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Questions and Answers about pastoral leases

Questions and Answers about pastoral leases, including tenure review, lakesides, rents, and government objectives

What is a pastoral lease?

The Crown owns nearly 2 million hectares of South Island high country land, located from Marlborough to Southland, which is leased or (in a few cases) licensed for pastoral farming. Pastoral leases were established under the Land Act 1948, although land in the South Island high country has been licensed or leased since the 1850s.

The Land Act granted lessees secure rights to the land, namely perpetual right of renewal and exclusive occupation of the land, and the right to use the land for a limited purpose, namely pastoral farming. Lessees pay an annual rent which is set at 2.25% (2% if paid promptly) of the land value exclusive of improvements (LEI).

Tenure review and lakesides

What is tenure review?
Tenure review of a pastoral lease is a voluntary negotiation between the Crown (Land Information New Zealand taking the lead) and the lessee, under the Crown Pastoral Land Act 1998. The process results in the transfer of some land with significant values (biodiversity, landscape, recreation, historic, public access etc) to the Department of Conservation as public conservation land, and the freeholding of some land capable of productive use to the lessee.

Final decisions on each review are made by the Commissioner of Crown Lands after comment from the Land Information and Conservation Ministers. Before any tenure review proposal can proceed, it must receive funding approval from the Minister for Land Information.

What has tenure review achieved?
Tenure review has delivered important gains for conservation, public access, recreational opportunities, the establishment of high country parks, and the protection of distinctive and rare ecosystems. It has also resulted in diversified economic use of freeholded land. However, the government has been concerned about the cumulative impacts tenure review could have, particularly on lakeside areas, as the process gradually advances across the high country.

What criteria were used to select the 65 properties that are affected by the policy to exclude lakeside properties from tenure review?
If a property is within 5 kilometres of and visible from a lakeside, and the lake is greater than 5 square kilometres in area, the default assumption is that the property is excluded from tenure review.

At a distance of more than 5 km, buildings and many types of landscape changes are relatively insignificant to the human eye. So if someone stands on the shore of a lake, the default position would be that tenure review would not be funded for properties within a visible radius of 5 km from where they stand.

The relevant lakes (from largest to smallest) are Wakatipu, Wanaka, Pukaki, Hawea, Tekapo, Benmore, Ohau, Coleridge, Aviemore, Dunstan, Sumner, North Mavora, Heron, Alexandrina, Waitaki, and Roxburgh.

Which 38 lakeside properties affected by the policy are in tenure review?
Rugged Ridges, Bendrose, Black Forest, Omarama, Rostriever, Glenthorne, Kawarau, Leaning Rock, Mt Difficulty, Lake Hawea, Mt Burke, Mt Grand, Clent Hills, Glenfalloch, Mt Arrowsmith, Glen Lyon, Huxley Gorge (Otago), Braemar, Ferintosh, Glentanner, Irishman Creek, Maryburn, Mount Cook, Simons Pass, The Wolds, Glynn Wye, Lake Taylor, The Lakes, The Poplars, Balmoral (Tekapo), Glenmore, Godley Peaks, Mt Gerald, Sawdon, Bellamore, Allandale/Greenvale, Loch Linnie, Mt Creighton.

Which 27 lakeside properties affected by the policy are not in tenure review?
Aviemore, Otematata 1, Waitangi, Bog Roy, Te Akatarawa, Mt Algidus, Mt Oakden, Cairnmuir, Hunter Valley, Upper Lake Heron, Omahau Part (Hill Block), Coal Creek, Gorge Creek, Matangi, Mt Benger, Riverside, The Forks, The Herrons, Mt Hay, Ben Lomond, Cecil Peak, Halfway Bay, Kingston, Mt Nicholas, Walter Peak, Minaret, Mt Albert.

What conditions must be met for tenure review to be reinstated for lakeside properties?
The conditions that must be met include –
• lakeside land being retained in Crown ownership (preferably) or covenanted to restrict subdivision;
• lakeside views being protected;
• no large artificial structures, barriers or subdivision within 5 km of a lake;
• no significant alterations of the lakeshore;
• no pollution or significant impact on the lake's aquatic ecosystem;
• due care being taken of historically important lakeside structures/foundations;
• significant biodiversity, wetland, waterway, landscape and access features being sufficiently protected, for example:
o sites or areas having priority for protection in "Protecting Our Places" where the indigenous biodiversity values have been verified by observation, and it is practical and realistic to manage and sustain those values;
o wetlands and waterways that make a significant contribution to a lake's ecosystems, and it is practical and realistic to manage and sustain those values;
o indigenous vegetation associated with wetlands, waterways and lake margins;
o public access routes that are of "prime interest and enjoyment" in the recreational/landscape setting (DoC being aware of commonly used/desired access routes that fall under this definition).

Also, any payment that the Crown is required to make to the lessee in the tenure review settlement would have to be affordable within the amount of funding for tenure review provided by Parliament.

What is the status of non-Iakeside pastoral leases?
The tenure review process can continue for non-Iakeside properties for those lessees who wish to pursue it, subject to significant values being sufficiently protected, and Crown funding constraints.

Rents

What was the government's response to the report LINZ commissioned from a panel of valuers entitled High Country Pastoral Leases Review 2005-2007?
On 5 November 2007, Cabinet agreed that the government response to the valuers' report be as follows:
1. the government recognises the value of the high country to the economy of New Zealand and the contribution farmers make to sustainable management of the high country;
2. a proper interpretation of s 131 of the Land Act 1948 requires amenity values to be retained in the land exclusive of improvements (LEI) value;
3. there are significant economic and financial implications for the Crown and high country pastoral lessees, in that this approach may lead to increased rents that may in some cases exceed the income generated solely from pastoral use;
4. for the Crown to reduce rents without lessees giving up some of their rights would in effect be a capital transfer of value from the Crown (on behalf of taxpayers) to lessees for no value;
5. the government wants to achieve outcomes that are lawful, fair and reasonable for the Crown and lessees, and durable;
6. the best option for achieving such outcomes is rent adjustment in exchange for additional land husbandry or heritage protection activities/improvements, or provision of public access;
7. all pastoral lessees, whether existing or new, will be eligible to seek rent adjustment; and leases, with their varying circumstances, will be addressed on a case by case basis;
8. it is not the government's intention to make rents unaffordable;
9. if a lessee has nothing of value to the Crown to exchange for a rent adjustment, and in the Crown's opinion an increased rent is unaffordable, the Crown would still consider reducing the rent for part or all of the 11 year rental period;
10. the government will abide by the decision of the courts on the interpretation of s 131 of the Land Act and not legislate to overturn the outcome of a judicial determination.

The government response confirms and builds upon the key points of the October 2006 preliminary government response to the valuers Interim Report: High Country Pastoral Leases Review 2005.

What does a lessee have to do to be eligible for a rent adjustment?
A lessee could seek a rent adjustment where they offer to provide enduring public access through the land, e.g. from a public road to a lake or river, or to public conservation land.

A lessee could also undertake land husbandry or heritage protection activities/improvements in addition to what they are required to provide under the terms of the pastoral lease or the general law (e.g. the Resource Management Act 1991).
Activities or improvements could include the provision of:
• cultural heritage protection;
• biodiversity or ecosystem protection;
• pest and weed management;
• erosion control or soil improvement; or
• other activities as agreed between the lessee and the Commissioner (the lessor).

All pastoral lessees will be eligible to seek rent adjustment, and leases, with their varying circumstances, will be addressed on a case by case basis. In some cases, activities that lessees have carried out in the past, beyond what they were obliged to do, may be considered, and made permanent through a rent adjustment.

What happens in subsequent rent review periods?
Lessees would agree to provide the government with the rent adjustment activity for an agreed period. This can be reviewed at the end of the agreed period or at subsequent rental notifications.

Enduring public access may be by way of an unformed legal road, an easement or a covenant. Such permanent changes to the pastoral lease would mean that there would be a change in the rent.

How often are pastoral lease rents reviewed and who reviews them?
Rents are reviewed every 11 years on a rolling cycle. Rents change to reflect changing land values over the 11 year period.

The Commissioner is required by law to ascertain the value of a lease for rental purposes. The Commissioner engages registered valuers to undertake the valuation work. The lessee can appeal the rental value to the Land Valuation Tribunal.

Does seeking a rent adjustment prevent a lessee from going to the LVT?
No. A lessee whose rent has increased would be able to approach LINZ at any time for a rent adjustment, without prejudice to the lessee's right to contest the lessor's current assessment of rent via the LVT. Alternatively, the lessee could elect to go to the LVT, and rent adjustment discussions could occur between the lessee and LINZ after a LVT decision is made.

It is not envisaged that rent adjustment would cause rents to be reduced below pre-review levels. A reduction would only apply to part (or all) of the increase sought by the Crown on rent review.

Government objectives and use of tenure review

What are the government's high country objectives?
In 2003 the government adopted 10 South Island high country objectives, which set out the wide range of things that the government wants to achieve in the high country – environmental, economic, social, and financial. The objectives are:
• promote the management of the Crown's high country land in a way that is ecologically sustainable;
• enable (tenure) reviewable land that is capable of economic use to be freed of current management constraints;
• protect significant inherent values of reviewable land by the creation of protective measures; or preferably by the restoration of the land concerned to full Crown ownership and control;
• secure public access to, and enjoyment of, high country land;
• take into account the principles of the Treaty of Waitangi;
• take into account any particular purpose for which the Crown uses, or intends to use, the land;
• ensure that conservation outcomes for the high country are consistent with the New Zealand Biodiversity Strategy;
• progressively establish a network of high country parks and reserves;
• foster sustainability of communities, infrastructure and economic growth and the contribution of the high country to the economy of New Zealand; and
• obtain a fair financial return to the Crown on its high country land assets.

Where is tenure review at?
Of the 303 pastoral leases eligible for the tenure review process under the Crown Pastoral Land Act, 58 leases (about 15% of the eligible land) have completed (or nearly completed) tenure review. This has resulted in a 42/58 split between land being transferred to public conservation land and land being freeholded.

In addition, 3 leases have been purchased in whole, and some in part, by the Crown outside of tenure review, for public conservation land.

Can the Crown withdraw from tenure reviews currently underway?
Tenure review has always been a voluntary process for both the Crown and lessees, and the Crown is now exercising its discretion not to participate in tenure review in some cases.

If tenure review is no longer an option for some properties, how will values be protected?
Land excluded from tenure review will either continue to be managed as pastoral lease or, if available for sale, may in some circumstances be purchased by the Crown and vested as public conservation land.

Pastoral leases prevent subdivision of the land and restrict what can be done with it. If properly managed, pastoral leases can provide good protection of natural values. Officials are reviewing land management practices on pastoral leases, and the issuing of consents by the Commissioner for non-pastoral activities or land disturbance.

ENDS

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