PERPETUAL LEASE INFORMATION
A perpetual lease, sometimes referred to as a ‘Glasgow lease’ or ‘Māori lease’, is somewhat of a misnomer as it usually lasts for 21 years.
Once the lease expires the tenant has a right of renewal on the same terms and conditions as the original lease. The lease itself takes the form of a ground lease, covering the unimproved land only. Any improvements form part of the leasehold interest and are owned outright by the tenant.
Buying leasehold property
When you buy a leasehold property you are purchasing the leasehold interest and rights to occupy the land. This comprises the improvements (e.g. a house or sheds) as well as the rights and responsibilities of the lessee under the lease.
The terms of the lease will be detailed in the sale and purchase agreement. You are advised to seek legal advice before committing to the lease.
Here we outline information for tenants leasing property owned by Wakatū Incorporation, including an explanation of how rents are set and ways to pay. This information refers to land leased under the Maori Reserved Land Amendment Act 1997 only.
For information regarding other types of tenancy or for personal assistance, please contact us.
How much is your rent?
Rent varies from property to property. Rent reviews are undertaken every seven years.
Rent review process
Rent reviews are bound by the provisions of the First Schedule of the Māori Reserved Land Amendment Act 1997 (the Act).
Rental rates are reviewed every seven years, with each lease having its own cycle. You will be notified of the pending review.
The rent you pay is linked to the value of the unimproved land, so if land prices increase so will rents. As all improvements belong to the lessee, these do not affect the rental.
Objection to rent increases
Upon receipt of the notice of the new rent at the review date, as the lessee you have a right to object to the rental stated in the notice. Any objection must be sent to Wakatū formally in writing via mail, fax or email.
Should you dispute the rental, the formal procedure to follow is detailed in the First Schedule of the Act.
On a “Without Prejudice” basis Wakatū recommends that you either provide your own formal rental assessment as at the review date or engage the services of a registered valuer for further discussion on the dispute. It is recommended that the parties’ respective valuers (acting as experts) enter into discussions in an endeavour to resolve the dispute.
The Lessee has the option to proceed directly to mediation if they wish. If mediation is proposed the mediation protocol adopted by the Arbitrators’ and Mediators’ Institute of New Zealand is a useful guide.
If mediation is not successful then arbitration is the last recourse. Arbitration is bound by the Arbitration Act 1996.
Under the Act the Lessee has an obligation to pay the rent as specified in our notice on demand, as per the terms of the lease. Once an agreement on the rental has been reached between the parties, any adjustment to the rent will be made. Any overpayment will be refunded to the Lessee.
Any objection to the rent review does not create a right for the lessee to pay the rental at any amount less than that stated in the rent notice.
It should be noted that if no formal objection to the rent has been received within three (3) months from the date of the notice, the rent is deemed to have been accepted.
If you are unsure of your obligations it is recommended that you seek separate independent professional advice.
Ways to pay your rent
Your rent is payable six monthly in advance. This means you will pay the rent in two equal instalments. For most leases this is 1st January and 1st July, but other dates are possible. Invoices are sent out three to four weeks in advance and payment is due in full on the due date. We prefer payment by automatic payment.
If you prefer to pay monthly this is possible, on the proviso that it is in advance to comply with the terms of the lease. In other words, the positive balance on your account on the due date must be equal to the rental invoice.
If you do not pay your rent we may take steps to bring the lease to an end. This may result in you losing your improvements. We will pass the matter to our solicitors to recover any outstanding rent.
Selling a house you are leasing
If you wish to sell your house, you offer to the market the improvements together with the leasehold interest in the land. Ensure your agent is aware that the property is leasehold and they will double-check the rental amount and review clauses to ensure that the property is properly marketed.
Under legislation, Wakatū has a first right of refusal for purchasing the leasehold interest. Once an offer is received Wakatū has 20 working days to match the offer or the sale will proceed to the offeror. If we have good reason to believe that the purchaser cannot fulfil the terms of the lease (e.g. they are unable to pay the rent) we can refuse to consent to the transfer.
As part of the transfer process Wakatū ensures that all new lessees are aware of the current rent and the date of the next review. We are happy to assist you with the details of the property and processes but it is recommended that you seek independent professional advice before making an offer.
When your lease ends
When your lease comes to an end we will write to you offering you a new lease on the same terms. The rent review may coincide with the renewal date but this is not necessarily the case.
Interested in freeholding the property you rent?
From time to time Wakatū offers lessees the opportunity to purchase the freehold interest in their property. The situation is regularly reviewed and invitations to make an offer for the freehold are issued.
Some properties are unlikely to be made available for freeholding for various reasons, whereas others are available or may become available. We are happy to discuss freeholding with a lessee or their agent, but don’t generally discuss freeholding with prospective purchasers.
Purchasing the freehold unites the interests and converts the property into a normal freehold. If you are a lessee and you are interested in freeholding your property, contact the Property Management Team.
Wakatū strongly recommends that you seek professional and legal advice prior to purchasing leasehold property. All information contained within this site is to be viewed as guidance only. We do not accept claims of loss or liability based on the information contained within.