Crown pays millions leasing unwanted land

Taxpayers have continued to pay millions of dollars to reserve a bare patch of dirt earmarked for a primary school, despite the plans being cancelled seven years ago.

The piece of land, located in the Auckland suburb of Remuera, is owned by the College Rifles Sports Club and is part of a property that consists of playing fields, a netball court, clubrooms, a gym and carparks. The total property is more than 3.6 hectares and has a capital valuation of $8.9 million, with $2.65m of that land value.

In 1999, the club signed an interim agreement with the Ministry of Education to lease a 6000 square-metre piece of the land for the construction of a primary school.

The agreement allowed for a perpetually renewing lease of 20-year periods, with rent rise reviews every five years.

The agreement was only supposed to be in force until all necessary consents for the school had been obtained and the normal lease began, but the years dragged on and no school eventuated.

In 2008 the ministry decided no primary school was needed and told the club it would not continue the lease after the first 20-year period expired in 2019.

Since 1999, the ministry has continued to pay rent for the land. This started at $135,000 plus GST a year, before rising to $274,854 in 2004, $303,458 a year in 2009 and $658,776 last year.

The ministry also spent $277,000 improving the area by resealing the carpark, and on demolition work. It also spent tens of thousands of dollars in operating expenses in lieu of outgoings.

Details of the deal were revealed in a High Court decision after the club filed a claim against the ministry, arguing they were locked into the deal until 2039.

The club said a clause in the agreement bound the ministry to the lease for at least 40 years, rather than 20. The ministry believed otherwise.

In his decision, Justice Simon Moore said the parties had treated the interim agreement as a lease but it was clear the contract allowed the ministry to stop the arrangement after the first 20 years.

‘‘It is inconceivable anyone could have been misled by this presentation into believing the ministry was somehow locked into a 40-year commitment, let alone a 100-year commitment.’’

Ministry head of education infrastructure service Kim Shannon said a decision was made in the mid-1990s to look for a school location to address the area’s growing population. The preferred option was to buy the land, but this was not available so a lease was signed.

To date, about $5.8m had been spent in lease and maintenance costs but changing demographics meant a school was no longer needed.

‘‘However, the club believed we should continue to pay rent until 2039, which would have been a further significant cost,’’ she said.

‘‘We consider that this money would be better spent on schools. Despite every effort to resolve this issue with the club, we were unable to agree on when the ministry could exit the lease.’’

Club general manager Derek Rope said an appeal was likely, but hoped an agreement could be reached.