the responses received and how the

consultation process influenced the policy.

5. Monitor your department’s effectiveness at consultation, including

through the use of a designated consultation co-ordinator.

6. Ensure your consultation follows better regulation best practice,

including carrying out a Regulatory Impact Assessment if appropriate.

The full consultation code may be viewed at

www.cabinet-office.gov.uk/regulation/Consultation/Introduction.htm

Are you satisfied that this consultation has followed these criteria? If not, or you
have any other observations about ways of improving the consultation process
please contact
Adam Bond, DCLG Consultation Co-ordinator,
Room 2.19, 26 Whitehall, London, SW1A 2WH;
or by e-mail to:
adam.bond@odpm.gsi.gov.uk

Please note that you should only contact Adam about the consultation
process. Comments on the subject matter should be sent to Mark Coram as
detailed at the beginning of this consultation.

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