Media Release
Friday 3 August 2007

High Country Tenure Review Sells Public Interest Short

New research by Dr Ann Brower (Lincoln University), Dr Adrian Monks (Landcare Research) and Dr Philip Meguire (University of Canterbury) reveals further evidence that the controversial land reform of the South Island high country, known as tenure review, is a deeply flawed economic process.

Dr Brower recently presented this latest research to the Law and Economics Association in Wellington. It examines in detail all 77 completed tenure review deals between the Crown agency Land Information New Zealand (LINZ) and high country leaseholders.

The nine month investigation of these completed deals, which were obtained after three applications under the Official Information Act, shows that prices for high country Crown leases under tenure review violate all interpretations of basic law and economics.

The paper by Brower et al makes it clear that the prices paid in the deals make no sense unless the incentives are taken into account for the contractors in charge of negotiating the deals with high country lessees; that is Opus International, Quotable Value and DTZ.

The key incentive is that the LINZ subagents are only paid a fixed amount when they ‘close the deal’, instead of being paid a commission. They are not paid more for getting the best price for the Crown and the taxpayer; and they are not paid less for paying too much.

The detailed economic analysis, entitled “Closing the deal: principals, agents and subagents in NZ land reform”, finds that the pattern of prices paid by lessees when the productive parts of their high country leases are privatised, bear no relation to the real value of the property rights exchanged with the Crown.

Crown agents (Opus, Quotable Value, DTZ) are repeatedly offering a bulk discount when privatising, at the expense of the public and taxpayers’ interest.

The research paper says this often means that, illogically, the more land a farmer privatises the more generous the price offered by the Crown. For example, the Shirlmar lessee privatised the most land – 99.7% of his lease – and was paid $9000. The Closeburn and Wyuna lessees privatized far less – around 20% -- but they each had to pay the Crown. Closeburn paid $158,000, and Wyuna paid $630,000 (the most paid by any lessee). While one would expect that lessees who privatise the most land would pay the most to the Crown, it is just the opposite. Those who get the least land pay the most, and those who get the most land pay the least. The researchers say this “defies economic logic.”

This means millions of dollars of public subsidy on discounted land deals have already been paid to high country lessees -- $18.5 million to be exact.

StopTenureReview says this research confirms one of its major concerns about high country tenure review; that what actually ‘drives the price’ appears to be the imperative of ‘closing the deal’, resulting in most tenure review settlements being very favorable to lessees.

In addition there are no reserve prices on the Crown’s property rights, and until recently it has never ‘walked away from the table’, unlike some farmers. Tenure review under the Crown Pastoral Land Act (CPLA) is a voluntary process for both the Crown and lessees.

The detailed analysis of tenure review data from 77 settlements shows that the process greatly benefits those at the negotiating table; that is property consultants and farmer lessees, at the expense of the public.

StopTenureReview believes this latest research is further evidence that, in economic terms, high country tenure review is selling the public interest short at the final and crucial stage in order to ‘close the deal’ over hundreds of thousands of hectares of Crown-owned high country land worth millions of dollars.

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