Pastoral lease rent changes welcomed

August 5, 2010

Proposed changes to the way rents are calculated on pastoral lease properties has been welcomed by farmers.

The previous administration had changed the way rents were set to include amenity values. They also reflected inflated values paid by the government and overseas purchasers, including Shania Twain.

The result was that properties with good views or close to lakes had to pay much higher rents which were completely unrelated to the earning capacity of the land.

In a media release, High Country Accord chair Jonathan Wallis said that farmers had never sought anything other than a fair rent which reflects the rights and obligations of the parties under the leases.

 “The new system brings transparency and certainty to a process that was becoming increasingly complex and costly to implement correctly.” 

Perhaps the last significant alienation of Crown land, pastoral leases were created under the Land Act 1948. They were seen as the ideal form of tenure set to balance the relative demands of pastoralism, with the needs of conservation in lands already identified as requiring separate management to other classes of rural land. 

“The purpose of the legislation, created more than 60-years ago, remains as valid today as it did then,” says Mr Wallis. 

“The Crown chose to retain an interest in how the land was managed through constraining the land use through the terms of the lease and the provisions of the Land Act. However, although the Crown retained an interest in how the land was managed, the majority of rights to the land were retained by the lessees, not unlike freehold ownership.” 

“The incentive for farmers to invest and transform what were once termed ‘wastelands of the Crown’ into economically and environmentally sustainable enterprises came in the perpetually renewable nature of the lease, implicit that rent could only be charged against the unimproved pastoral proposition with all improvements remaining the property of the lessee.” 

The contractual nature of the lease meant considerable consultation between the Government and the lessees was required to ensure the balance of property rights remained unchanged from one system to the next.

Mr Wallis says it would be wrong to assume that agreement was reached on every last component but he has acknowledged the extremely high standard of input and review from independent experts in developing this policy.

He says the challenge of moving to a different system of setting rents with more transparency was to leave the essential property rights of high country farmers unchanged.

“The new system does not change the fundamental nature of the lease but unlike the current system for setting rents which has a fixed rental rate, the new system incorporates a variable rate to allow the rent to more closely follow the economics of pastoral farming.”

 “The current policy towards Crown Pastoral Land is a refreshing contrast to recent times which has certainly taken its toll on the high country community both from a social and financial perspective.”

 “The Government has looked to a rational solution for setting rents in accordance with the law and not in a manner which suits those who have a particular axe to grind from time to time. I applaud them for this sensible approach,” says Mr Wallis. 

Federated Farmers also welcomed the changes:

Federated Farmers is welcoming the Land Information Minister, the Hon Maurice Williamson’s, announcement approving a new system for setting rents for South Island high country pastoral leases.

“We think that the Earning Capacity Rent has the possibility to work effectively, so we’re welcoming it with cautious optimism,” says Donald Aubrey, Federated Farmers vice-president.

“The High Country Accord has been working arduously to get these new rents, which will be based on a property’s earning capacity and we’d like to congratulate them for their efforts.

“Although I’m optimistic about the changes, I’m slightly disappointed that we were unable to get greater relief for those facing back rents of up to five years.

“This will place a considerable financial burden on these farmers, but we’re happy to see that Land Information New Zealand (LINZ) is prepared to accept the payments over five years.

The proposed changes announced by Minister of Land Information Maurice Williamson and Agriculture Minister David Carter require  legislation which the ministers hope to have before the house later this year.

Mr Williamson says the new system for setting rents takes into account a number of factors, including the productive capacity of the lease and pastoral economic conditions.

“The way rents are currently calculated is complicated and costly and often produces disputes over both the process used and the result,” he says.

Agriculture Minister David Carter says the new system will provide greater certainty to farmers.

“It is simpler to administer, more transparent and provides a fair rent. It will allow farmers to get on with the job of farming and looking after the high country rather than fighting bureaucracy.”

There are 231 pastoral leases, mainly in Canterbury and Central Otago, which cover around 1.6 million hectares of pastoral land.

The ODT reports:

Modelling by Government officials shows the new system will not alter the total amount of rent it collects from lessees, but should remove disputes over the rent-setting process, which had prompted more than half the 231 South Island lessees to dispute their latest rent reviews.

The proposed system will base rents on farm productivity and current livestock values, which the Government says is a transparent and objective process.

This calculation would happen every 11 years and take into account a farm’s carrying capacity in its unimproved state, or base, then the subsequent increase in numbers, with the rent charged on a per livestock unit basis.

Under the land value based system, rent was calculated every 11 years at 2.25% of the value of land exclusive of improvements.

The two systems recognised that the Crown owns the land in an unimproved state but the lessee owns the improvements such as fertiliser, pasture, tracks, fences and buildings.

Forest and Bird isn’t as positive as farmers:

Forest and Bird South Island conservation manager Chris Todd said he had hoped the rentals would be based on a system that was more wide ranging.

“We were a bit disappointed that the review didn’t include the idea of rewarding good environmental stewardship with rental discounts.”

This would provide incentives for high country farmers to undertake activities such as carbon farming or retiring areas of the lease to protect fragile soils.

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`What we want is incentives to look after the land. It’s still an incredibly good deal for anyone who’s farming to get a rent that’s comparable for a whole farm to a unit in the city.”

Their main concern was the way in which these lands were cared for. There were a lot of issues such as wilding trees, pests, overgrazing and they were going backwards in their biodiversity, Mr Todd said.

It is not possible to make a comparison between pastoral leases and units in a city. Pastoral leases are for land exclusive of improvements, a principle which has been tested in the courts.

Leaseholders are restricted to pastoral farming. They require permission for any other activities and rents are adjusted if that increases the earning capacity.

The Crown didn’t want what they described as “wastelands” when the leases were established and it’s farmers’ good stewardship which has protected the often fragile environment on these high country properties.


Beauty and blots

June 8, 2009

The ODT’s report on plans for irrigation in the Mackenzie basin illustrates two opposing views.

Forest and Bird South Island conservation manager Chris Todd said the proposed irrigation to allow intensive farming of the basin could turn its “spectacular dry, sunburnt vistas” into a replica of the highly developed Canterbury Plains.

“Industrial-scale farming in our most fragile and visually stunning high country landscapes is not sustainable.”

The second has a different view:

Mackenzie Irrigation Company director Murray Valentine, of Dunedin, said compared with the size of the Mackenzie Basin, the 27,000ha that farmers wanted to irrigate was very small.

The plan was not to irrigate the high country but the “flat land”, he said.

If farmers got approval, they could increase stock rates per hectare by up to 15 times.

“We’re talking about areas that are basically the nearest thing we have to desert and are completely modified with hieracium and wilding pines.”

In some countries bringing life to the desert, with the economic, environmental and social benefits which follow is seen as a wonderful achievement.

The scenery in this area is stunning to most people, but they drive through it at 100 kilometres an hour – or faster – on the journey between Canterbury and Central Otago.

It’s a different picture for many of those who live in the Mackenzie. They too see beauty but those “spectacular, dry sunburnt vistas”  are heartbreaking for people trying to earn a living who would regard the green pastures of Canterbury as paradise.

It’s possible to make objective decisions on such things as pollution of waterways, but beauty is subjective.

One person’s stunning scenery is another’s blot on the landscape.


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