Commercial leaseholders will be able to renew their leases on paying 10 per cent of unimproved value, under a policy announced yesterday by the Minister for Environment, Land and Planning, Bill Wood.
The decision ends more than two years of uncertainty. Holders of 50- and 99-year commercial leases were facing problems with long-term financing. Residential leaseholders can renew on payment of an administrative fee.
Some of Canberra’s first 99-year leases will fall within the 30-year period in the next couple of years. It would mean, for example, a purchaser of the old Canberra Times site seeking 30-year financing would have to pay about $700,000 to secure a renewal beyond the financing limit. Some 50-year leases are probably within the limit.
Mr Wood said, “”The policy will accommodate the needs of commercial lessees for stability and certainty in planning their businesses.”
Comment from the Building Owners and Managers Association was not available yesterday but its preferred option has been leases in perpetuity or the same as the residential option. However, it is likely to welcome the end of the uncertainty and be at least relieved that other options such as payment of full value were not taken up.
Mr Wood said it was important to uphold the lease system in Canberra and as commercial leases were for profit-making it was appropriate that a fee be paid.
The policy from 1980 to 1992 was that if a commercial lease had more than 15 years to run it could be renewed for 10 per cent, otherwise it could only be renewed at full value. In 1992 the new Land Act said renewals could be made at a fee to be determined by the Minister. The Minister made that determination yesterday.
Mr Wood said also that 50-year leases could be converted to 99-year leases on payment of the fee.
Renewals would only be granted if the Government did not need the land for “”public purposes”.
The policy for residential leases has been consistent since before self-government _ that leaseholders need not worry about leases running out during long-term finance arrangements. Renewals would be automatic on payment of an administrative fee. Since the abolition of ground rent by the Gorton Government it has meant that leasehold has been more akin to freehold.
The commercial side has been different. Lease renewals have been granted on a one-by-one basis since 1992.
A related issue has been betternment charges when leessees want to change the use of the land to a purpose outside the terms of the lease. BOMA says the Government’s latest policy of a charge of 100 per cent of the difference in value between the old lease and the new lease is too high. It says it has stiffled development. However, some academics and residents groups argue that it is the only way to ensure the community gets full value for changes to land use.
It is likely that residents groups and perhaps ratepayers groups will argue against the latest change as not giving the community enough return.
Mr Wood made the decision two weeks before the official caretaker period applied in the lead up to the February 18 election. However, it is not a substantial change in policy from the pre-1992 position. The Land Act gives the Minister the discretion to set the renewal fee.