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Perpetual leases facts

Why is the Government selling this land?

The conversion of certain perpetual leases to freehold is about ensuring land that is already managed by the private sector, is owned by the private sector.

It is ineffective and costly to administer these types of leases. It is in the public interest that resources are applied to improving the department's stewardship role such as managing bush fire threats, weeds, feral animals and the state's 33,000 Crown Reserves set aside for the community.

Will this affect my existing conversion application and the purchase price I have to pay?

The amendments introduced to the Act discontinue the practice of allowing the purchase price of land to be paid by instalments (for applications received after 1 July 2004). The purchase price will now be required to be paid in full on the settlement date contained in the contract for sale.

Existing applications will continue to be processed as normal.

Should a holder wish to withdraw their current application (lodged prior to 1 July 2004) and reapply, their new application will be processed in accordance with the new provisions contained in the Act.

Any client considering withdrawal of an existing application to convert a perpetual lease to freehold should seek legal advice on the implications of doing so.

How much time will I be given to convert my perpetual lease to freehold? Will the rent I pay be increased in the meantime?

Holders of Perpetual Leases whose lease is not subject to periodic redetermination of rent, will have until 30 June 2009 to make an application to convert their Perpetual Leases to freehold.

Advice of this purchase offer has been sent to all leaseholders who have not applied to purchase.  This means that an application for purchase of the lease should be lodged with NSW Crown land (the Department) on or before 30th June 2009 to avoid the market rent provisions.

If an application is not received within this time, the rental of the leased land will be at a market based value but not less than the minimum rent provisions, currently $412 plus GST.

If your application to convert is refused you will not be charged a market rent, but will still be subject to a rent that reflects your current rent subject to minimum rent provisions plus CPI.

What will happen if I choose not to convert my perpetual lease to freehold?

If you choose not to apply to convert your Perpetual Lease to freehold prior to 30 June 2009 the amount of rent you pay will be a market based rent of the land but not less than the minimum rent provisions, currently $412 plus GST.

An application to convert to freehold after this period will still be possible, but a market based rent may apply pending the determination of the application.

How will my existing perpetual lease, which is subject to rent redetermination, be affected?

You will still be able to apply for the conversion of your perpetual lease but there is no longer a provision to pay the purchase price by instalments.

Please note the concessional purchase price of 3% of the land value does not apply to leases which are subject to rental redetermination. Conversion of these leases to freehold will be at current market value or the notified capital value (CPI adjusted) whichever applies under the legislation.

Please note a rental redetermination does not mean an increase in rent that has occurred due to CPI adjustment or to the increase in the minimum rent of the lease due to amendments to the legislation.

What protection will these lands have after they convert to private ownership?

It is no longer essential these lands are held in public ownership to maintain environmental and conservation controls over them.

Initiatives like native vegetation protection, improvement to catchment management and natural resource management assist in ensuring these lands are managed to maintain their environmental sustainability.

In addition, the legislation enables the Minister for Lands, on behalf of the State, to impose certain restrictions (called covenants) on land that is purchased under the special arrangements in the legislation.

These restrictions, or covenants, may be utilised to protect the environment, protect or manage natural resources or protect the cultural, heritage or other significant value of the land.

A restriction on subdivision of the land and a restriction on allowing any dealing with multiple lots separately, where they comprised a former lease, will also be imposed upon conversion of perpetual leases except for some leases of minimum area in some urban localities.

Will the conversion of perpetual leases result in the loss of significant environmental values?

The National Park Association of NSW (NPA) has recently released a report which questions the Crown lease conversion policy. The NPA has said that the Department claimed that only 3% of the perpetual leases under consideration for conversion to freehold have conservation values. No claim has been made by the Department about what percentage of perpetual leasehold land has conservation values.

The majority of perpetual lease holders have had a right to purchase their leases for many years. The landholders effectively hold the great majority of the equity in the land, and the land is already treated as a form of title that is almost equivalent to freehold.

The Department's reforms contain provisions for the protection of environmental and other significant values. The reforms gave the Minister for Lands power to impose covenants and restrictions on title when Crown land is converted to freehold.

The proposed covenants generally reflect the previous lease conditions and will target the protection of areas with significant values while continuing to allow current lawful management practices.

The State Government has allocated $13 million over four years for the voluntary purchase of high conservation perpetual Crown leases, funded through the increased Waste Levy. These funds will be used to purchase leases where environmental values cannot be adequately protected by covenants.

The Department will continue to work with the Department of Environment and Conservation (DEC) to develop covenants to protect environmental values and to identify priority high conservation land. The Department will also work with Catchment Management Authorities (CMAs) and rural communities. This approach will ensure that significant environmental values are protected and conserved without unnecessarily compromising productive use of the land.

What do I need to lodge with my application?

  • There is a prescribed application fee of $398 which is non-refundable in the event the application is not successful. Application forms were attached to the 19 August 2008 letter to holders but further forms can be obtained online on the 'forms' page.
  • Applicants will need to fill out an application form for each lease. Multiple applications for leases held by the same registered holder will only incur one (1) application fee provided they are lodged at the same time.
  • You must gain the consent of your mortgagee/s prior to lodging an application. If there is more than one mortgagee all mortgagees are to sign the application or provide an accompanying letter of concurrence.

How much will it cost to convert my Perpetual Lease to freehold?

  • There is a prescribed application fee of $398 which is non-refundable in the event the application is not successful.
  • Any rental arrears and/or fines outstanding on the Perpetual Lease account must be paid prior to the application being lodged.
  • Rent continues to be payable on the Perpetual Lease until the application for conversion is approved and finalised.
  • By making application to purchase your perpetual lease you will only be subject to your current rent (subject to minimum rent provisions) instead of full market rent while your application is being determined.
  • The purchase price to convert will be the lesser of either the Notified Capital Value as recorded by the Authority or 3% of the current land value based on information provided by the Valuer Generals.
  • GST may apply to the purchase price depending on the nature and use of the subject land and/or premises.
  • Survey costs may apply.
  • Stamp Duty may apply.
  • Land Property Information fees will apply

Does GST apply to any of the fees and/or costs?

The prescribed application fee of $398 is not subject to GST

Does GST apply to the purchase price?

GST may apply to the purchase price depending on the nature and use of the subject land and/or premises.

What is the Notified Capital Value?

  • The Notified Capital Value is the value of the land determined as at the date the lease was originally granted and adjusted by the CPI quarterly from 1st May 1990.
  • The purchase price will be determined at the lesser of the notified capital value or 3% of the current land value and the applicant advised as part of the procedure.
  • The applicant will have the opportunity to convert at the determined purchase price.

How is the current land value calculated?

  • The Department will determine the current land value as at the date the application for purchase is received by using valuation information provided by the State Valuation Office.
  • The notified capital value is the value of the land determined as at the date the lease was originally granted plus quarterly CPI adjustments from 1 May 1990.
  • The Department will compare the notified capital value (if applicable to your lease) with 3% of the current land value. The current land value purchase price will be determined using valuation information provided to the Department by the State Valuation Office
  • A letter of offer to purchase the perpetual lease will then be sent, with the purchase price being the lesser of these two (2) amounts.

As at what date is the purchase price determined?

The purchase price will be determined as at the date an application for purchase is lodged with the Department.

I have a  Perpetual Lease but I have not received an offer to convert at the special purchase price under the new legislation. Why?

  • If your Perpetual Lease is subject to periodic rent redeterminations it is not eligible for conversion to freehold at a purchase price of 3% of the land value under the current legislation.
  • Holders of Perpetual Leases that is subject to periodic rent redeterminations may still be eligible to make application to convert however the purchase price would be the full current market value. Provision for payment of the purchase price by annual instalments no longer applies.

How long do I have to lodge my conversion application?

  • Perpetual Lease holders will have until 30th June 2009 to lodge an application for conversion before the annual rent will change to a market based rent.
  • After that date, you will still be able to apply to convert your perpetual lease to freehold at the special purchase price but a market based rent will apply to the lease pending the determination of the application.

What happens if I don't convert?

If lessees have not applied to convert to freehold by 30th June 2009 the rent for the Perpetual Lease will change to a market based rent (subject to the minimum rent amount of $412 pa plus GST + CPI adjustments).

How is the market based rent calculated?

  • A market based rent will be determined based on the value of the Crown land, the tenure purpose, the land area and other relevant rental determination matters using appropriate valuation methodologies.
  • The market based rent will be reassessed every 3 years and be subject to annual CPI adjustments.

How long will the conversion application take to process?

  • Where Perpetual Leases are identified as containing areas of environmental and/or other significant values they will be protected by the placement of covenants on title as part of the conversion process.  The review undertaken to ensure that these values are identified may result in a delay in decisions about purchase applications.
  • As there are many categories of Perpetual Leases which are subject to this conversion offer and within each category there may be a variety of different circumstances, each application will be considered on an individual basis and contact made with holders as part of the processing to ensure all the relevant information is obtained and considered.
  • Due to the large number of account holders affected by this conversion offer and the number of potential applications to be received it is not possible to indicate a processing timeframe at present.

When do I have to pay the purchase price?

  • The conversion of Perpetual Leases will require the use of a Contract for Sale, similar to other Private Treaty Sales.  Upon settlement of the contract all purchase monies must be paid in full.
  • The current legislation does not provide for the payment of the purchase price by way of annual instalments.

How will Perpetual Leases formerly affected by the moratorium be dealt with under the new legislation?

  • Holders of those Perpetual Leases formerly affected by the moratorium can still apply to convert to freehold.
  • As with previous legislation, conversion of such Perpetual Leases will still require consultation with other government agencies eg State Forests, Department of Environment and Conservation (includes former NPWS), etc and may not result in approval to convert.
  • The current legislation still allows for land to be retained in public ownership for the protection of significant conservation or environmental values.
  • The Minister for Lands has the power under current legislation to place covenants on the land as part of the conversion process from Perpetual Lease to freehold to protect the land from subdivision without the Ministers consent and/or for the specific protection of environmental or other significant values.
  • A covenant is a legal obligation or restriction that is attached to the title of the land.

What happens if I do not agree with the covenants placed on the conversion of my Lease?

  • The decision to include any covenants or restrictions on the title of a converted Perpetual Lease will be based on conservation, cultural, heritage or other concerns.
  • You will be contacted by departmental staff to discuss the conversion process, attributes of the lease, current management practices and how the covenants will relate to the features present on the lease. The negotiated outcome will target those areas that require protection by covenants.
  • The covenants will permit continuing lawful rural land uses and provide an increase in management certainty and flexibility by removing the current lease controls.
  • There is no provision for appeal against the decision

If I lodge an application will I be required to continue paying an annual rent?

Yes but the rent will remain at the current level (subject to minimum rent provisions) while your application is processed. However if you did not lodge an application for purchase by 9 March 2009 your rent will change to a market based rent.

What happens if I lodge an application to purchase and my application is unsuccesful?

In circumstances where an application to purchase (lodged by 9 March) is not granted over all or part of the land in a  perpetual lease, or if it is agreed that the land should remain as leasehold and as a result an application is unsuccessful then the holder will continue to pay a rent that reflects their current rent (as at the date of application) subject to minimum rent provisions, currently $412 plus GST plus CPI.

NOTE: The reforms do not apply in the Western Division of the State.