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A three-bedroom home in the heart of the Grammar zone in Epsom, Auckland, sold in October for $ 233,000.
The price is not a misprint: While its neighbors are worth more than $ 1 million, the property changed hands for less than a quarter of that price because it is a lease.
The land on which it sits is owned by the Cornwall Park Trust Board.
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The property owner has to pay $ 13,750 a year for the land below it and can expect a significant increase in that amount when the lease is renewed in 2032.
Work is now underway to ensure that owners of other properties like this can cope with the next land rent hike.
The Cornwall Park lease issue has been in and out of the news over the years due to the value of the coveted land, in an exclusive part of Auckland.
There are 103 residential properties on it, and their owners must pay the rent for the land set at 5 percent of the land value. Including his business interests, which is currently estimated at $ 246 million.
For most properties, the rent is set for 21 years and then revised, which means that landlords face huge increases in land rent on renovation. Twenty-one years ago, the median house price in Auckland was still below $ 250,000.
The owners can retire at each renovation and the property is put up for auction, but if it is not sold it reverts to the ownership of Cornwall Park Trust with no compensation to the owner.
A group representing the owners of the leased properties estimates that some 20 properties have been abandoned in recent years and the board now rents them out.
In a recent letter to tenants, the group said 90 percent of homeowners were expected to leave at their next renovation.
The board of trustees said only one property was turned over in 2019. In addition to the Manukau Rd property, one was recently sold on Wheturangi Rd.
One owner, Duncan Cox, said he faced a potential increase from $ 68,500 a year to $ 200,000 if the formula remained in place.
He said a resolution was needed for the owners to receive adequate compensation for the homes on the land if they chose to leave them.
Martina Llewellyn, Cornwall Park business and property manager, said the land leasing model had worked well in the park over the course of its life and this was expected to continue in the future.
“But we are aware of the increase in property values in recent years and we recently wrote to tenants describing some of the policies we are introducing to help make their leases more attractive and affordable in today’s real estate market.
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“We have recently introduced a policy for the next 21-year period, which offers residential tenants with renewal dates between January 1, 2021 and December 31, 2028, a discount on the rental percentage of their land. upcoming renovation.
“Once the value of the land is established, the board of trustees will offer discounted land rents, with a 40 percent discount on rent, at 3 percent, annually for the first seven years, followed by a discount from 20 percent to 4 percent for the next seven and status quo from 5 percent for the remaining seven years.
“The board of trustees wants to help tenants where it can, while protecting the park’s continued operating income and the ability to provide the benefit and enjoyment of all park users.”
The board is also proposing a possible “support” price set by the board to act as a floor for the value at which a property was sold, and modernizing its auction policy.
Board chair Adrienne Young-Cooper said the board wanted to help tenants while safeguarding the park’s ongoing operating income.
Tenants have been invited to express their interest in discussing the policies in early 2021.
The tenants association has recommended that landlords disagree with either option until they have been thoroughly discussed.
