KEY POINTS:
Ground rent at one of the country's largest high-density housing estates is rising 244 per cent from $900,000 to $3.1million annually.
Instead of paying an average $3400 for land under each of the 258 apartments at Auckland's Beaumont Quarter opposite Victoria Park, unit owners will now be up for an average $12,000 a year each.
A partial decision from arbitrator Sir Ian Barker, QC, over new ground rent has been issued and the full decision will be out later next month.
Owners desperate to avoid the dramatic ground rent increases were last year quitting places and said the new payments would make it unfeasible for investors to rent Beaumont Quarter townhouses.
But owners are claiming the $3.1 million ground rent settlement as a big win because the land owners actually wanted $4.4 million a year.
Beaumont Partners, managed by Augusta Funds Management which is connected to the listed Kermadec Property Fund, proposed last year to hike ground rents but the residents objected, initially gaining valuations that they should only pay $2.2 million.
So the land owners commissioned a valuation from property consultants Jones Lang LaSalle and the numbers were confirmed by Colliers International.
Neville Corbett, chairman of Beaumont Quarter Residents Society Inc, wrote to owners describing the $3.1 million settlement is a victory.
"Our ground rent will be approximately $1.3 million a year less than the $4,435,000 wanted by Beaumont Partners. That is a reduction in the ground rent of $9.1 million over the seven years rent period. This is a great result for the Beaumont Quarter apartment owners.
"The result of the rent reduction means that the lot value for the Beaumont Quarter will reduce from $64 million to approximately $45 million."
However, he emphasised that the final decision on the ground rent would not be out until February 27 and said it was hard for residents because it left them in limbo.
"This non-finality is not helpful to us," he said. "Unfortunately the partial award does not give a finite answer to what the new ground rent amount actually is and further consideration by both parties and calculations by the valuers are required for further submissions to the arbitrator for him to give his final award."
Corbett's letter said the residents had won a further victory, forced to pay a penalty interest rate on money in dispute lower than that the land owners originally sought.
"The arbitrator is not accepting the Beaumont Partners' penalty interest amount of 26.2 per cent and approving a penalty interest rate of 19.5 per cent," he wrote.
The new $3.1 million annual leasehold payment has been backdated to April 1 last year.
"We did lose two legal points regarding the interpretation of the ground lease document relating to how the market rent should be assessed and (residents' lawyer) John Carter has suggested we should consider appealing these two issues," Corbett wrote.
A special residents' meeting is planned soon.
Corbett said a small group of townhouse owners had failed to pay money due so legal action was being taken against them.
"An update on the legal moves on the 11 worst-case payment defaulters is that court cases against them have commenced this week," he wrote.
Mark Francis of Augusta was unavailable to comment on the issue.
