New basis for pastoral lease rentals fairer, more transparent

After the conflict, stress and uncertainty of recent years, it is good to see common sense and commercial reality returning into administration of pastoral leases.

Since 1948, the Land Act (1948) has been the legal basis of pastoral leases, and it sets a very solid foundation.

Under this Act, the Government leases out the land in its unimproved state under perpetually renewable 33-year leases. Lessees are given permanent right of renewal, full occupancy rights and ownership of all improvements.

Rental was originally based on carrying capacity of the land in its unimproved state. In 1979, the basis of rental was changed to 2.25% of the value of the land in its unimproved state (LEI).

This worked for many years, but since 2000 the Government and some others were paying prices for high country land far beyond its productive value.

The value of unimproved land has become increasingly difficult to ascertain. There is little unimproved land on the market these days; most is within the Department of Conservation and not on the market.

A proverbial spanner was really thrown into the works when a previous government decided that rentals should be based on amenity values as well as productive, even though lessees are not allowed to generate income from these values.

This led to proposed rentals which were clearly unsustainable and totally unrealistic.

Lessees can appeal their assessed valuations to the Land Valuation Tribunal (LVT) and at present 113 leases are under appeal.

It was agreed between lessees and government that Minaret Station be used as a test case before the LVT, and their decision confirmed that amenity values should not be included in the rental valuation.

However, there was still some confusion over amenity values, and LEIs have become increasingly difficult to determine.

So government, represented by Land Information New Zealand (Linz), and lessees have worked constructively together to determine a new basis for rental, which this was announced recently.

Under the new proposal, a base carrying potential will be established for each lease in its least productive state, and this will be recorded in the lease contract.