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What is Trust Leasehold Land in Qld. Worth

A friend of mine is looking at "purchasing" a leasehold grazing property in Queensland. The question that is glaringly obvious is; what exactly is leasehold under the new Trust Lease worth?

In view that there is a buy price and rent applicable to the leasehold land what does the "purchaser" actually get for his money?

When you take into account that the following clause is present on many of these leases: "No compensation for improvements or development work is payable by the State at forfeiture, surrender or expiry of the lease, but the lessee has the right to remove the lessees movable improvements within a period of three months from the forfeiture, surrender or expiry of the lease, provided all money due by the lessee to the State on any account whatsoever has been paid, or be required to remove those improvements as specified in any further condition of lease."

If we assume that there are no livestock on the property, doesn't that make the purchase price zero, in view that the improvements you must maintain, if you cannot move them, are worthless. I guess the comparison here is leasing a factory for a term, to produce widgets, the only outgoing in relation to the property itself is normally the rent.

Who would purchase nothing and also pay rent???

How do the banks now justify lending money when the asset looks as though it is worthless?? Is the mortgage held over a Trust Lease instrument worth anything, there is no land assett as this is State owned (Crown) land.

Surely everyone is going to opt to freehold, based on the following from the Land Act 1994; if they don't, they are loosing their only assets on the property, i.e. the developments. However then the lessee has to pay to convert to freehold after paying for the potentially worthless lease in the first place.

LAND ACT 1994 - SECT 166

166 Application to convert lease

(1) Subject to subsections (2) to (4), a lessee may apply to convert (a conversion application)--

(a) a perpetual lease to freehold land; and

(b) a term lease to a perpetual lease or to freehold land.

(2) The lessee of a term lease issued for pastoral purposes may only apply to convert the lease--

(a) to a perpetual lease; and

(b) after 80% of the existing term on the lease has expired, unless in the chief executive's opinion, special circumstances exist.

(3) A lessee of a term lease not issued for pastoral purposes may only apply to convert the lease to freehold land.

(4) A conversion application can not be made for a lease if it contains a reservation that all of the lease land is a future conservation area.

(5) A conversion application may be rejected without consideration under section 167 if--

(a) the applicant has made an earlier conversion application and the application was refused; and

(b) there is no relevant change in circumstances from the earlier application.

(6) In this section--

existing term, of the lease, does not include an extension under section 155A, 155B or 155BA of the term of the lease.

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Replies to This Discussion

Permalink Reply by Greg Blackmore on February 3, 2012 at 2:56pm

Another article (link below) by Michael Vail titled "What is a Living Area These Days?

Being an Accountant and Agri Advisor, Michael puts up the financial evidence, based on today's costs and incomes to come up with a more realistic scenario.

WHAT IS A LIVING AREA?