News and Events

Lord Howe Island land tenure review - part 2

04-Oct-2014

The NSW Government has appointed the Hon. Ken Handley AO QC to undertake a comprehensive review of the current arrangements for land allocation and tenure on Lord Howe Island. As part of the review, Justice Handley will consider options for new land allocation and forms of tenure, including options for increasing supply of land and improving economic sustainability.

We’ve prepared a summary of the current arrangements for land tenure and allocation on Lord Howe Island. It is intended to help explain the issues in context and make an informed submission to the review. Land tenure arrangements are set out in the Lord Howe Island Act 1953 (NSW) (LHI Act), while land allocation is mainly dealt with in the Lord Howe Island Local Environmental Plan 2010 (NSW) (LEP).

Leases in Perpetuity

The Minister may lease areas (max size 2 hectares) for residence to an Islander or Islanders (s21). The Board may recommend a new lease and conditions of leases after considering the merits of the application and the public interest. The lessee or sublessee must live on the land (s21(7), (7A) and (7B)). The condition of residence can be suspended by the Board for a period if the lessee or sublessee is sick, or other adverse circumstances prevent him/her from living on the land. The Minister can also suspend the residence condition on a lease held by an islander who already owns another lease.

Questions: Should the Board enforce existing residency requirements to ensure that all houses are occupied on a full-time basis? Should there be any changes to the residence requirement or the maximum size? Should the Minister grant new perpetual leases, if so how many?

Special Leases

The Minister can grant special leases for cultivation, grazing or other purposes recommended by the Board (s22). The period of the lease is fixed and cannot exceed 10 years. However a new lease can be granted. Only perpetual lease holders may hold a special lease. In deciding whether to grant a new special lease, the Board must consider the public interest and the merits of the case. The Board decides on the conditions of the lease and the rent.

If the Board recommends, the Minister may withdraw from a special lease any land required for home sites or other public purposes (s22(8)). If this happens, the special lease holder is entitled to compensation as determined by the VG for the loss of the land and improvements. The compensation for loss of the land is to be determined taking into account the unexpired period of the lease (or 5 years if there are less than 5 years of the lease left).

The Minister may refuse to renew a lease if the lease is required for home sites or other public purposes. If this occurs, compensation for the loss of the expectation is available, as determined by the VG. If the leaseholder is dissatisfied with the VG’s determination as to compensation, he or she can appeal to the Land and Environment Court.

While the LHI Act allows land to be withdrawn from Special Leases to be used for home sites, the Board’s recent decisions about “Category B” land have been controversial and divisive. The Act provides that compensation in this case will be determined by the Valuer General. However, in practice, these decisions are made by one individual, Derek Hill, of ValueState. Compensation in these cases is likely to be minimal and will not take into account the long connection that many special leaseholders have with the land.

Questions – Should the island have land set aside for cultivation and grazing in the future? Is it important to have agricultural land on the island to provide sustainable local produce for islanders and visitors? Is it important to have agricultural land on the island to create a rural ambiance near the settlement areas? Will leaseholders invest in their special leases, for example by planting fruit trees, establishing market gardens or buying new stock if the leases can be removed with little compensation? Is it important to have businesses other than tourism on the island, such as agriculture? Is it fair that special lease land which has been held in the same family for generations can be withdrawn for house sites? Where else could future house sites come from?

Rent for leases in perpetuity and special leases

Rent is payable in advance. Rent is determined by the Board (s22B). Where a lease is transferred to a non-Islander, the Board may re-determine the rent (s25). Rent determinations remain in force for 3 years. The Board can reduce rent for eligible pensioners (Reg 66). The maximum rents for Perpetual and Special Leases are specified in the regulation.

Questions: Should there be any changes to the Board’s power to determine rent for perpetual and special leases?

Transfers and subleases

Perpetual and special leases may be transferred or sublet. In the case of a transfer, the consideration must not exceed: “the fair market value of the interest of the transferor in the unimproved land the subject of the lease, the fair market value of the improvements on the land at the commencement of the lease and of any improvements subsequently effected thereon with the approval of the Board and, in the case only of a lease of land used for commercial purposes, a sum for the goodwill of the business conducted thereon, being goodwill transferred to the transferee in connection with the transfer of the lease or accruing to the transferee in consequence thereof”. The fair market values and the amount for goodwill shall be as determined by the Valuer-General. In practice, these decisions are made by Derek Hill of ValueState on behalf of the VG.

All transfers and subleases must have the approval of the Minister. If the proposed transferee is not an Islander, the approval of the Governor is required. The Board must not recommend the granting of consent to a transfer or subletting to a person who is not an islander unless it is satisfied that there is no islander who desires and is in a position to take the transfer or sublease. The Board has a draft policy about how it will determine whether or not to recommend the transfer of a lease to a non-islander.

While it is the Minister who consents to transfers, the Minister will not do so without reports or recommendations from the Board. And in some cases, the Board’s report or recommendation is a pre-condition, without which the Minister cannot act. The Board, therefore, decides issues of ownership and transfer and, when land is limited, it has enormous power.

Questions: Should there be a maximum price for the transfer of land between islanders? If so, who should set the maximum price? Are there other sale methods, such as an auction for islanders, which might be fairer or more transparent? How long should the Board wait before allowing a transfer to a non-islander?

Position of Mortgagee

If a mortgagee enters into possession of the lease, it may hold the lease as determined by the Minister on recommendation of the Board. Similarly, the mortgagee cannot foreclose the mortgage or transfer the lease except with the consent of the Minister on recommendation of the Board. Leases may be liable to forfeiture and revert to the Crown if the Minister’s consent to foreclosure or transfer is not granted.

The Act provides that the Board can act as Mortgagee in certain circumstances.

Questions: Should there be any changes to the powers of mortgagees? Does this restriction make finance more difficult to obtain?

Inheriting a lease

The Board may recommend and the Minister may allow a person to hold a lease given to them under a will or intestacy for a certain period (s22(10)). Within that period, the person may apply to the Minister for a certificate that the person is entitled to hold the lease or he or she may sell and transfer the lease. If the person does not obtain a certificate or transfer the lease, the lease is liable to forfeiture.

If a non-islander inherits a lease under the will of a parent or grandparent, then he or she is deemed to be an islander and can apply within 2 years to be registered as the holder of the lease.

Where a person who is an islander and already holds a perpetual lease inherits a lease from a parent or grandparent, the Board can recommend and the Minister can suspend the residence condition on the inherited lease and approve the transfer to a child or children of the beneficiary under the will – even if he or she is not an islander at the time.

Questions: Should there be any changes to the provisions about inheritance? Should islanders be able to leave land to people other than direct descendants?

Forfeiture

Leases can be forfeited if the rent is not paid, a condition of the lease is not observed or if the Minister is satisfied on report of the Board that the land is not used for the purpose for which the lease was granted (s27). The Minister can declare a lease forfeited in the Gazette. If a perpetual lease is forfeited, then any special lease held by the same person will also be taken.

At expiration of a special lease, the lease holder shall have tenant-right in improvements which were on the land at the commencement of the lease or subsequently erected with the approval of the Board. If the lease changes hands then the previous leaseholder is entitled to receive the capital value of the improvements from the new leaseholder.

Questions: In what circumstances should land be forfeited? Have these provisions ever been invoked?

Permissive Occupancies

The Minister on the recommendation of the Board may grant a PO over vacant Crown lands. A PO can be terminated by the Minster at any time on recommendation of the Board.

POs can be held by perpetual leaseholders or by an incorporated body providing an essential community service. The PO must be continually used for the purpose for which it was granted. POs cannot be transferred. If they are no longer held, they should be surrendered to the Board. If a PO is surrendered, the Board will pay the PO holder the VG’s valuation of the improvements.

Questions: Many POs are now used for commercial purposes, should these be treated differently to a non-commercial PO? Is PO still the most appropriate form of tenure for these interests, or should they be converted to leases with longer tenure? Given that commercial POs are so valuable, could more certainty be given to PO holders? Should an interest in a PO be able to be left by will?

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