Farmers and software representatives
LegalJanuary 17, 2023

End of controversial High Country tenure reviews

By:Lester Blomfield
The Crown Pastoral Land Reform Act 2022 ends the controversial practice of tenure review for Crown pastoral leases in New Zealand. The practice has resulted in large areas of former Crown pastoral leasehold land being converted to freehold land and sold to the former leaseholders. There has been criticism that some of the land freeholded has been farmed too intensely for the environment or has been on-sold at exorbitant prices by the former leaseholders.

After 18 May 2022, only those reviews currently in implementation or at the substantive proposal stage can continue.

Background

The Crown began leasing high country land to farmers for pastoral use to farmers in the 1850s. In 1948, the Government was concerned by poor environmental outcomes on this land and introduced the Land Act 1948 to promote better stewardship. The Land Act provided leaseholders with more security of tenure and gave them the incentive to take a longer-term approach to managing the land and protecting the land through the management of soil erosion and quality while allowing for its economic use.

There are currently 171 Crown pastoral leases that cover approximately 1.2 million hectares of the South Island. The majority are located in Canterbury and Otago with the remainder in Marlborough, Southland and Westland. The leases are largely in the South Island high country.

The leases have 33-year terms, but these are perpetually renewable. Leaseholders own any improvements they make to the land, such as buildings and fencing.

There are only a limited range of activities allowed under the leases. Leaseholders can only use the land for pastoral farming (the grazing of stock, such as cattle, and sheep) and cannot disturb the soil, burn vegetation, or increase their stock numbers beyond set limits without consent from the Commissioner of Crown Lands. Leaseholders must farm the land diligently and to keep it free from pests and weeds.

The Commissioner can grant easements over pastoral land, and recreation permits for certain non-pastoral commercial activities, such as tourism, hunting, ski fields or filming. These are legal rights separate from the pastoral leases and can be held by third parties.

Tenure review

The National Government formalised the voluntary process of tenure review in the Crown Pastoral Land Act 1998.

The process gave anyone who was farming Crown pastoral lease land an opportunity to negotiate to purchase part of the freehold of their leasehold land.

Typically, for pastoral land with significant inherent values or was required by the Crown for some other purpose, the leasehold interest in this land was purchased by the Crown and returned to full Crown ownership (mainly as public conservation land). The remainder of the leasehold land was freeholded and sold to the pastoral leaseholders as an economic unit. Some of the freeholded land were subject to covenants to protect values, or easements for Department of Conservation or public access. The process was often protracted, costly and uncertain.

In the case of Muzzle Station which is located beside the Clarence River in South Marlborough, the negotiations between the leaseholders, DOC and LINZ lead to a 12-year cycle of arguments, discussions, applications and reviews. The leaseholders obtained freehold land in return for giving up the leasehold on higher pieces of the property that reach to the top of the Inland Kaikoura Range. This meant the leasehold of 10,000 ha of the original station was purchased by the Crown and put back into full public ownership and the leaseholders purchased 8000 ha of former leasehold land as freehold land plus a 30 year DOC lease on an adjacent 8000 ha of Clarence Reserve grazing land that was already in public ownership. Part of the station’s freehold land was also subject to easements. These easements enable trampers and mountain bikers to access the high country now taken over by DOC.

The tenure review process was intended to enable the Crown to exit its lessor role over time with the Crown taking over the areas of significant inherent values including the alpine land in exchange for allowing the leaseholder to purchase the freehold of parts of it.

It was thought that all Crown pastoral leases would undergo tenure review. This has not been the case as more than half of the Crown’s pastoral estate remains under Crown pastoral leases since the Crown Pastoral Land Act was enacted in 1998. Tenure reviews had been becoming less frequent.

Part of the problem was that the process was completely dependent on the level of Crown appropriations available each year for the buying of leases and selling of land.

Remaining Crown pastoral leases

With the end of tenure reviews, the remaining pastoral leases will continue but will be subject to the controlling legislation which has been changed.

The reform act amends the Crown Pastoral Land Act 1998 and Land Act 1948. As well as ending tenure review, it introduces an outcomes-based approach to the regulatory system to help ensure that sustainable pastoral farming maintains or enhances the inherent (ecological, landscape, cultural, heritage and scientific) values of the land.

The new regulatory system controls the activities which may be undertaken on Crown land. It identifies a range of farming and other management activities into three categories, permitted, discretionary and prohibited.

Permitted activities, for example, certain limited disturbances of the soil or invasive exotic pest plant control that does not involve associated by-kill of indigenous vegetation, can be undertaken by leaseholders without consent. The permitted activities tend to be day-to-day farming activities.

Discretionary activities, such as burning vegetation, and constructing buildings and infrastructure, will need the consent of the Commissioner of Crown Lands.

Prohibited activities, for example, the ploughing of wetlands cannot to be undertaken and consent cannot be applied for.

The Commissioner must consult the Director-General of Conservation before deciding whether to consent to a discretionary pastoral activity. The Commissioner must also consider (among other things) the adverse effects arising from the pastoral activity and the inherent values likely to be affected. Inherent values do not include pastoral farming activities.

The Commissioner may consider New Zealand’s commitment to reducing greenhouse gases.

In deciding whether the activity is necessary to enable the leaseholder to exercise their rights and obligations under their lease, the Commissioner may consider any economic benefits associated with undertaking that activity only to the extent that those benefits relate to the ongoing financial viability of the pastoral farming enterprise.

Public access: a sting in the tail of the reform act

A new clause was introduced into the reform bill at the select committee stage by the Environment Committee, without prior notice or consultation with Crown pastoral leaseholders.

That clause required the Commissioner of Crown Lands to be satisfied that an applicant seeking consent to the transfer or subleasing of their interest in Crown pastoral land had made reasonable endeavours to enhance public access to the land.

This clause was changed before the reform act was enacted. Instead, the Commissioner must now consider whether an applicant seeking consent to the transfer or subleasing of their interest in Crown pastoral land has unreasonably refused requests for public access over the land in the past.

If the Commissioner does consider that the leaseholder has unreasonably refused requests for public access in the past, the Commissioner may make their consent to the transfer or sublease subject to the condition that the existing leaseholder, and the potential leaseholder or sublease holder, must enter a negotiation process with the Commissioner so that access requests will not be unreasonably refused after the transfer or subleasing.

The select committee considered that their access clause was needed because the reform act created a new duty for the Commissioner. That duty requires the Commissioner to support the New Zealand Walking Access Commission as far as practicable in meeting its public access objective where that relates to pastoral land.

The select committee considered what their provision would mean in a scenario where there was already public access to the pastoral land. In such a scenario, the Commissioner could consider whether enhanced access would be reasonable in light of a range of considerations, including the amount of access already available, and the likely impact of further access on the value of the lease and the farming operation.

However, the enacted provisions apply to all Crown pastoral leases and not just to Crown pastoral leases that already allow public access.

It is also unclear where the requests for public access might come from. Could it be a request from the Commissioner, the New Zealand Walking Access Commission or simply a request from a member of the public?

Leaseholders under Crown pastoral leases have a perpetual right of renewal for terms of 33 years, but they now have no rights to freehold any of the land. They have an exclusive right of pasturage but have no rights to the soil. It is an interest very close in practical terms to a freehold interest.

There are no general requirements for Crown pastoral leases to allow for public access. Public access can disrupt the smooth running of farming operations, and private leaseholders normally have exclusive possession and quiet enjoyment of the land.

The public access provisions fundamentally alter the ability of pastoral leaseholders to transfer or sublease pastoral leases for full market value. Both the leaseholder and the new leaseholder will be unable to predict whether a sale price has to be reduced to take into account possible public access requirements by the Commissioner.

The Commissioner can grant easements over the pastoral land and a leaseholder could be compensated for that. But it is not clear whether the requests for access amount to an easement. If not, it could amount to the provision of public access without compensation for leaseholders at the sole discretion of the Commissioner.

Public access is only reviewed when leaseholders wish to transfer their leasehold interest. When this occurs will vary widely with some leases remaining in the same ownership for lengthy periods. This could lead to a haphazard public access system.

Under the Walking Access Act 2008, the New Zealand Walking Access Commission can only negotiate an agreement with the landholder of Crown pastoral land, (the leaseholder as occupier and the Commissioner of Lands for the owner) for land in pastoral leases for an easement or lease or the purchase of part of the land for use as a walkway. The Commission cannot force the landholder to grant an easement or lease or sell part of the land for use as a walkway.

The select committee reported that their public access clause would allow the Commissioner to play a facilitative role in negotiations with the New Zealand Walking Access Commission and pastoral leaseholders.

However, the public access provisions enacted in the reform act mean that the Commissioner could instead play a determinative role in negotiations with the New Zealand Walking Access Commission and Crown pastoral leaseholders. The provisions could force Crown pastoral leaseholders to provide public access to their leased land so the sales of their leases can progress smoothly.

Lester Blomfield
Senior Content Management Analyst, Wolters Kluwer New Zealand

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