In the very essence of Auckland idyll, a family and friends picnic under a tree in Cornwall Park. Photo / Greg Bowker
In the very essence of Auckland idyll, a family and friends picnic under a tree in Cornwall Park. Photo / Greg Bowker
OPINION
If you’re one of the thousands to have enjoyed Cornwall Park over the summer, spare a thought for the lessees who are paying for it.
Around 100 families lease land on which they have either built family homes or lovingly restored bungalows. They have cared for their properties andpaid their monthly ground rent for 20 years or, in some cases, 30-plus years.
The next round of leases is coming up and the trustees of Cornwall Park are refusing to explore reasonable lease rentals. Lessees will soon be offered new rents which no one would sensibly pay.
The formula in the Glasgow leases (now banned in the UK) is 5 per cent of the land value. A typical house in the area with land valued at $3 million will face a lease of $150,000 per annum. This far exceeds the market rent of $65,000 on a comparable house, so the ground leases are now hopelessly uneconomic.
Many homeowners are planning to walk away, something Sir John Logan Campbell would never have imagined. Some have already walked.
Advertisements in 1923 show assurances that the lessees would always get full market value for their improvements. The Cornwall Park trustees will have destroyed Logan Campbell’s vision of leasehold homes around the edge of the park. Just as they destroyed his vision of having the showgrounds close to the park.
For 150 years, the ASB Showgrounds provided exhibitions, events, and recreational space that appealed to many different audiences. Tragically, the A&P board - a group of smart businessmen - tried to negotiate with the trustees and, combined with the challenges of Covid-19, the board had few choices, leaving the park trust board with all their buildings and facilities.
Then the trust had the battle with XPO Exhibitions, which had put on successful shows that enabled small businesses to promote and sell their wares - something many couldn’t have afforded to do without the exhibitions. XPO Exhibitions took the board to court over the way its lease negotiations were conducted and won. The trust even got a telling-off by the judge.
Still, there is no accountability from the Cornwall Park trustees, who have spent around $3.5 million on legal fees and other consultants in the last three years.
Add that to the loss of revenue, $1m and counting, on the “ghost” Maungakiekie Ave section that has sat empty for 20 years. If a fair rent had been offered, someone might have taken the risk of building a home as many others did 20 years ago.
In 2003, 106 Wheturangi Rd sold for over $1 million with 21 years left on the lease. The modern design, plaster-clad with a swimming pool on a large section, is now sitting empty - abandoned by its owners, who couldn’t afford the new lease.
David Glen.
Over the past decade, the trust board has acquired more than 20 houses, on non-renewal of leases, at mortgagee sales, by forfeiture, or by direct purchase (some secretly through blind nominee companies) for very low prices. Some of these houses had a market value of $1 million-plus.
The trustees then rent out the homes at market rate but, after property management costs, insurance, maintenance, usual household repairs, grounds and garden maintenance, they’ll be lucky to get a 1 per cent return. They would get more money for less work and maintain communities if they just negotiated a fair rent.
A proposal from the Leaseholders Association to pay all the property costs with an inflation-adjusted market rent for 21 years was rejected. The British parliament recently outlawed leases like the one Cornwall Park uses.
In 1993, the Government Lusk report into leasehold land proposed that anyone who had a leasehold residential property have the right to freehold written into the lease to ensure that they were able to maintain value in their asset. The Cornwall Park Trust Board wasn’t a party to the Lusk report and while it did freehold in the early 1990s, it has never done so again.
The risk the trust faces is a serious financial threat thanks to rising inflation and static income. The value of the trust’s residential properties is close to $275 million. It currently earns around $4.5 million in rents, representing a cash yield of under 1.6 per cent per annum. With inflation currently running at close to 8 per cent and looking likely to remain elevated for a few years, the trust’s operating costs will increase while its income will be largely static.
Yes, Cornwall Park is a wonderful park. However, it’s wrong that there is no protection for people who built or restored homes from being forced to walk away from them because the Cornwall Park Trust Board has ignored the Lusk recommendations about fairness to lessees.
The Cornwall Park Leaseholders Association has begun a petition asking Parliament to change the law to ensure that the Cornwall Park Trust Board (and other ground lessors in New Zealand) have to compensate lessees fairly for their improvements (homes) when they take back the land.
We are ready to talk.
David Glen is the chairperson of the Cornwall Park Leaseholders Association.
