6. ‘They’ve earned it’:
High country runholders were basically told they owned the land, so why not now profit from it?
On its face, it sounds indefensible: the taxpayer spending millions to dispose of land it owns, some of which is sold or developed for significant private gains.
It does, however, have supporters, who say the process is fair and simply a consequence of laws made long ago.
In 2006, Land Information New Zealand (LINZ) commissioned an independent review of the tenure review process from experienced valuers, which sought to find out if it was being handled fairly.
What became known as the Armstrong report argued, yes, it was fair – if anything, farmers were paying too much in rent for their leases.
The report’s lead author, Donn Armstrong, says tenure review is poorly understood, and to understand how it works requires recognition of the high country’s history and the role farmers played in shaping it.
When pastoral leases were allocated in the 19th century, they were not perpetually renewable – the Government could kick the farmer off the land at the end of a lease period for any reason, which discouraged them from investing in and looking after the land.
That changed in 1948, when a new law made the leases perpetually renewable; a farmer could only be removed if they broke the terms of the lease.
It meant that although the Crown owned the land, it was the farmer who had the right to occupy it. Occupation, in this case, was more valuable than ownership.
‘‘[Perpetual leases] transferred a vast deal of property rights to the lessee,’’ Armstrong says.
‘‘The Crown couldn’t just move and take that high country station because they wanted it to revert to tussock, or something, because they had a right of renewal. It’s a very strong right. The Crown gave away the right that the people came and paid the big money for... That, essentially, is owned by the lessee, not the Crown.’’
In cases where lakefront properties have on-sold for extraordinary profits, it was the farmer’s right – that of occupation – that was being sold.
Even if it seemed exorbitant, the Crown had given away its rights to make money from the stations long ago.
‘‘A lot of people were saying these people who have got the leases are making a lot of money out of this, but they have every right to, because they have this right of occupation, a perpetual renewal of a lease,’’ Armstrong says.
‘‘People that have complained about the situation have said it’s not fair the Government’s not getting it, but the Government gave away those rights... The licensee, in most cases, have a significantly bigger chunk of the property rights than does the Crown, hence the differential.
‘‘That’s not understood by people. All they think is all these bloody high country runholders, making all this money … well, that right was given to them in 1948, and fortuitously for them, the demand for these things moved up very substantially in the last 25 years.’’
It’s an argument long pushed by the High Country Accord, a group representing high country farmers, which has defended the money paid to farmers by the Crown. It has particularly opposed Brower’s research, and lists its objections on its website.
The same logic underpins the work of the agency leading tenure review, LINZ.
It defended the process, while acknowledging it was still refining as it went along.
‘‘Pastoral leases provide exclusive possession to the farmer, so they actually have a bundle of rights that’s fairly similar, in some respects, to a freehold property,’’ says Jerome Sheppard, deputy chief executive of Crown property.
‘‘People look at it and think, isn’t this Crown land? At a technical level, yes it is, but as a bundle of rights, the Crown – as part of the Land Act 1948 – actually provided a really significant bundle of rights to the leaseholders and said go for it, you invest in these properties and get a return out of them.’’
It isn’t right to think of a pastoral lease as a rental, he says – it is far closer to ownership.
During a review, the Crown effectively bought the lease and sold part of the freehold back. Because pastoral leases and freehold land were similar in value, the costs – once accounting
‘‘Nobody’s going to care what money changed hands in 100 years time . . . We will care about the outcome of the land.’’
Jan Finlayson, vice-president of the Federated Mountain Clubs
for improvements on the land, which are owned by the farmer – often worked out in the leaseholder’s favour.
While some deals in the past may not have been as favourable as they could have been, the process as a whole had been fair.
‘‘We’ve learned a bit through this process,’’ he says.
‘‘There were some individual circumstances where if you had the opportunity again you’d probably improve the valuation, so maybe the outcomes for the Crown weren’t as good from a valuation perspective.
‘‘But just like every time we do a review, we make some improvements to that process. It’s a lot clearer now. That’s not to say it’s perfect – it’s certainly not.’’
Aspects of this view are disputed by Ann Brower, who says the evidence shows that even if that was the philosophy behind the payments, it still wasn’t consistent.
If the Crown’s interest was indeed worth less than a leaseholder’s, there would be consistency across all of the reviews.
The amounts paid by both the Crown and the leaseholder have swung wildly over the years, with no apparent overriding pattern of logic. One of the only consistencies is that the less land the Crown gets, the more it pays.
To understand the philosophical divide separating both sides, it pays to look at the review of Caithness Station, completed in 2014.
The farm covers around 2200ha near Moeraki, in Otago. The review agreed that the entire property, bar 10 hectares, would be returned to the farmer as freehold.
The Crown bought the lease for around $2m, keeping 10ha for a scientific reserve, ostensibly to protect a population of flathead galaxias, a small species of freshwater fish.
It sold the rest back as freehold for the same price, cancelling the payment out.
Part of the privatised land had a conservation covenant, but critics said it was vague – for example, it allowed stocking at a rate ‘‘that in the opinion of the Minister does not adversely impact on the values’’ of the land, seemingly prioritising a politician’s personal view over what would be an ecological measure.
For LINZ, this is an example of a good outcome. It secured a scientific reserve and a covenant for nothing.
But look at it another way: The taxpayer effectively paid a $200,000 per hectare rate for its reserve, while the farmers paid $900 per hectare for freehold land, of which the majority had no protection at all. The premium paid by the taxpayer, for land less valuable, was roughly 22,000 per cent.
How you view the result of that review is indicative of how you see the process as a whole – is the Crown giving the land away, or is it simply recognising the murky politics of property rights?
It does not, however, answer the question of consistency.
Across the tenure reviews completed since 1998, the median ratio of what the Crown pays versus what the farmer pays is around 4.3 – meaning, per hectare, the Crown has paid around 4.3 times as much as the farmer.
(LINZ does not consider a per hectare rate during reviews, but it is a way to compare values across time and within individual examples.)
The highest this ratio has ever reached was 1257, during the review of Shirlmar Station, a large farm spread across the scorched and snowy tussocks of the Lindis Pass.
The farmer paid $6000 for freehold rights to 3500ha, while the taxpayer paid $15,000 for a tiny,
7ha piece of conservation land. The farmer’s rate was $1.70 per hectare, while the taxpayer’s was
$2140 per hectare, a premium of around 125,000 per cent.
The farm, which the taxpayer paid $9000 to privatise, was sold 18 months later for $6.6m, property records show.
Shirlmar was one of six stations in the area that went through tenure review together; by the time the so-called Lindis Six completed their review, farmers had bought 19,000ha for $270,000 and sold 33ha to the Crown for
$68,000. Another of the stations, Geordie Hills, was on-sold for
$6.3m.
Sometimes, the gap is much closer, or in rare cases, reversed. At Wyuna, the leaseholder paid a