By Keith Woodford*
The New Zealand high country has been undergoing remarkable changes in land tenure over the last 20 years. Much of the marginal pastoral land has moved into the conservation estate, and much of the better pastoral land has shifted from leasehold to freehold. However, the process has been mired in controversy.
The argument against land tenure reform has been led by Dr Ann Brower, until recently from Lincoln University and now from Canterbury University. Dr Brower has argued that runholders have been granted superior land-tenure rights on the lower country that have led to inappropriate land-use developments, which in turn have led to major windfall benefits for private individuals. In particular, the runholders have been able to sell their new rights for huge capital gains.
The idea that it is all a big rip-off is now firmly embedded in the public psyche. Supposedly, the officials have messed it up under both National and Labour led governments, selling off our birth-rights to access these so-called public lands. Even worse, those benefits have at times accrued to foreigners.
Missing from the debate has been an understanding of New Zealand land law, and the powerful bundle of rights held by leasehold runholders. In particular, runholders hold blocking rights which, in perpetuity, prevent the public from accessing their leased lands.
Rectifying this situation, and bringing fragile mountain lands into the conservation estate, has been a major driver for land-tenure reform. Gaining public access via reserves and covenants to some of the lower country adjacent to the big South Island lakes has also been important.
The way this has been done is via a trade-off. Runholders give up all of their rights to some areas, typically the high country, with additional rights given to them for other areas. The balance of transferred land rights then determines the net payment in either direction to ‘square things off’.
There is no doubt that land-tenure reform has subsequently triggered major developments on some of the lower land. This has highlighted inadequacies of some local government district plans, and the absence of a capital gains tax has meant that capital gains have not been shared with the public. These are indeed flaws, but they are not flaws of the tenure reform process itself. Solutions to these problems lie elsewhere in the legal system.
If we are to understand the events associated with land-tenure reform, then first it is necessary to understand the characteristics of New Zealand land-law. Regardless of tenure system, land can never be owned by individuals in the way that individuals own other assets.
When lecturing to students at Lincoln University, I would often use my shirt or the watch on my wrist as examples. I would explain to the students that I owned those items in an absolute sense and I could do what I wanted with them. If I wished, I could also destroy them, by ripping the shirt and smashing the watch.
In fact, I did neither – the limits of lecturer remuneration and sobriety acted as major constraints to such behaviour – but the point was that I could have if I wished. That is what absolute ownership is all about.
However, in the case of land, no-one has the right to destroy it. Anyone who does destroy land by coming in with a bulldozer and shifting the land around without a permit, will at best end up with a considerable fine and may end up in jail. Land ownership is different.
The distinctive characteristic of land ownership is that there are multiple forms of tenure, each with its own ‘bundle of rights’. Whereas the general public thinks that freehold tenure is ‘ownership’ and that leasehold tenures are ‘not ownership’, this is not what the law says. Underlying all of the land tenures is the notion that the ‘Çrown’, on behalf of all of us, has power as to what can and cannot be done with the land.
In the New Zealand high country, land occupation was initially granted to runholders in the mid-19th century, most likely for little more than a song. Then in 1924, the runholders were given 35-year licences to occupy, but still with no guaranteed right of renewal.
Then, in the 1940s, it was argued that the licence system contained a fundamental flaw. With no guaranteed right of renewal, there was a disincentive for runholders to look after the land. So, the 1948 Land Act gave them 33-year leases, with perpetual rights of renewal as long as they met good land-husbandry requirements. Rentals were set every 11 years, but only in relation to the unimproved value of the land for pastoral purposes.
With hindsight, we can look back through the mists of time, and argue about the merits of the 1948 Land Act. However, the reality is that the granted bundle of rights is clear cut.
A key right within the leasehold bundle is the right to ‘quiet enjoyment’. It gives leaseholders an absolute right to exclude the general public from that land, and to on-sell that right to future leaseholders. It means the public can be locked out in perpetuity. That exclusion relates not only to the high country, but to accessing, via runholder land, the shores of the big South Island lakes.
In some respects, this access situation is not greatly different to access rules between a tenant and the freehold owner of a suburban house. Although the landlord holds freehold title, this landlord has no right to have a picnic on the front lawn. If the landlord wishes to inspect the property, then prior notification is required.
These rights to quiet enjoyment have been greatly underplayed in public discourse. As a result, a key feature of tenure review, being the opening up of our mountain lands to all of us, and accessing the shores of the big lakes, has also been underplayed.
In part, the underplaying has been because experts coming from overseas have not appreciated the rights which are specific to New Zealand law. For example, it is a very different situation than exists either in England, where there is ‘rights to roam’ legislation, and also very different to the public-access rights within America’s so-called public lands.
Way back in 1948 at the time of the relevant Land Act, access by the public to these New Zealand mountain lands would not have seemed important. Even in the 1960s when I started my own tramping and mountaineering journeys amongst our mountain lands, those of us with such interests were very much in the minority.
In those days, if we wished to travel across runholder land we would simply call in at the homestead – a somewhat grand term for what were often in those days very simple houses – and ask permission. It was never refused.
Over time, the friendly relationship between runholders and walkers has changed. The number of walkers has greatly increased. And so, more and more runholders have applied their legal right of quiet enjoyment, blocking out the rest of us.
Within the public discourse, there have also been elements of what I call ‘noble cause corruption’. This is where a noble cause leads to information being miscommunicated, either consciously or subconsciously, to buttress the noble cause.
In the case of high country land tenure, the miscommunication has been to ignore the legal rights relating to quiet enjoyment. Whereas the officials administering the tenure process have to work within the law and take account of the respective bundle of rights, the media is not so constrained.
This has meant that the media has been able to highlight a story of freehold rights for the lower country being granted to the runholders for an apparently small price, without making it clear that it is actually only the balance between perpetual lease rights and freehold rights that the Crown has sold. In essence, the Crown’s freehold rights were to collect a modest annual rental from the leaseholder and not much more. In contrast, when some runholders, now with freehold rights, chose to on-sell the property, they were actually selling the combined rights including their prior perpetual access and use rights.
My purpose here is not to argue that tenure review has been without flaws. There have indeed been flaws, particularly but not only relating to specific properties with subdivision potential. But the pros and cons do not all lie on one side.
It is notable that 133 out of 303 runholders have either declined to enter or subsequently withdrawn from the voluntary process of tenure reform, because of its costs, complexities, and risks to pastoral viability from having a property of smaller size. In contrast, 130 reviews are complete, and 40 are in various stages of progression (LINZ website, updated December 2017).
In moving forward, the solution is not to stop tenure reform. There is still much work to be done. But lessons do need to be learned, particularly about subdivision values, and with recognition that it is often the flaws in other legislation, including subdivision law, water law and the taxation of windfall capital gains, that have led to sub-optimal outcomes.
*Keith Woodford is an independent consultant who holds honorary positions as Professor of Agri-Food Systems at Lincoln University and Senior Research Fellow at the Contemporary China Research Centre at Victoria University. His articles are archived at http://keithwoodford.wordpress.com. You can contact him directly here.