CONVERSION OF PERPETUAL LEASEHOLD LANDS by nyut545e2

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									CONVERSION OF PERPETUAL LEASEHOLD LANDS
(excluding Western Lands Lease)
There are Still Advantages to Applying to Convert

All holders of perpetual leasehold land had until 30th June 2009 to lodge an application to
convert land held under a Lease to freehold lands on favourable terms. Whilst the
deadline has expired, holders of perpetual leasehold land still have the opportunity to
convert the lease to freehold land.

1.      Purchase Price

The Department of Lands advises any applications lodged after deadline will have the
same price as those lodged prior to the deadline being the lesser of the following:

a)      The original Crown debt plus CPI increases; or
b)      3% of the land value as determined by the Valuer General’s latest Valuation.

2.      Rental

Lodging an application prior to the 30th June 2009 deadline would have secured minimal
rental while awaiting processing of the application, being $350 for three years. Rental
payable on leases that did not have an application lodged prior to the deadline will now be
no less than $440 per annum (including GST). This is now the minimum rental and is
subject to increases in CPI. The rental payable will be greater than this if the rental market
value of the land is greater than this.

3.      Avoiding Large Increases In Rent

We have had an experience where a client was paying rent of $440 until the 14th April
2010. At the 14th April 2010, our client was advised that the rent had increased to $1,820
per annum. This rental was calculated by looking at the land value (in this case $455,000
as per the Valuer General’s notice) and multiplying that by 0.4%.

Our client was advised that rental for the following year to the 14th April 2012 will increase
in accordance with CPI and the year after that, the rent will be reviewed at a percentage of
the land value yet to be determined. After three years, the rental will be 0.8% of the
current land value. If this was applied to our client then the rental payable after three
years will be $3,640 per annum.

In the case of this land, this is the equivalent to almost one half of the balance owing to the
Crown and if these 3% of land value is applicable, the land could be converted to freehold
for no more than a purchase price of $13,650.

Why pay rent at this level when you could be paying off a debt to the Crown?




02/11
4.      Applying To Convert A Perpetual Lease To Freehold

The applications are still being accepted and the steps involved are as follows:

i.      Lodge an application to purchase with a fee of $398.
ii.     Once the application has been lodged, the Department will consider whether there
        are any other issues with the application. If it is a straightforward application, it can
        be processed reasonably quickly.
iii.    Once the application to purchase has been granted, the purchase price is then
        payable within six weeks of the date of the offer from the Department. The
        Department will, however, consider an application by the purchaser to pay the
        purchase price within six the twelve months.
iv.     The purchase price to convert to freehold is usually the lesser of either:

        (a)    3% of the current land value as determined by the Valuer General’s
               Valuation; or
        (b)    The original Crown debt plus CPI.

5,      Selling Or Buying Rural Lands

If you are selling or buying rural land, be sure to check whether there are any perpetual
leaseholds and consider how the perpetual leasehold will be dealt with in connection with
the transfer. For example, it could be dealt with as follows:

a)      If the Vendor has lodged an application, there could be a condition to provide that
        they are responsible for application fees, rent and debt owing to the Crown; or
b)      Is the sale subject to the Purchaser taking on the responsibilities under the Lease
        including rental and any conversion costs.
c)      It can make the transaction easier if perpetual lease land has been converted prior
        to sale.




02/11

								
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