Developing Northern Australia: tenure reform and assisting with investment

2631334-v1\SYDDMS Developing Northern Australia: Tenure reform and assisting with investment 9 NOVEMBER 2015 OCCASIONAL PAPER #2 Download Contact us Visit our website Northern Australia has the benefit of large tracts of pastoral land that have not been fully exploited for their highest and best use. Our previous paper noted the release of the white paper entitled Our North, Our Future: White Paper on Developing Northern Australia (White Paper), and the focus on land reform as a key aspect of the future development of Northern Australia. History of pastoral leases and native title Land tenure such as pastoral leases was introduced in Northern Australia in colonial times to accommodate pastoralists while the colonies were still developing. Freehold land beyond the coastal fringe was not favoured by governments. Instead, granting pastoral leases allowed the holder to use the land for grazing purposes only, while the then colonies were able to preserve their options for the future. The nature of land tenure in Northern Australia is specific to each jurisdiction, and has changed over time. In all jurisdictions, pastoral leases generally have not granted their holder the right to exclusive possession of the land as such an extensive right is usually not required for the purposes of grazing. Therefore, native title rights and interests can often co-exist with a pastoral lease. However, where native title rights and interests are upheld, they are generally held by Indigenous Australians as a communal bundle of rights that are of varying scope and that cannot be transferred to third parties or commercially exploited. Progress is being made in Queensland, Western Australia and the Northern Territory to create transferrable Indigenous interests in land, that are distinct from native title rights and interests. 2631334-v1\SYDDMS Current matters to consider when investing in Australian land Investors are often faced with the following challenges to investment in land in Northern Australia for pastoral or agribusiness purposes:  the due diligence, acquisition and compliance burden associated with multiple types of tenures that are subject to:  different governing regimes;  different search capabilities, search result timings and levels of information accessibility;  unregistered statutory interests that require specialist searches;  differing pre-completion, completion and post-completion obligations, including stamping and lodging documents separately in each jurisdiction;  tenure in rural or sensitive areas is generally granted as Crown land, which allows the government greater control over the land for the purposes of long term management. Crown land is governed by a different regime to freehold tenure, is usually granted for (and only for) a particular purpose and often Ministerial consent is required to deal with the land. If a person wishes to use the land for another purpose, restrictions and native title issues apply;  until recently, Crown tenure in Queensland was granted for a limited term and tenure holders had security of tenure for that term only. The renewal process (where available) triggered a merits based assessment of the land use and the appropriate persons to hold the land, that generally could not occur until 80 per cent of the lease term had expired. Some rights were (and remain) not renewable at all;  Crown tenure is liable to forfeiture in certain circumstances (usually involving failure to remedy notified breaches of the terms of the tenure);  Crown tenure is vulnerable to native title claims. As native title claims continue to be made in Northern Australia and often experience lengthy delays before a determination is made, this results in uncertainty for investors as to whether native title will need to be accommodated when using the land; and  conversion of Crown land to freehold is a "future act" that requires a native title assessment to determine whether native title subsists, has been extinguished or has been surrendered. This may require a court determination of native title. Recent and proposed tenure reforms The three Northern Australian governments have recognised the need for reform and have been progressively reforming their land tenure systems. Queensland On 1 July 2014, the first suite of changes to Queensland's State land tenure took effect, by way of amendments to the Land Act 1994 (Qld). To offer greater security of tenure and to simplify the tenure renewal regime, the State government introduced rolling term provisions that apply to certain leases. Those leases include certain island leases granted for tourism purposes and rural leasehold land used for agriculture, grazing or pastoral purposes of at least 100 hectares (or less if Ministerial approval is obtained). If a tenure holder applies for an extension of the term during the last 20 years of the tenure (or earlier in special circumstances), then unless the tenure holder has already applied to surrender the tenure, the tenure must be extended ("rolled over") for a term equal to the original term of the tenure. This process can be applied unlimited times. Further, the land management agreement regime has been rolled back. 2631334-v1\SYDDMS Two long term key restrictions on holding tenure have been removed:  corporations are no longer restricted from holding perpetual leases issued for grazing or agriculture purposes, grazing homestead perpetual leases, grazing homestead freeholding leases and subleases of those leases; and  the restriction on holding two or more leases that together constitute "substantially more than 2 living areas" (with the definition of a living area being (in effect) an adequate area of land that can support a family farm) has also been removed. The freeholding process has been simplified and a new formula now applies to calculate the purchase price of grazing or primary production tenures. This new formula is based upon the net present value of the expected rental stream for the land, which is then aggregated with the market value of any commercial timber on the land. Tenure holders of adjoining leases can now consolidate term leases for pastoral purposes with perpetual leases for pastoral purposes, if native title has been addressed, to create an amalgamated perpetual lease. Western Australia In 2011, the Western Australian Government commenced the Rangelands Reform Program. The aim of this program is to develop Crown land, so as to drive economic and market opportunities and to address pastoral industry issues. Some of the key focus areas relate to proposing new forms of land tenure, prompting multiple land uses, creating development precincts and effecting tenure reform and development opportunities for Indigenous communities. The key land tenure reforms proposed as part of the Rangelands Reform Program include introducing:  perpetual pastoral leases, in addition to term pastoral leases;  term-limited rangeland leases, to be granted for multiple uses of land on a broad scale basis (for example, Indigenous, pastoral, horticultural, agricultural, tourism, mining, carbon sequestration and other uses), potentially for higher rent;  permits for (broader) primary production activities defined under the Native Title Act 1993 (Cth);  statutory renewal rights in respect of existing tenure; and  increases in maximum lease tenure sizes to 1.5 million hectares (from 500,000 hectares). This would primarily occur by converting (with the agreement of existing tenure holders) existing leases into the new forms of tenure, or in limited circumstances by offering the new tenures to the market. These amendments have not yet been implemented. In the interim, on 1 July 2015, all pastoral leases expired and all eligible leases were replaced with new pastoral leases. Northern Territory In 2006, the Aboriginal Land Rights (Northern Territory) Act 1976 (Cth) was amended to allow the creation of township leases in favour of the Executive Director of Township Leasing. This director could then grant subleases for up to 99 years to interested persons who could then mortgage or transfer their subleases and achieve home "ownership". From 2014, the Pastoral Land Act (NT) was amended to allow pastoral leaseholders to apply for a permit (to be registered against and automatically transferred with their lease) to use all or part of their land for non-pastoral purposes, for a period of up to 30 years, at an annual fee. To date, permits have been granted for accommodation, horticulture, tourism and irrigated agricultural activities. However, total destocking of the land will not be permitted, and a separate permit is required for each activity. 2631334-v1\SYDDMS The Commonwealth White Paper The White Paper recognises many of the challenges to investment that apply to current land tenure and (broadly) proposes that:  pastoral lease reforms be accelerated to create simpler and more secure tenure arrangements;  land reform occur more generally, including by trialling reforms in pilot projects in willing communities;  availability of water rights be freed up by assessing water resources in various catchments and continuing to implement water market reforms under the National Water Initiative;  investment in water infrastructure and roads be accelerated;  a single point of entry for major projects investors be established;  a streamlined environmental approvals approach be created by the Commonwealth and State or Territory governments;  more efficient negotiations be facilitated between native title bodies and businesses, and outstanding native title claims be resolved (and the means to do that be facilitated, such as land surveys);  additional township leases be granted in the Northern Territory, as well as freehold or 99 year leases;  exclusivity of leasehold Indigenous tenure be explored, and used for commercial purposes, as transferable interests in land that can be used as collateral to obtain finance; and  cultural heritage protection processes be streamlined so as to avoid duplication and inefficiencies. The aspirational implementation plan for land tenure reforms is as follows:  in the next two years:  develop principles for pastoral reform; commence land tenure pilots;  survey land to assist in granting tenure;  develop new business friendly information on land tenure;  support the use of exclusive native title rights for commercial options;  progress COAG land investigation outcomes;  in the next five years:  lessen prescriptive requirements on pastoral leases;  negotiate long term NT township leases;  arrange for individual ownership or very long term leases on Indigenous land;  implement outcomes from pilot land tenure programs;  in the next 10 years:  remove all prescriptive requirements on pastoral leases;  lease exclusive native title rights;  finalise all outstanding native title claims; and  make information regarding the agricultural potential of land more accessible. Next steps It remains for investors, Indigenous Australians and other stakeholders to await the outcomes of the White Paper and the recent land tenure reforms in Northern Australia, together with other complementary policy documents such as the Agricultural Competitiveness White Paper. 2631334-v1\SYDDMS There are always risks when being an early adopter of change, but in this case the potential for economic exploitation of Northern Australia and the empowerment of Indigenous Australians may prove an irresistible call to action. We will monitor the outcomes of the White Paper and report on the practical outcomes as they are finalised and delivered. Please let us know if you have any tenure queries that you would like to discuss with us. Click here to opt-in for future alerts on this topic. Download Alert Follow us For more information Philip Christensen Partner philip.christensen @bakermckenzie.com John Mollard Partner john.mollard @bakermckenzie.com John Fabbro Of Counsel john.fabbro @bakermckenzie.com Sarah Merrett Senior Associate sarah.merrett @bakermckenzie.com Brisbane Level 8, 175 Eagle Street Brisbane QLD 4000 Australia Tel: +61 7 3069 6200 Melbourne Level 19, 181 William Street Melbourne VIC 3000 Australia Tel: +61 3 9617 4200 Sydney Level 27, AMP Centre, 50 Bridge Street Sydney NSW 2000 Australia Tel: +61 2 9225 0200 This email is sent by Baker & McKenzie (ABN 32 266 778 912), an Australian partnership and member of Baker & McKenzie International, a Swiss Verein. This communication has been prepared for the general information of clients and professional associates of Baker & McKenzie. You should not rely on the contents. It is not legal advice and should not be regarded as a substitute for legal advice. The contents may contain copyright. 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