COMMONWEALTH OF AUSTRALIA

SENATE Official Committee Hansard

RURAL AND REGIONAL AFFAIRS AND TRANSPORT LEGISLATION COMMITTEE

Reference: Australian Capital Territory (Planning and Land Management) Amendment Bill 1997

MONDAY, 23 MARCH 1998

CANBERRA

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SENATE MONDAY, 23 MARCH 1998

RURAL AND REGIONAL AFFAIRS AND TRANSPORT LEGISLATION COMMITTEE

Members: Senator Crane (Chair), Senators Calvert, Forshaw, McGauran, O’Brien and Woodley Participating members: Senators Abetz, Bartlett, Boswell, Brown, Brownhill, Chapman, Bob Collins, Colston, Conroy, Cook, Eggleston, Ferris, Gibbs, Harradine, Lundy, Ian Macdonald, Sandy Macdonald, Mackay, Margetts, Murphy, Neal, O’Brien, Schacht, Sherry, Tierney and West

Matter referred by the Senate for inquiry into and report on: Australian Capital Territory (Planning and Land Management) Amendment Bill 1997

WITNESSES

McCANN, Mr Noel Edward, Principal Partner, McCann and Associates, Australian Institute of Valuers and Land Economists, 6 Campion Street, Deakin, Australian Capital Territory ...... 1

NYE, Mr Bryan, Chief Executive Officer, Australian Institute of Valuers and Land Economists, 6 Campion Street, Deakin, Australian Capital Territory ...... 1

RAISON, Mr Barrymore Victor, Australian Institute of Valuers and Land Economists, 6 Campion Street, Deakin, Australian Capital Territory ...... 1

HEDLEY, Mr Anthony Robert, Property Council of Australia, 3rd Floor, Canberra House, Marcus Clarke Street, Canberra City ...... 10

SERVICE, Mr James Glen, President, Property Council of Australia (ACT Division), 3rd Floor, Canberra House, Marcus Clarke Street, Canberra City ...... 10

LOURANDOS, Mr Nicholas James, President, Canberra Property Owners Association, Seventh Floor, State Bank Building, 161 London Circuit, Canberra, Australian Capital Territory ...... 18

COOK, Mr Ross Michael, Manager Corporate Policy, Planning and Land Management, ACT Government, GPO Box 1908, Canberra, Australian Capital Territory 2601 24

GILMOUR, Mr Rodney Charles, Chief Executive, Department of Urban Services, ACT Government, Canberra, Australian Capital Territory 2601 ...... 24 HAWKINS, Mr Lincoln James, Executive Director, Planning and Land Management, ACT Government, Canberra, Australian Capital Territory 2601 ...... 24

HUMPHRIES, Mr Gary John, Deputy Chief Minister, ACT Government, Canberra, Australian Capital Territory 2601 ...... 24

NEUTZE, Professor Graeme Max, 52 Bindaga Street, Aranda, Australian Capital Territory ...... 38

TROY, Professor Patrick Nicol OA, 14 Amaroo Street, Reid, Australian Capital Territory ...... 38

MOORE, Mr Michael, Member, Australian Capital Territory Legislative Assembly, Canberra, Australian Capital Territory 2601 ...... 46 Monday, 23 March 1998 SENATE—Legislation RRA&T 1

Committee met at 8.47 a.m. CHAIR—On 10 March 1998 the Senate referred the Australian Capital Territory (Planning and Land Management) Amendment Bill to the Senate Rural and Regional Affairs and Transport Legislation Committee for consideration and report by 31 March 1998. I should add here, in terms of the subject matter before us, that I understand there have been some 12 inquiries over the last 10 or 15 years into this matter, so it has certainly been well aired publicly. Following its referral to the committee, the committee wrote to the ACT government and to individuals, companies and groups potentially interested in the reference, seeking their views. The committee secretariat also prepared an information kit on the bill, of which a number have been distributed to interested persons and bodies. The committee’s inquiry was also advertised in the Canberra Times on Saturday, 14 March 1998. In response to its advertisement and invitations, the committee has received 24 written submissions to date. Resolved: That this committee authorises the publication of the submissions received. CHAIR—If anybody has any particular aspect of a submission they would prefer not to have published, then bring it to the attention of the committee. Today we will hold discussions with a number of bodies and individuals from the ACT, and with the minister’s nominee from the ACT liaison unit of the Department of Transport and Regional Development. It should be noted that the committee has authorised the recording, broadcasting and rebroadcasting of these proceedings in accordance with the rules contained in the orders of the Senate of 23 August 1990 concerning the broadcasting of committee proceedings. Before we commence taking evidence, let me place on record that all witnesses are protected by parliamentary privilege in respect of submissions made to the committee and evidence given before it. Parliamentary privilege means special rights and immunities attached to parliament or its members that are necessary to the discharge and function of the parliament without obstruction or without fear of prosecution. Any act by any person which operates to the disadvantage of a witness on account of evidence given by him or her before the Senate or any committee of the Senate is treated as a breach of privilege. The first witnesses today represent the Australian Institute of Valuers and Land Economists. McCANN, Mr Noel Edward, Principal Partner, McCann and Associates, Australian Institute of Valuers and Land Economists, 6 Campion Street, Deakin, Australian Capital Territory NYE, Mr Bryan, Chief Executive Officer, Australian Institute of Valuers and Land Economists, 6 Campion Street, Deakin, Australian Capital Territory RAISON, Mr Barrymore Victor, Australian Institute of Valuers and Land Economists, 6 Campion Street, Deakin, Australian Capital Territory CHAIR—Welcome. We have a pretty tight schedule today because parliament starts sitting at 12.30 so for each witness the period is limited to 30 minutes. I would invite you to make an opening statement, but I would also suggest, if you can, you clean up your statements within about 15 minutes so that the committee can address questions to you. Mr Nye—We have made a written submission, and I am not going to go through that written submission. Most of the points included in our arguments are in the written submission. I would like to summarise where we are actually coming from. The ACT land management

RURAL AND REGIONAL AFFAIRS AND TRANSPORT RRA&T 2 SENATE—Legislation Monday, 23 March 1998 system we have at the moment is an anathema really. It was established as a leasehold system, but just on 30 years ago it ceased to really be a leasehold system as soon as we started to do away with land rents and allowed municipal rating systems to take over. Since then we have had premium sales of lands. The tenant has the right to maintain the improvements. As I said, land rents have been abolished, and there is now automatic renewal of residential leases and administration fee. Already in the federal legislation there is a provision for the 99-year lease to be extended. It says, quite clearly ‘99 years or such longer period as is prescribed’. There are already cases of the 999-year lease or perpetual leases here in the ACT. All the universities and the churches already have them. It is almost a natural progression today to go to the 999-year leases. The chairman mentioned the many inquiries. A lot of those inquiries had nothing to do with, or their tasks were not to do with, the leasehold system, but every single one of them has come up and said the leasehold system is not particularly adequate at the current time. I think it is time. Our argument, very strongly, is for us to have the same type of system or land tenure that is available elsewhere in Australia. The Northern Territory got it in 1980. It is time the ACT residents had the same opportunity. The leasehold system maintains the renewal of the leases and the clauses allow the government to keep control of planning, and there is no change in that. Overall, the greatest disincentive at the current time to investment by business in the ACT is that land tenure system. Irrespective of what people might think about it, it does prevent people wishing to invest in the ACT. We believe that as the ACT now has self-government, the federal government should allow the ACT government itself to make the decision on the land management system in the ACT. CHAIR—Thank you. Do you wish to add anything, Mr McCann or Mr Raison? Mr Raison—I would like to comment on some of the points that have been raised against a 999-year leasehold system. These have come out of other debates and submissions, and press articles, but I think there is an answer to every point that has been raised against 999-year leases. Briefly, some of those have been as follows. First: ‘999 years is a cute way of circumventing the constitution.’ That is no worse than the automatically renewable 99 years that we have now. ‘It’ll destroy the heritage of historic buildings,’ et cetera. That is an entirely separate issue, and it is covered by heritage legislation. ‘There’s a loss of potential revenue from renewals’. That is claimed. Our current fee is only an administration fee which is meant to cost recovery only, so there is no loss of potential revenue. ‘Renewable 99-year leases should be sufficient,’ they claim. ‘We need protection from possible future changes.’ If repeatedly renewable 99-year leases are acceptable, why not go all the way to 999-year leases in one hit? ‘Claimed to cause higher residential municipal rates.’ There is no direct connection. If all the values go up because the system becomes more attractive, the rate in the dollar would go down. ‘It’s a windfall for commercial properties,’ they claim. There will be little, if any, immediate gain. Any future increases would assist employment and investment and revenue from land sales. Commercial and investment properties already pay land tax; therefore they pay again for their leases over a 99-year period. It is claimed that it will weaken or destroy the planning and leasehold system. That is not the case. We are adequately protected by the lease purposes clause, the Land Planning and Environment Act, the territory and national plans. We still have the main features of ACT leasehold and planning controls, but even if we did not, freehold works adequately elsewhere. Short-term leasehold could still be used for some specified categories that are reserved for

RURAL AND REGIONAL AFFAIRS AND TRANSPORT Monday, 23 March 1998 SENATE—Legislation RRA&T 3 future development. We are claimed to be only caretakers or custodians. That might apply to the national component, but not to our individual properties. Our homes, businesses and investments should be personal property, the same as elsewhere. ‘Term leasehold works well in Hong Kong and other cities,’ it is claimed. There is great demand and little choice in those places. People understand and accept that system in those places. Even if it is effective in four or five cities, there are also hundreds of major freehold cities, and at the other extreme a few with no private land. What is available in the rest of Australia is more relevant to us. I conclude from that that we belong to the Australian Capital Territory, with the emphasis on the Australian part, not some foreign power, and why should the ACT be a short-term leasehold pothole in a long-term freehold road? Mr McCann—I would like to deal with the security of title, or tenure as I prefer to call it. In 1970 when the land rent system was abolished as the principal revenue from leasehold in the territory, there was a big step forward in providing security of title to the residents and the business community of the territory. It took until 1980 for the community to convince the government of the day and Bob Ellicott, the minister at the time, to deal with renewal of title. We lost that for a short time in the early 1990s—1992 to 1996—where renewal of title was only permitted under the Land Planning and Environment Act of the ACT when you were within the last 30 years of your title, and therefore there was concern across the investment and banking community as to what really was the title and security of title in the territory. The current government moved in 1996 to allow renewal at an administrative fee. This process would allow the local community to judge whether it should go to 999 years, which will set a base from which we can grow our private sector and confidence in the community, the banking industry and the investment community about what title in the ACT is all about, and why is it so different from everywhere else in Australia at the moment, and therefore whether we can move forward and prosper with a fair dinkum title. CHAIR—Thank you. Could I just ask you a couple of questions of clarification. In terms of the lease arrangements now, does each lease come due at a different time, according to when the lease was granted, or do they all become due on a set date? Mr McCann—At a time different from their commencement time. So Kingston, for argument’s sake, was leases in the late 1920s and 1930s. CHAIR—That is not my question. Individually, you hold a title—it does not matter what sort of a title it is—and you sell that to a new one. Does a new lease start, or if you have run it for 40 years does it run for the remaining 59 years out? Is that right? Mr McCann—Yes. CHAIR—Can you just explain how that operates? Mr McCann—You sell the title with the current unexpired term. At the moment you can apply for a new 99-year lease, so if there was a total application for every lease in the territory, then maybe a new title would commence the 99 years in 1998, but at the moment you could go up the street and there could be 10 different expiry dates over 50 years. CHAIR—So if I was to buy a property in Canberra now, I could start a new 99-year lease on that property? Mr McCann—That is right, for $200. CHAIR—The other point of clarification is this. Is the only change from 99 to 999? Do all the other conditions stay as they are, or are there some changes in terms of responsibilities and liabilities as far as the leasehold is concerned?

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Mr McCann—Our understanding of the act is that there are no other changes, other than the term. All the development covenants, purpose clauses, are in place, and the mechanism under the Land Planning and Environment Act for variation of purpose clause for a higher order use still gives the rise to betterment or change of use charge, as it is now called. CHAIR—That is how I read the bill. Mr McCann—That is correct. CHAIR—But I was just getting some expert advice. Senator O’BRIEN—The question that exercises my mind is: what effect will this change— that is, the ability to transfer from a 99- to a 999-year lease—have on values in the ACT— property values? Mr Raison—I suggest it will make little change immediately, if any, but in the long term it will make it more attractive to keep existing owners and investors here and to attract new ones. Senator O’BRIEN—Why? Mr Raison—Because they are getting a term of ownership closer to what they expect in the rest of Australia. Mr McCann—I would support the comment of Barry that initially there may not be any significant difference, because this community and the investment community in Australia has been used to the system being tinkered with, and therefore one gain at some stage soon after tends to get a withdrawal of that gain. Therefore it will take some time of confidence that in fact these leases are in place at 999 years, so I do not think it would automatically follow. It would just be a legal instrument. It would need the issue of new crown leases to get certainty in the marketplace. Senator O’BRIEN—A 999-year lease would be effectively an in-perpetuity lease, wouldn’t it? Mr McCann—That is so. Senator O’BRIEN—I know that you describe this as a natural progression. The next step would be freehold title, wouldn’t it? Mr Raison—Subject to the legal and constitutional restrictions. Senator O’BRIEN—And that is really what your submission is and supports, isn’t it? Mr Raison—Accepting those restrictions do exist, actually trying to achieve the best possible system under the current law. Senator O’BRIEN—I am just wondering what evidence you have that the leasehold system prevents investment in the ACT. Mr Nye—I can give two personal examples of that. In my position I have had delegations from overseas come and visit me. I have had two delegations from China, one from the Shanghai business community, another one out of Beijing, and both would not even consider investing in the ACT because of the leasehold system. They wanted freehold land investment, and no matter how hard you tried to explain it to them, they just would not understand that 99 years is a long time. They said, ‘Oh, but it’s a lease, and it expires.’ They wanted long-term investment. It is the commercial area that really is greatly affected. Senator O’BRIEN—In the case of those properties, what part of the lease was unexpired, what period?

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Mr McCann—It is the semantics. It is not really the argument that ‘Look, it’s 99 years. The property hasn’t expired.’ It is when somebody is about to make an investment, they see one is a freehold and another is a leasehold title, and it is just that perception. You cannot explain it away. It is the business confidence. They are making investments; they do not understand the system. That is what you are really talking about; understanding what the system is about. It is pretty hard to explain. Senator O’BRIEN—Why would it be hard to explain? Mr Nye—You can explain it, but when a person is making business investments from overseas, when he is trying to invest in something, he sees one is freehold so he holds the title, while another one is a lease. They find it very difficult to accept. Senator O’BRIEN—Do you think changing it to a 999-year lease would have influenced those people differently? Mr Nye—Definitely. Senator O’BRIEN—It is still a lease. Mr Nye—But it is that incredibly long time, and most of us will not be around to see that. Senator O’BRIEN—It was the period, not the fact that there was— Mr Nye—It is the period. Mr Raison—I think that was intended to be the effect of the 99-year lease. People thought when they introduced it that it was almost forever, but leases are now faced with renewal. There are leases that are 70 years old, so it has become a factor. Mr McCann—The downside of the 99-year lease is the concept that at the end of a lease the tenant rights are in the improvements only. There is no right of renewal of the lease, notwithstanding at the moment that— Senator O’BRIEN—There is now, isn’t there? There is a right of renewal? Mr McCann—There is an ability to renew the lease at the moment. Senator O’BRIEN—There is no right of renewal? Mr McCann—I do not believe it is a right. The government can turn around and say, ‘No, we’re not going to renew it,’ and this is one of the issues that is going on in the rural area at the moment, particularly around Pialligo. If the government decides they do not want to renew the leases in Pialligo because of the train or the airport or whatever, then I do not believe there is any compulsion on the government to have to do it, and the real issue is what rights do the leaseholders have over the unexpired period of the lease. It could be argued that under the act there is an option for a renewal, and therefore under the Lands Compensation Act or the Lands Acquisition Act they should be paid for the notional ability to renew. But that is not yet tested. So it is really the uncertainty of what the tenant rights are. Senator O’BRIEN—What effect does the leasehold title have on new residential land subdivisions—that is, on the price? Does that have an effect on moderating the price of the land as it is released? Mr McCann—It is interesting that if you look for comparison at the development of parts of Queanbeyan, and, say, Jerrabomberra, compared to the new suburbs of Canberra, there certainly appears to be a solid value in Jerrabomberra developing because of the freehold title, notwithstanding the flight path situation, compared to the new greenfield areas of Gungahlin which are similar distances from Lake Burley Griffin precinct which is the major employment area of Canberra and so on.

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Senator O’BRIEN—The prices are noticeably different, are they? Mr McCann—We believe they are stronger. Senator O’BRIEN—At Jerrabomberra? Mr McCann—At Jerrabomberra, and yet Jerrabomberra has developed differently from Queanbeyan and in stronger values, but the comparison is with the catching up of Tuggeranong where there is a definite difference in location. It is nearly 30 kilometres from Civic compared to 12 to 13, but with the same location in Gungahlin—Gungahlin along the waterway—the Ginninderra Creek corridor has similar values to Jerrabomberra, but in the general area of Gungahlin in the new suburbs, Jerrabomberra has higher values. CHAIR—Could I welcome Senator Lundy here who is replacing Senator Forshaw for these hearings. Senator McGAURAN—You have just mentioned some rural land where there may have been some concern about renewal of leases. What was that rural land, where was it, and when is that due? Mr McCann—The unexpired terms are in the order of 25 to 30 years in the precinct of the Majura Valley between the Molonglo River and the Federal Highway. Senator McGAURAN—And it could be in their minds, or in some people’s minds, that it is fit for expansion of the airport? Mr McCann—There are a number of issues. There is the train, there is the Majura Parkway, the airport development, so it is a precinct where there are development opportunities, and the leasehold is currently in transition. Senator McGAURAN—I would assume if the lease does run out, then there is no compensation for those rural holders. Their lease runs out; that is it: they have to get up and leave. Mr McCann—They get compensated for tenant rights improvements, depending on the wording of the lease. Senator McGAURAN—For improvements. Is that the case with the leasing; that you say this is approximately 25 years before it expires, whereas other leases still have 50 years? There are all different degrees of expiry dates around Canberra? Mr McCann—That is right. There is anywhere between 99 years and down under 20 years, I guess. I do not know any exactly under 20 years, but no doubt there would be some. Senator McGAURAN—Given that Civic is the oldest development in Canberra, that would be the area most due to expire. Would that be right? Mr McCann—Kingston and the Sydney and Melbourne buildings in Civic are the oldest, but when the Ellicott policy, as we call it, came into being in 1980, there was an ability to renew commercial leases but not residential leases at the time, and most crown lessees that we were advising or we knew were taking the opportunity of extending their leases out to 99 years. So most of those leases, we would surmise, would be in the order of 80 years unexpired at the moment because it would be 18 or 19 years since that time. Senator McGAURAN—I suppose I should know this. I will ask you in relation to this legislation, if the 999-year lease was to be accepted, would that mean at 999 years, at the end of each expiry date, whenever it comes due, or would it just be straight across the board immediately?

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Mr McCann—We’re not quite sure of the mechanism because the ACT government would need to pass legislation. My personal view, because we have not discussed how we might deal with it at that level, would be to bring certainty to the process a new 999-year lease should be granted on surrender of the current leases and be available at the admin cost currently running through the process at the moment at $200 an application fee for an original 99-year lease, and again under the current legislation, if your lease was for less than 99 years or granted for less than 99 years, somehow or other we have a fee at $2,000 to renew those leases. But either way, we would see, rather than a legislative change that would pick up and say, ‘All leases are now 999,’ because that would be subject to the Legislative Assembly changing that at some stage in the future. To get certainty into the process, we would be looking for direct grants of 999-year leases. CHAIR—I think the point that needs to be clarified absolutely here is that this is enabling legislation. It in fact does nothing other than enable the Capital Territory government to enact what they have requested the federal government to do to enable them to do it. That makes sense. Mr McCann—It will only facilitate it. It will not enact it. Senator LUNDY—Mr McCann, you said earlier that there was no automatic right to renew. Can you point to any examples where any leaseholder has been thwarted in their attempts to renew their commercial lease? Mr McCann—No, I cannot. What I pointed to was an area that is in transition, where the government is not dealing with it at the moment, in the precincts of the Majura Valley. What I put earlier was that there may well be a legal argument to enforce the government, but that is yet to be tested. Senator LUNDY—With respect to the comments you made about comparative land take-ups in Jerrabomberra and Gungahlin, to what degree is that contingent, do you believe, on the difference in the leasehold and freehold status, and to what degree is it contingent on other factors? Mr McCann—Certainly our research indicates that the majority of people that are in Jerrabomberra seem to prefer freehold title as against leasehold title because they have the opportunity of going anywhere in what we describe as the X plan rather than the Y plan, with Queanbeyan sitting at the bottom part of the Y. There are other factors, but I was trying to draw the analogy that if you put new land in Jerrabomberra against new land in Gungahlin, there is an order of five to seven thousand dollars difference for similar land size in similar locations, and I am not talking on the Ginninderra Creek corridor, where there certainly is an added value part in Gungahlin. Senator LUNDY—Have you done any formal surveys or anything that you could point the committee to to substantiate what you have just described? Mr McCann—Surveys in terms of asking the purchasers? Senator LUNDY—Yes, anything documented or anything that is a bit more formal than what you have told the committee with respect to those people? Mr McCann—We run nine valuers, and we are doing research every day. We run a Queanbeyan office for the very simple reason that Queanbeyan is fairly parochial, as against our Braddon office, and we try and service that parochial nature. But we have rural land development around the territory, we have Jerrabomberra, we have Bungendore, and they are

RURAL AND REGIONAL AFFAIRS AND TRANSPORT RRA&T 8 SENATE—Legislation Monday, 23 March 1998 all functions of the concept of desire for freehold but work in Canberra, and locational functions. Canberra has the majority of the market; there is no argument about that. Mr Raison—Could I add there that in residential subdivisions in Queanbeyan and rural or commuter subdivisions nearby in New South Wales, they always make a feature of it being freehold land, so it is a definite selling point, and all we are trying to do is get as close as possible to freehold with 999-year leases. CHAIR—You say it is a definite selling point. Is it also a definite buying point? Mr Raison—Yes. I know of people coming to Canberra and choosing to go to those areas because they are getting freehold. Senator LUNDY—When you promote freehold, do you provide a brochure or information pointing out the distinctions between leasehold and freehold, or do you supply potential customers with any information? Mr Raison—We are not sales organisations. Senator LUNDY—Do your members? Mr Nye—Our members do not sell. Mr Raison—We are impartial, completely independent, Senator. We are measuring it. Senator LUNDY—I will ask others that question. The other thing I wanted to ask you is: as an institute have you participated in the series of inquiries and reports that have been done over the years on this issue? Mr Nye—Almost every one. Mr McCann—Going all the way back to the Else-Mitchell inquiry in 1973. This has just been an ongoing thing. I have been here since January 1974; Barry Raison has been here since what, the late 1960s? Mr Raison—1969, and I have been involved in at least 12 of them, I think. We are gradually getting there. Senator LUNDY—What has your position always been with respect to those reports? Has it been argued for a transfer from a leasehold to a freehold system consistently, or what have your positions been? Mr Raison—We have always sought perpetual leasehold, because of the confines of the constitution and the government act. Senator LUNDY—And in terms of your position that has been put previously, has the 999 years ever been raised previously? Where did 999 come from? Mr Raison—It has been developing probably over the last three years. I accept it as a reasonable compromise. To me 999 is forever or perpetual. Senator LUNDY—Like they thought with 99. Mr Raison—I think they had that original concept. It is also possibly a legal limitation that you have to have a term. A lease has to have a term. In Australia we do have perpetual leaseholds, but apparently that is unacceptable overseas. Perhaps we are bending towards that a little bit. Senator LUNDY—But why 999? Is it just an arbitrary figure? Mr Raison—Because it sounds like forever less a day.

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Senator LUNDY—Yes. In terms of the institute’s role in these various inquiries, what sort of emphasis have you placed on not just obviously perpetual leasehold being your position, but also on the commercial impact of such a decision? I am trying to get to the nub of your argument. Is it around quite specifically the commercial value of the land, or are there other factors that you can point to? Mr Raison—My viewpoint is probably more of a psychological one. It has commercial implications but we are Australian citizens and we are entitled to as good a title as the rest of Australia. That will no doubt affect some people’s commercial decisions as well. Senator LUNDY—We have seen a lot of evidence in the various reports that in fact, like you say, it does not actually make a lot of difference whether it is leasehold or freehold. You mentioned before the fact that outside of the ACT freehold is a strong selling point. If there is not a lot of difference, why do you persist with that emphasis of the point of distinction between leasehold and freehold? Mr Raison—I would approach it in reverse and say if there is such little difference, why pose it? We might as well have that psychological and possible economic advantage of— Senator LUNDY—The problem is, Mr Raison, we have had four reports all saying that there should be no extension of that leasehold period, so we have actually been through a vast range of political processes to assess it. Mr Raison—The only report that was specifically on that subject was the Else-Mitchell inquiry and that recommended perpetual leasehold for residential land. The other inquiries were that the leasehold system was incidental. The last inquiry was about the administration. Senator LUNDY—Just on that point about residential perpetual leasehold, what are your views on the current arrangements for automatic renewal? Mr Raison—They are automatic from the point of view of applying, but as Noel McCann stated, there is no guarantee that the government is going to either grant the application or continue that policy. While it is subject to policy changes anything can happen. Senator LUNDY—But there are no examples to date of that occurring. There is certainly no indication politically that that is anyone’s intent. Is that the case? Mr McCann—Perhaps I could take the senator back to the early seventies. Between 1973 and 1975 we had grants of leases for 50 years; we had grants of leases on land rent systems that varied between the long-term bond rate and all magical, mystical figures, as to how you would calculate a land rent, and the system for those leases ground to a halt. In fact it took five years of industry between 1975 and 1980 to convince the then government that they had to do something to get the commercial ingredients right. That came to the Ellicott outcomes, which went through huge public debate, an inquiry that Else-Mitchell sat on again, that gave a series of recommendations. What we went to was abandoning all those mystical formulae for land rent and an opportunity to renew crown leases for up to 99 years, an ability to go from the 50-year lease to a 99-year lease for an extra cost, and a realisation that tinkering with the system over 1973 to 1975 had caused damage to confidence around the nation—let alone internationally—but at the time our major market was Australian bound and we needed to build confidence back up and we were heading that way. Senator LUNDY—One final question: in relation to other cities where leasehold is the main method of tenure, can you give some indication as to what the various terms are of those respective leaseholds? Perhaps you can take that on notice, but I am interested in what some of the comparative leasehold cities’ general terms are.

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Mr Nye—We will take that on notice. CHAIR—Will you take that on notice? Mr Nye—We will. CHAIR—I just want to ask you one question too, which you can take on notice. Have you taken any legal advice or can you supply any advice to the committee on the likely effect of native title in terms of changing the lease arrangements? Have you taken any advice? Mr Nye—No, we have not. CHAIR—Thank you. Could I thank the witnesses for their evidence. If necessary the committee reserves the right to call you back if we wish to take more evidence, but thank you very much. [9.23 a.m.] HEDLEY, Mr Anthony Robert, Property Council of Australia, 3rd Floor, Canberra House, Marcus Clarke Street, Canberra City SERVICE, Mr James Glen, President, Property Council of Australia (ACT Division), 3rd Floor, Canberra House, Marcus Clarke Street, Canberra City CHAIR—The committee has received a submission from you on the issues before it. Do you have any objections to its publication? Mr Hedley—None at all, Mr Chairman. CHAIR—Thank you. Would either of you gentlemen like to make an opening statement. Mr Service—Mr Chairman, thank you. I would just like to make a couple of brief opening comments. I think our submission points to a number of key issues and I think the Australian Institute of Valuers and Land Economists have also made some important points. I think there are probably three or four key issues which we would like to reinforce from our submission. You will hear today a whole range of views and you will hear some opponents and you will hear some people who are in favour of a change. We simply take the view that this is a key issue in the longer-term development of the ACT. Leasehold, as opposed to our newest competitors, is fundamentally not as well understood as is a freehold system. There are examples, as have been quoted and as have been presented at other inquiries, of investment organisations taking a different view as to the acceptability of a leasehold system, or a shorter-term tenure in leasehold. The issue of the maintenance of the national status of Canberra is, in our view, not affected by a change to 999-year leases. This is fundamentally about the economic development of Canberra as a city in its own right. We do not accept the proposition put from some quarters that this affects the status of the national capital. We think this is an important opportunity to grow revenue to the community of the ACT. Any increases in land values flow through to increases in rates and taxes, increases in employment, and increases in revenue generation to the ACT government and the ACT community. We fundamentally support the provision of the enabling legislation and if the Senate approve it and it then comes before the ACT assembly we will lobby equally as hard to ensure that the message that this is important for the community of Canberra goes through. I think that is probably all I need to say in support of our submission. Senator LUNDY—Yes. In your submission you make reference to the total vacancy factors particularly of the civic area, as showing that that vacancy factor is continuing to increase. How do you anticipate that change in this legislation—and working on the hypothetical that

RURAL AND REGIONAL AFFAIRS AND TRANSPORT Monday, 23 March 1998 SENATE—Legislation RRA&T 11 in fact the assembly chooses to proceed to the next step—will actually make an impact on some of those raw effects, if you like: those economic indicators such as vacancy rates in the higher density office areas of Canberra? Mr Service—I think, Senator, we said in our submission that this would not provide any short-term resolution to the difficulties that have been created over the last couple of years, but we see this as being one of the things that needs to go forward in support of some of the things already done by the ACT assembly. There were some changes made to the Land Planning Act in terms of renewal of leases, in terms of user rights charges, and in terms, particularly in Civic, of the opportunity to reuse buildings. As I said in my opening remarks, this is an opportunity to continue to promote a Canberra economic climate, and the economic investment of property on a similar footing to the other states and, I have got to say, to overseas, remembering that a number of major institutions are substantially or wholly owned by overseas businesses, and they look at what are the competitive opportunities. So, yes, the short answer is that we do not see this as a short-term solution. Having suffered some fair degree of pain over the last couple of years we see this as an opportunity to continue to move Canberra out of that difficulty period and into a longer- term return to health in the economy. Senator LUNDY—Okay, so in terms of it not being a short-term panacea for some of those structural problems for Canberra, can you just elaborate further on how you see it being a step. You just spoke about it being part of a number of elements. Can you point to exactly what the other specific elements are in leasehold and land tenure provisions that have been perhaps introduced in the last couple of years, or are planned to be introduced in the context of the legislative assembly, to point out to the committee where this fits in the grand plan to improve general investment in the ACT. Mr Service—There were three major decisions taken in the last assembly. One was the right to apply for renewal for a new term, with the payment of simply an administrative fee. The second was a reduction for an interim period in user rights charges. That was to change use, remembering that you cannot change use— Senator LUNDY—This is commercial? Mr Service—Yes, commercial and industrial. Remember, you cannot change use without, of course, going through the planning process. The third was the basis of cost of change. Many people had argued previously that if you wanted to renew a lease you ought to pay another premium, a 10 per cent premium. We have consistently argued that you pay at the time you buy a lease—as you buy anything—effectively a market price, and there should be no penalty for people renewing leases. Senator LUNDY—Just going back to the first point about the renewal of commercial industrial leases, what proportion of those leases have been renewed to date? Mr Service—I will have to take that question on notice, Senator. I know that a number of major owners are taking advantage of that as quickly as they have been able to. Senator LUNDY—So this is when they have got within the 30 years. Mr Service—No, this is where, for instance, 30 years of the term has already expired and there is 60 years left, and they have now applied for a new long lease. Senator LUNDY—Yes, and those new leases are for 99 years. Mr Service—Yes.

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Mr Hedley—If I could interrupt here, a number of them, after the Ellicott proposals were introduced in 1980, where at the time you paid 10 per cent of your unimproved capital value, and there were a lot of concerns at that stage as to what would happen. A number of commercial and industrial property owners did take advantage and pay their 10 per cent in 1980 and then a couple of years immediately following to renew their crown leases for another 99-year period. That was actually changed, or the right to do that was changed, in the life of the self-government, very early on in one of the early assemblies, when I think Rosemary Follett was Chief Minister. There was no right, and a period of great uncertainty then arose as to what might happen. That uncertainty was removed by the Carnell government introducing amendments and proclaiming the regulations 12 months ago. Since then, my understanding is that the department has received several hundred applications for a fresh 99-year period. I am not able to give you total numbers but I notice that later witnesses today are from the department and they may be able to give you the precise numbers. Senator LUNDY—Yes, in terms of the applications. I am asking obviously all witnesses, regarding the issue of that automatic renewal, if they can think of any examples where there has been any indication from governments that there are any barriers or blockages to that renewal. Mr Hedley—There have been some examples with crown leases in a commercial sense which have not been renewed, one of which is the Downer shops of course, which was a short- term lease which was issued, I think for 20 or 30 years. At the expiry of that date the government of the day said, ‘No renewal.’ That is the classic example in Canberra which is often used as what might happen on a lease if the government of the day says, ‘No renewal.’ Senator LUNDY—How does that compare to experiences elsewhere in terms of governments of the day needing to acquire land and so forth? Mr Hedley—There is no difference in the ACT from elsewhere. There is a lands acquisition act which applies both Commonwealth-wide, for Commonwealth needs to acquire land, and in the states. Most of the states have got a lands acquisition act which enables the state governments to compulsorily acquire land for public purposes, and the ACT government has a lands acquisition act which enables it to compulsorily acquire. What we want and what we are advocating is a system which is no different from the rest of Australia. That is, basically you own your land for the longest period possible—in the states it is freehold, in the ACT currently it is 99 years, subject to the current renewal legislation not being amended in the Assembly—but if the government does need land for a school or a hospital, or road widening, or whatever, it has always got the right to compulsorily acquire your land on just terms. Senator LUNDY—You mentioned before that there was a period of uncertainty under a previous Labor assembly government. Mr Hedley—Yes. Senator LUNDY—If this enabling legislation goes through which empowers the assembly to make decisions in this regard, what makes you so sure that that uncertainty will not be a factor once again in how the ACT assembly manages tenure? Is that statement contingent on the fact that you have the current government? Mr Hedley—No. What this legislation which you are considering now does is authorise the ACT legislature to pass legislation. If this legislation is passed through the Senate, it is up to

RURAL AND REGIONAL AFFAIRS AND TRANSPORT Monday, 23 March 1998 SENATE—Legislation RRA&T 13 the ACT Legislative Assembly to pass enabling legislation to enable 999-year leases. If that is done and people apply for 999-year leases, then the issue is put beyond doubt because you have then got a title to a parcel of land for residential, commercial, industrial or agricultural purposes for 999 years. For the government to take that back it would have to exercise its powers under the lands acquisition act to compulsorily acquire that parcel of land. So this would be but the first in a series of steps to enable people to have a land tenure system which is much closer to the rest of Australia. Senator LUNDY—No, I appreciate that. I think you missed my point. Because this is enabling legislation and it empowers the ACT to actually enact that in a way they have not been able to before, to what degree does that actually increase the instability of the ACT land market, given the relative instability of the ACT assembly? How much is that a concern to your organisation and your members? Mr Hedley—The bottom line is if it goes through the Senate then the assembly is authorised to pass the legislation. Now, if it passes the legislation— Senator LUNDY—Well, it is authorised by the federal parliament, not necessarily by the assembly per se. Mr Hedley—Yes, sorry, that is what I am saying. The first stage is through the Senate. For the second stage it is up to the assembly then, the government of the day—whoever it might be—to introduce legislation enabling 999-year leases. So there is a second stage with a locally elected legislature which can determine what its constituents ought or ought not to have. If it does go through the assembly, authorising 999-year leases, then presumably there would be a process as part of that which would enable leaseholders to apply to convert it from 99 years to 999 years. So it is a series of steps which it has got to go through. Senator LUNDY—Yes, I am fully aware of that. What if it does not go through the assembly, Mr Hedley? Mr Hedley—What if it does? Senator LUNDY—What if it does not go through the assembly? Mr Hedley—Well, we are no worse off than we are at the present time, which is that we are dependent upon the current renewal provisions remaining in place. That is the big uncertainty to investors’ minds, because people are saying, ‘What happens if in the legislative assembly the current rights of renewal are amended by a subsequent legislative assembly? What have I got then?’ And that is a difficult question to answer. Senator LUNDY—Yes. If it does go through and subsequent legislative assemblies choose to revisit it, what are the risks there in terms of tenure? Mr Hedley—What they are doing then in effect is shortening the term from 999 years. If we can use a practical example, if this legislation goes through the Senate, then goes through the legislative assembly, and a crown lessee does apply for renewal or extension to 999 years, then if a subsequent assembly purports to shorten the period down, they are interfering with property rights, in effect, and would be subject to the constitutional protection of compulsory acquisition on just terms. Senator LUNDY—So there would be automatically some provision under the constitution for adequate compensation. Mr Hedley—There is a constitutional provision requiring compulsory acquisition of land to be done on just terms, and just as there is Commonwealth lands acquisition act, there is

RURAL AND REGIONAL AFFAIRS AND TRANSPORT RRA&T 14 SENATE—Legislation Monday, 23 March 1998 also an ACT lands acquisition act, which requires compensation to be paid where land is taken from a person or individual or company. Senator LUNDY—So once this happens, once this is in, that is it; it is locked in, unless you utilise the provisions of the lands acquisition act. Mr Service—We very much hope so. Mr Hedley—What we are aiming for is to put the ACT on an equal footing with the rest of Australia, bearing in mind that capital is mobile, it goes where the best opportunities are. It has always been our view that there is an impediment to investment in the ACT, because of the lesser quality land title system which applies here, and we have been consistent in that approach for many years. Senator LUNDY—What position has your organisation taken on the previous inquiries? Mr Hedley—The last one was the Stone inquiry. The Stone inquiry was really not about this. The Stone inquiry was about the administration of the leasehold system, and suggestions of maladministration in some respects, and that was its primary focus. The Property Council, or BOMA, as it was then known as, appeared before it, and we put in a submission which dealt with the primary purpose, which was maladministration and administrative aspects of the leasehold system. We also commented, as part of that, on the land tenure system, and suggested there that the ACT should follow the example of the Northern Territory. Our submission was that we moved to freehold land, bearing in mind that immediately after self-government in the Northern Territory they moved from a leasehold to a freehold system; that we would be expected, under self-government, to stand on our own two feet financially, pay our way; and that we ought not to have any impediments or restrictions imposed upon the capacity of business in the ACT to complete on an equal footing elsewhere. But that was not the primary purpose of the Stone inquiry. Senator LUNDY—So you differed from the Institute of Valuers and Land Economists? Mr Hedley—They did not actually give evidence, to the best of my knowledge, to the Stone inquiry. Senator LUNDY—But as an organisation you have always argued for freehold. Mr Hedley—That is the ultimate aim, to move to freehold. At this stage we are very strongly supportive of the current legislation before the committee here, which is to move to 999 years. Can I also dispel something else. It has been suggested by a number of commentators, and also suggested in the House of Reps debate, that there is some sort of constitutional impediment to freehold land in the Territory. The federal Attorney-General’s Department some years ago, in advice to the former joint parliamentary committee on the ACT, made it clear that there are no constitutional impediments to the grant of freehold land in the Territory, and that is consistent with advice which the Property Council gave to the Stone inquiry. We commissioned a professor of law from the Australian National University, Professor Leslie Zines, who also made it clear there are no constitutional impediments to the move to freehold land in the Territory, but people keep saying there are. It is mainly non-lawyers who keep saying there are constitutional impediments. But, as I said, both the advice of federal Attorney-General’s Department and our own advice is quite clear: there are no impediments at all to freehold land. Senator LUNDY—So why do you support 999 years?

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Mr Hedley—Well, it is an interim step. It is a compromise. It is also for ease of administration, because you can still keep the same planning system; you can still keep the same leasehold administration system there. The integrity of the planning system is retained, because the planning system in the territory here is controlled by lease purpose clauses. They are still in existence. A lease purpose clause will define the height, the building set-back, the usage, all those sorts of factors. They are still here. Senator LUNDY—Mr Hedley, can I just ask a question about your organisation. What we have heard today, from previous witnesses and you, is that one of the main issues here is the perceived impediment to investment in the ACT with the leasehold system, but we are also hearing that your council and the previous institute also actively campaign at a political level against the current leasehold system, thereby perpetuating the distinction and perhaps inadvertently reinforcing those barriers to investment. What is your intention as a council? How will you approach this issue if hypothetically the legislation is passed here, and it is subsequently passed in the assembly? Will you continue to campaign for freehold, given it has formed your platform on this issue for, well, as long as my corporate memory lasts? Mr Service—Almost as long as we have been in existence. Senator LUNDY—Indeed. Can you see what I am getting at? Mr Service—Yes. Senator LUNDY—Because if the problem is investment, then those sorts of issues are going to have to be worked out, in the first instance, for everybody’s sake, I think. Mr Service—If I could answer that, Senator, we have taken a position consistently that one of the most fundamental issues for our members, who are principally owners of properties— that is, owners and investors and the providers of capital—is to achieve an outcome of certainty. We have not necessarily campaigned against a leasehold system per se. What we have campaigned for is the best system. We have consistently said that, in our opinion, in a long-term sense, freehold is the best system for Territory-owned land; that is, the land that territorians own and the land that others invest in in the territory, leaving aside the issue of national land. But we have equally recognised that there are some views of principle, and some emotive views, about why freehold may not be appropriate for the ACT as it stands. Having said that, we have recognised that still our obligation to our members is to seek to achieve the best outcome we possibly can, within the time frame, and within the measures available to us, and with the opportunities we have to put that case forward. In this instance, a move from 99 years to 999 years is the next best step to freehold, and we will actively support that as being as close as our members can get, as close as the Territory can get, to selling our leasehold system outside of the ACT. Mr Hedley—It would be major headlines throughout the property industry Australia-wide if the Senate were to pass this legislation, and if the assembly were to pass the enabling legislation, and I can assure you that in the national magazine, which is read by most of the people involved in the investment of capital Australia-wide, the very first thing they would see would be the fact that the major area of business uncertainty has been removed by the capacity of going to 999-year leases. We believe very strongly that that would lead to investment decisions being made in some of the boardrooms in Australia to in fact look much more seriously at the ACT as a place to invest.

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Senator LUNDY—Yes. I have to wind up questions because we are running short of time, but perhaps I could just place a couple of short questions on notice. I am certainly interested, if it is possible, for the committee to peruse the advice you received from Leslie Zines. Mr Hedley—Yes. I can table a copy here, Mr Secretary. Senator LUNDY—Thank you. Mr Hedley—It is a photocopy of a fax. Senator LUNDY—Is it legible? Mr Hedley—Yes. I am sure that the secretary could also get the previous advice that was given by the federal Attorney-General’s Department to the joint parliamentary committee on the ACT. It was about 10 years ago. CHAIR—I was going to ask you the year. Mr Hedley—It was about 10 years ago, but the federal Attorney-General’s Department, the advisings division, have got it on their index there. I have seen a copy. I do not have a copy of it, but that advice from Professor Zines makes reference to it, and it makes it abundantly clear that there is no constitutional impediment to moving to freehold land in the territory, and that is exactly what the federal Attorney-General’s Department said. Senator LUNDY—Also, with respect to your members being—and please correct me if I am wrong—the owners of property in the ACT, I am interested in the actual state of the ACT tenant market, if you like. Could you provide the committee with an outline, or even just supply us with a couple of back issues of your bulletin, about the state of the ACT rental market, and the impact you think this particular piece of legislation, if it is carried through to fruition through the assembly, will actually have on the current vacancy rates in the ACT, and also, if you could, highlight other impediments to improving those tenancy rates that are currently in place in the ACT. What I am looking for, Mr Hedley, is I suppose some comparative analysis between the barriers to improving your tenancy rates currently, and to improving indeed the property values in the ACT. Mr Hedley—Yes, sure. CHAIR—Could I just, before we wind up, get you to clarify a couple of points. Coming from Western Australia I certainly understand your argument in terms of the security of tenure, because we range from freehold title to perpetual lease to 99-year leases down to I think 50- and 30-year leases. Those people who have got the best security get the best commercial deal. There is no question about that. But you talked about the right to resume, and I understand the Territory’s legislation for a right to resume for public works or public purposes. The legislation here is very similar to the Western Australian legislation, and fully compensatable. It is very strict in terms of what can be resumed. But if a lease is not renewed—as in the example you gave here—is compensation paid in those cases? Or is there provision for compensation? Mr Hedley—Only on the value of improvements. So there is no value for the land as such; it is only on the value of improvements. So if you have a house or an office or factory or whatever it is on the land, you get nothing for the land component as such, you get a valuation, and there is a dispute resolution mechanism there— CHAIR—To sum it up, because we have not got much time, does that mean in fact it is a lesser form of compensation?

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Mr Hedley—Yes, I believe it is less than it would be under a freehold system. Under a freehold system there is compensation on the value of the improvements erected on the land and the value of the land. Could I just answer one other question you raised earlier on native title? CHAIR—Yes, I was going to ask another question. Have you taken any advice on changing lease arrangements at all? Mr Hedley—Well, I am a lawyer, but there is no impact. Once a crown lease has been issued in the Territory here it extinguishes native title, whether it is 99 years or 999 years. There is no impact, so there is no impact on native title, to the best of my knowledge. I raised this issue with somebody else, another lawyer who is operating here, and they were of the same opinion: there is no impact on native title. If you have got an existing lease for 99 years and you extend it for another 99 or 999 years, native title on that particular parcel of land has been extinguished by the issue of the original crown lease. CHAIR—You may need to take this on notice, but in terms of the situation in Kalgoorlie, which has 99-year leases which I understand are almost identical to the last written word, there is now more than a major concern in terms of the lease arrangements there. Mr Hedley—I understand that the ACT Attorney-General Gary Humphries is going to appear this morning. CHAIR—Yes, he is appearing. I just want to get the advice put on the table. Mr Hedley—Sure. We could provide some views on that issue. CHAIR—Thank you. There was one other matter. There is something I do not quite understand, so even if I get it a little bit wrong I think you will understand the thrust of my question. In terms of the capacity when somebody gets out the 20 or 30 years when they can roll over the new lease into a new 99-year lease, are there any instances where in fact that cannot happen? Mr Hedley—The government has to make a choice on each application for renewal as to whether the land may be required for any purpose. I know from my own particular circumstances, where I have made use of the legislation which was introduced by the Carnell government last year, that the first thing is that they have a discussion with the National Capital Authority, as I understand it, to ask whether in fact that land may be used for public purposes, and whether there is any impediment to renewing for a further 99 years, and that is a threshold question. CHAIR—So that is a question for Gary Humphries. Mr Hedley—Yes, and also the National Capital Authority representatives. But, on my understanding that on each application they do ask the question, is it likely to be used for public purposes? CHAIR—Right. Unfortunately we are going to have to wind up here, because we have to keep moving when parliament starts at 12.30 and we cannot continue beyond that. But could I thank you both for your evidence here today. If necessary, if we need you, we may call you back. Thank you very much. Mr Hedley—Thank you very much, Chairman. Mr Service—Thank you, Chairman.

RURAL AND REGIONAL AFFAIRS AND TRANSPORT RRA&T 18 SENATE—Legislation Monday, 23 March 1998

[9.52 a.m.] LOURANDOS, Mr Nicholas James, President, Canberra Property Owners Association, Seventh Floor, State Bank Building, 161 London Circuit, Canberra, Australian Capital Territory CHAIR—Is there anything in your submission that you object to being publicised? Mr Lourandos—No. CHAIR—Thank you. I invite you to make an opening statement. We need to keep moving, as you have probably gathered. Mr Lourandos—Thank you, Chair. In relation to the Canberra Property Owners Association I would just like to make the point that we represent non-institutional owners of property here in Canberra. I suppose one way to look at us is as the smaller end of town. Committee, at the moment our members are very confused; they are very worried, and quite frankly do not really trust politicians at the moment. We are very confused about why this should not be a bipartisan issue to provide more security for the holders of property here in the ACT. As far as we are concerned, the security of our tenure should be outside the political system. I think it is very important to make the point at the outset that in relation to the leasehold system, in principle, I personally do not have any problem with the leasehold system. But there are two separate parts to the leasehold system. The first part is the planning issues and the controls that you may want to have. The second part is security. Now, they are two separate and distinct issues, and we should not get one confused with the other. What we are arguing about here is the security of the leasehold system, not about what height or what colour your building can be or whether there is enough car parking on the site. They are all valid planning issues, and I do not want to propose anything that will take away from those planning issues. I cannot emphasise enough that we are talking about security. The other important thing to realise is that most people in this town do not see themselves as tenants. When you are a leaseholder, you are a tenant. You ask the average person out in the street what they are, and they will say they own their house or they own their small commercial properties. They do not see themselves as tenants. But in the past we have—maybe not easily—trusted governments to do the right thing. Now, it is reaching the stage in this town where I do not think we can trust government any more to do the right thing. I think the onus is on the politicians to do the right thing by the people of Canberra, and that is to give us greater security. The other point that I want to make at the outset is that sometimes you will see arguments raised about the distinction between residential and commercial property. As far as we are concerned, there is no difference. You could have a residential property that has been rented out for investment purposes, you could have a commercial property that starts out as commercial property and, because of planning changes, becomes a residential property, as we have seen in the inner parts of Canberra, and in Sydney and Melbourne it has happened recently. The most confusing part is that you can have the one building that is used for both residential and commercial purposes. If we are going to treat them differently what is going to happen to that building? A prime example is maybe James Court at Northbourne Avenue. You have an apartment complex and then underneath you have hairdressers, car rental companies, and restaurants. Are we going to treat them all differently? I think that point needs

RURAL AND REGIONAL AFFAIRS AND TRANSPORT Monday, 23 March 1998 SENATE—Legislation RRA&T 19 to be made at the outset—that there should be no difference at all between residential and commercial property. I really think the crux of this matter is one of compensation. My understanding is that under the federal constitution when you own property freehold you get reasonable compensation. But that is made up of two things. First of all, it is made up of the value of your improve- ments, and it is also made up of your land value. The bottom line is: if we are not going to get security of tenure, in effect what the government is telling us is that they want to strip away our land value and only give us the value for our improvements. As far as we are concerned, that is not good enough. That is a fundamental issue. If the people who do not want to support this proposal are trying to say to us, ‘We are going to strip away your land values so at the end of your lease we will acquire your bricks and mortar, and the depreciated value of that, but we’re not going to pay anything at all for your land,’ that is totally unacceptable. I think that might do for an opening statement. Thank you. Senator O’BRIEN—Mr Lourandos, you finished that statement talking about compensation for ‘your land’ but I think you concede that it is actually a leasehold: there is not ownership in land at the moment. Mr Lourandos—I would actually say that a fair perception is that when someone purchases a block of land they do consider it theirs. Senator O’BRIEN—Yes, but you know that that is not actually the case. Mr Lourandos—I know that is not the case. Senator O’BRIEN—They do not purchase the land; they enter into a leasehold. Mr Lourandos—That is correct. Senator O’BRIEN—So you see this enabling legislation before the Senate as increasing security by extending the leasehold? Mr Lourandos—Yes, we do. Senator O’BRIEN—I guess the question that turns on that is that someone is going to ask at some stage in the process, ‘What is this security worth?’ If the ACT assembly legislates to make available extended tenure, what is it worth, and should they recover that? Mr Lourandos—I would argue that when people are going out there and buying blocks of land here in Canberra, as far as they are concerned, they are paying the capital value of something more than 99 years. As far as they have been concerned in the past, they have always felt that government would do the right thing by them, and not charge them again when the lease expires. So I think that the price has already been paid up-front. Senator O’BRIEN—It seems that there are a couple of arguments running around in the debate at the moment. We heard earlier evidence about the rights to compensation in the case of resumption, which will be enhanced by perhaps extending the leasehold. It would certainly be enhanced by going to freehold. But on the other hand, your evidence—and I do not think you are necessarily different from the evidence that was presented by earlier witnesses—is that there should not be some substantial fee for increasing the security of the tenure situation. So it seems to me that what is behind the submissions so far is that you want a situation, for a notional amount or a very small amount, to extend the security so that if there is resumption in the future for example, that you can get back what you paid in the first place

RURAL AND REGIONAL AFFAIRS AND TRANSPORT RRA&T 20 SENATE—Legislation Monday, 23 March 1998 for a 99-year lease. That is to me the essence of the argument that I am having some trouble with. Would you like to address that? Mr Lourandos—It is the essence of the argument, but I still go back to the point that when someone came to Canberra during the 1940s or the 1950s or the 1960s and bought a block of land, and the government back then was actively encouraging people to come to Canberra, the perception was that when you paid for a block of land it was no different than if you paid for a block of land in Queanbeyan or you paid for it in Marrickville or if you paid for it anywhere else in the country. I think that the government in the past, whether it has been the federal government or currently the ACT government, has already got the money in the pocket, and in effect they would be double-dipping if they charged again. Senator McGAURAN—They won’t. Senator O’BRIEN—I bet they have not got it in the pocket. Mr Lourandos—I agree that they probably have not got it in the pocket; governments are very good at spending money. But I think that is a very different issue. I think the government would be double-dipping and it would be a very unfair and unreasonable proposition for that to happen. Senator O’BRIEN—I understand what you are saying and I know where you are coming from. What I am saying is that there is this conflict between the position that you put about people who have paid up-front and all that should happen is that they should have their security enhanced by increasing the tenure. Mr Lourandos—That is correct. Senator O’BRIEN—Let us take this scenario: that it is achieved by legislation, and a future Assembly decides that it was the wrong decision and wants to go back, we would have the argument, ‘Well, then they’d have to pay compensation to do that.’ But why should they, because no substantial fee was paid to increase the tenure in the first place? Mr Lourandos—Our argument is simply that we want to be treated the same as everybody else in the rest of Australia. The message that we have got very clearly in the last two or three years, stand on your own feet, make your own way, go out there and be self-sufficient. Now, there is no point throwing us in the deep end of the river and tying our hands as well. The point that I am making to you is that if you are not going to support this, you are in effect hindering us in our ability to make our livelihood in this town, and I do not think that is a fair proposition. Senator O’BRIEN—You mean by buying and selling property? Is that what you mean? Mr Lourandos—Not only buying and selling property. I am going to be leaving here and taking my suit off and putting on my steel cap virtually and going back to my construction site where I will be dealing with everyday people who do not make their living this way. What I am saying to you is that those people are very scared and they are very worried. Most of the subcontractors who work for me actually live out in Queanbeyan. They come from cultural backgrounds where they do not particularly trust government. They have come out after the Second World War from governments who stripped away property rights, who have done millions of things to them, and we have been very lucky in this country: that sort of thing has not happened, and most likely will not happen. But we want to reach a system whereby our security of tenure is outside the political system, and if government is going to take away our property rights, it should do the honourable thing and pay just compensation, not only for the value of the improvements but for the value of

RURAL AND REGIONAL AFFAIRS AND TRANSPORT Monday, 23 March 1998 SENATE—Legislation RRA&T 21 the land, and that is the bottom line. We are not saying, ‘Give us a block of land; you can’t do anything you want with it forever, but if you’re going to take it back give us fair compensation, including land value.’ Senator LUNDY—Mr Lourandos, you mentioned as part of your opening statement, I think, quite a critical point, and that went to the distinction between the land values and the value of improvements in the event that either the compulsory land acquisitions act is brought into force or indeed the government chooses, for whatever reason, not to renew a lease and thereby introduce some course of action that requires compensation. We have already heard of—I think only one example, and correct me if I am wrong—the Downer shops as being the issue where the government actually chose, or not, to renew a lease. To what degree did your association feel that that compulsory acquisition or the refusal to renew a lease is a real threat to the businesses and the developers that you represent? Mr Lourandos—We end up meeting at least once a month, and the biggest concern that everybody raises at every meeting is the security of the system, and the biggest problem we have is that under the previous Follett Labor government we had a situation where some of our members were going to go and renew their crown leases, and basically at that stage the Follett government said, ‘No, you cannot do it.’ That caused widespread panic and upset, to put it mildly, in our members, and we were asking ourselves, ‘What is the secret agenda of the government? Is a secret agenda of the government to strip away our land values? Why didn’t the Follett government allow us to renew our crown leases?’ When that sort of thing happens in the political process, we say, ‘Listen, we’ve had enough of the political process. Why are our security rights dependent on the current assembly of the day or the current parliament of the day?’ We are talking about property rights. I am in this chair one day, you are in this chair the next day; tomorrow there could be different faces. The security of our tenure should be outside that control. Senator LUNDY—Given what you have described as political insecurity and, given the nature of the assembly and the fact that this is enabling legislation, do you think that part of the solution is actually to empower the assembly even more to make decisions with respect to leasehold, in the first instance? Mr Lourandos—Senator, I see it as a step in the right direction. I am not a lawyer and I do not know whether the federal government can say, ‘Listen, you’re automatically going to get 999-year leases.’ I suppose that would be my preferred option, if we could bypass the local assembly. But if the process is going to be enabling legislation and then letting the local assembly do it, I would really hope that both sides of politics—and I am talking of both the mainstream sides of politics—get behind this and say, ‘Listen, we’re not going to score any political points off each other. Let’s look at it as a bipartisan thing and let’s do the right thing by the people of Canberra.’ Senator LUNDY—Mr Lourandos, in terms of your membership, one of the issues from my perspective that seems to affect the security of the people you represent is not so much the underlying planning system but indeed the choices by the ACT assembly on the relative approvals for developments in the ACT and the comparative spread between the main centres and the regional centres, the group centres and so forth. I acknowledge in your introduction you made the distinction. To what degree do those planning decisions impact upon the insecurity of your members, as opposed to the underlying leasehold system? Mr Lourandos—I think the issue that you raise is a very complex one. It probably requires an inquiry on its own, and I think the local government is pursuing those matters, so it is not

RURAL AND REGIONAL AFFAIRS AND TRANSPORT RRA&T 22 SENATE—Legislation Monday, 23 March 1998 something I would particularly like to comment on, other than to say that planning issues obviously do impact on what you can and cannot do, and on the activities that members can undertake. I do think—and that is why I made the point at the outset—that that should be a separate issue. You should be able to divorce that issue, treat that as a separate issue—the security issue of tenure. Senator LUNDY—But you acknowledge at least that it is part of this conglomerate of issues that take your association to obviously the high level of dissatisfaction that you have with the way the ACT assembly manages its affairs with respect to land tenure. Mr Lourandos—Yes, that is correct. Senator LUNDY—I have one other question with respect to your support of the 999-year lease as opposed to freehold. The 999-year lease, as we have heard from other witnesses, is an extension in perpetuity. Given what you have expressed, how do you see that actually resolving some of that insecurity, in that what you have articulated is quite a vehement support of freehold for of all of those what can be described as psychological reasons. Mr Lourandos—I did not actually think I said that I supported freehold as such. I said I am pretty happy to work within the leasehold system. But just to clarify that point, if you said to me, ‘Here’s freehold,’ I wouldn’t say no. I want to make that point clear. I have got no problem with the leasehold system as such. What I am talking about it is security of the tenure and fair and reasonable compensation if the government wants it back. Senator LUNDY—All right. So, for example—and I know I am speaking in the hypothetical, but I am interested in your association’s views—if in fact this legislation was to fail and the processes of automatic renewal of the commercial and residential leases occurred, would an element relating quite specifically to the land value improvements as part of that compensation package—should a lease renewal be refused, or should the compulsory land acquisition be introduced in some capacity—go a long way to satisfy your association’s specific concern, or would you find that that would not be enough to address your specific concerns in that regard? Mr Lourandos—Sorry, Senator, I am a little bit confused. Could you put that point again? Senator LUNDY—Sorry. You mentioned that in terms of the compensation attached to the current leasehold system that land values were not a component of that. Mr Lourandos—Yes. Senator LUNDY—If they were, and if that were able to be achieved, would that satisfy your specific concerns in that particular area? Mr Lourandos—Well, again, I am not a lawyer, so I am not sure what is the best way to deal with it is. I suppose what I am saying to you is that there is a perception problem, and I am not sure whether it is a cultural problem. Senator LUNDY—I am trying to work out if it is a technical problem or if it is a perception problem, and what weighting your association and your members give to either. Mr Lourandos—If I could just go on about the perception problem, we are still a very young country in historical terms. The Chinese culture goes back 4,000 years. In Japan they talk about thousands of years. Here in Australia we have been a federated nation now for under a hundred years. I think when the government first decided to create Canberra and issue the 99 years and that sort of thing, and avoid land speculation, that was a fair thing back then. But I think we have reached the stage where 99 years is not a long enough period of time for

RURAL AND REGIONAL AFFAIRS AND TRANSPORT Monday, 23 March 1998 SENATE—Legislation RRA&T 23 a mature nation, and I think we have reached the stage now where we cannot think of a hundred-year block. We have sophisticated financial markets in the States where they commonly deal in 30- and 40- and 50-year loan periods. Twenty years, 30 years ago here in Australia if you went and asked for a 10- or 15-year loan, they got a bit sort of shaky, and thought, well, that is a bit too unsophisticated for us, but it is reaching the stage now where for a commercial property you can get a 10- or 15-year loan, and one day you will probably be able to get a 30-year loan. The banks are starting to get very nervous if all of a sudden there are only 10 or 15 years to go on the lease, and there is no security about what is happening. The bottom line is that the banks will pull their money; on the bottom line, you say you own your house, but in effect all you are doing is just representing the bank, and hopefully one day you can pay it back. Senator LUNDY—So the banks have actually expressed a specific concern? Mr Lourandos—They have got very deep concerns, yes. Senator LUNDY—That is an interesting point, Mr Lourandos. Are there any other services that your members utilise that use limited lease tenure, despite automatic renewal, as a barrier to doing business in the ACT? Mr Lourandos—Do we see any other barriers besides security of tenure? Senator LUNDY—No. You have mentioned that banks actually articulate that lease system as being a barrier to doing business or to lending money. Mr Lourandos—Yes. Senator LUNDY—Are there any other services that your members utilise that also throw that back at you as a barrier to doing business here? Mr Lourandos—Generally not, because the bottom line is one of money, nine times out of 10, so it is the person who controls the purse strings who controls the outcome. Senator LUNDY—That is a good point. Thank you. CHAIR—Could I just clarify a couple of points with you. I notice in your submission you expressed disappointment at the lack of notice given with regard to these submissions. Mr Lourandos—Yes. CHAIR—Without making an issue of it, I will point out that this legislation did come in in December. It was not until a couple of weeks ago, when somebody approached the Democrats, that it was referred on to this particular committee. The way it operates is responding to the community, so it has been around, and I think it has been an issue in the Territory. I do not want you to feel that we as a committee withheld holding this particular inquiry. Because the legislation is being dealt with in the current sittings of parliament, we had to move fairly quickly. Mr Lourandos—Senator, I appreciate that. I suppose our point was that we wanted the opportunity to be able to express our views, and we thank you very much for enabling us to do that. CHAIR—You have done it well. Mr Lourandos—Thank you. CHAIR—If I could just go back to this question of compensation, it follows on the previous question I asked with regard to the right to resume compensation which operates here. If the

RURAL AND REGIONAL AFFAIRS AND TRANSPORT RRA&T 24 SENATE—Legislation Monday, 23 March 1998 government makes the decision, for whatever reason, under very strict guidelines, as I understand it, and in relation to compensation, if a lease is not renewed—and I have got the feeling this morning, from what has been said, and I would like your views on it—if in fact it is compensation when the lease is not resumed, that in fact relates to a lesser compensation than if the government makes a decision to resume it for a particular purpose. Is that a fair assessment? Mr Lourandos—It is basically our understanding that the only compensation we would receive if there is no renewal is the depreciated value of the improvements, so in effect there will be a zero land value. In effect what the government will do is strip away the land value. CHAIR—But if they resume it for a public purpose, then in fact there is compensation paid for your lack of use of that land for the remainder of your lease period? Mr Lourandos—I am not sure, Senator. CHAIR—That is all that I have, thanks very much. Could I thank you very much for your evidence. As I have said to the other witnesses, if we need you back, we shall call you back. Thank you. Mr Lourandos—Thank you very much. Proceedings suspended from 10.14 a.m. to 10.30 p.m. COOK, Mr Ross Michael, Manager Corporate Policy, Planning and Land Management, ACT Government, GPO Box 1908, Canberra, Australian Capital Territory 2601 GILMOUR, Mr Rodney Charles, Chief Executive, Department of Urban Services, ACT Government, Canberra, Australian Capital Territory 2601 HAWKINS, Mr Lincoln James, Executive Director, Planning and Land Management, ACT Government, Canberra, Australian Capital Territory 2601 HUMPHRIES, Mr Gary John, Deputy Chief Minister, ACT Government, Canberra, Australian Capital Territory 2601 CHAIR—I welcome the representatives from the ACT government. If you wish to make an opening statement, please do, and then we will get into questions. Mr Humphries—Thank you, Chairman. May I say very briefly at the outset that of course we have a submission before the committee, and I adopt that submission of course as my submission to the committee. There is another argument I want to put to the committee in respect of this particular debate, and it is about the level of autonomy and sovereignty of the ACT, which I think is an issue that has been much in debate in recent years. I think this particular bill is an illustration again of the issue that has been debated and which needs, I think, to be reinforced again. We have had self-government now for just on nine years. There are still some aspects of government in the ACT which differ from the arrangements in the states and even the Northern Territory. We understand that that is not surprising perhaps, given that the ACT political system is still emerging and still, in a sense, finding its feet, but we believe there is a very strong argument that says that matters pertaining to the ACT’s direct and appropriate interest are matters that ought to be within the control of the ACT community and population. The question in this case of the nature of the system under which land is held in the ACT is a matter which under the Commonwealth constitution—at least the Seat of Government Act—the Commonwealth parliament has already expressed a view about; that is, the Commonwealth view is that there ought to be a leasehold system operating in the ACT.

RURAL AND REGIONAL AFFAIRS AND TRANSPORT Monday, 23 March 1998 SENATE—Legislation RRA&T 25

That is a matter about which we do not put any argument. We do not object to or argue against that, and accept that that is appropriate for a variety of reasons. But having protected, if you like, the Commonwealth interest by having a leasehold system in place, I would argue very strongly that it is up to the people of the ACT to decide what the nature of the administration of that leasehold system is. So I would argue that the bill before the Senate at the moment is simply a bill recognising the legitimate interests of the ACT community in making a decision about a matter that directly touches on their welfare and their interests. I accept that there is intense debate within at least in some sectors of the ACT community about this, and that is a good thing, but it is a debate that ought to take place within the ACT community and be decided by the ACT Legislative Assembly as the elected representatives of the people of the ACT. Indeed, it was an issue that was put before the electorate at the recent ACT election. The government that Kate Carnell headed went to that election and argued that we should do this. The government was returned. I do not want to get into the debate about mandates, but I think that we clearly put that issue before the electorate and it did not object to or argue against that proposal by the Liberal Party to move towards longer leasehold. So I think that, in all, it is appropriate for the ACT now to move down that path, to at least have the debate in its parliament, and that is why we would urge this legislation be passed as soon as possible. Senator LUNDY—The legislation before the federal parliament is enabling, as you have pointed out, and would provide for the legislative assembly to subsequently enact a piece of legislation to change the way the leasehold system is administered. In the memorandum of the explanation attached to this bill, it outlines a series of options that would be available to the ACT assembly should in fact this bill be passed. The first of four different options relates to the automatic increase in leases from 99 to 999 years. Can you explain what the administrative and bureaucratic procedures would be if that was the option that was taken by the assembly? Mr Humphries—In terms of how the ACT government would carry forward a decision to pass the bill? Senator LUNDY—Yes. What would actually occur? Mr Hawkins—It would require amendments to ACT legislation, principally the land act. I think Mr Cook might just enunciate that in greater detail. Senator LUNDY—Any other act? Mr Cook—Senator, I think we would need to look at some of the other legislation, including the unit titles act in the ACT which looks at strata titling in the ACT and so on. The automatic renewal could be achieved through an administrative process, where we could pass amendments to our legislation which would deem leases to have been granted for a period longer than 99 years. That is obviously a matter for the assembly to look at. Senator LUNDY—But in terms of a first option, obviously a whole plethora of amendments to different acts would be required. I am just trying to get a clearer picture, the issue of course being, if parliament does pass this act, that we need to be very clear on just exactly what door we are opening for the ACT with respect to the leasehold system. Mr Cook—Senator, we have a regime in place at the moment where we can seek by application the renewal of leases up to a maximum period of 99 years. I would envisage a system like this working in the same way—on application.

RURAL AND REGIONAL AFFAIRS AND TRANSPORT RRA&T 26 SENATE—Legislation Monday, 23 March 1998

Senator LUNDY—So it is not automatic; it is upon application? Mr Cook—Correct. CHAIR—Could I just get a point clarified on this one. In fact in practice there could be leases granted for any period between the 99 and the 999 years? Mr Cook—That is correct. CHAIR—There could be some at 200, there could be some at 300, there could be some at 150. Mr Gilmour—Under this proposal, yes. Mr Humphries—In theory, yes. I am not sure we would want to have a regime with all that difference of lease length, but certainly in theory it is possible. Senator LUNDY—Who governs the period of tenure in that respect for those leases? Mr Humphries—Obviously this is a question which the ACT assembly, and then in turn the government, if it passes the legislation, would need to address. But my argument would be that it would be easier and safer to convert the system to a system of 999-year leases, so there would be a standard lease issued for residential, commercial and rural property in the ACT that would simply have such leases on offer, and in turn there would be some system to convert the present leases to those 999-year leases—whether it is by application or some other method. Senator LUNDY—From what I have heard described, this first option, option 1, provides theoretical discretion between 99 years and 999 years. Mr Humphries—Yes. Senator LUNDY—Mr Humphries, we have heard from witnesses just this morning, with respect to this bill, of their concerns about the perception of certainty, and the perception of having leasehold over freehold given as a barrier to investment in the ACT, but we have also heard cited as a significant area of concern the relative political instability of the ACT assembly, and a history of that, I suppose, insecurity with respect to leasehold being perpetuated in many ways by the goings on in the ACT assembly. If there is a high proportion of theoretical discretion in the period of tenure for those various leases under this option, how can you see that particular concern being addressed if option 1 is implemented? CHAIR—Before you answer that question, could I just clarify: the gentleman running around with the cameras is from the Canberra Times. We do allow the press to come in and take photographs. Mr Humphries—That is fine. I am quite comfortable with that. As you say, there has been a perception of uncertainty, and it may be that that has contributed to a problem in the perception of the ACT as a place to invest. Providing for a longer lease regime is, in a sense, a way of addressing that concern, if there is a real concern out there. We want to provide for a different regime to take over, a different set of assumptions to take over, about the way the leasehold system operates. Now, if we, for example, were to pass legislation to provide for 999 years in the ACT parliament, pursuant to the present bill in the federal parliament, and then provide for, say, the conversion of existing leases to 999 years, almost all leases in the ACT would become 999 years in that setting. So the only uncertainty about what would happen for future leases would be those leases which were to be issued after the conversion of the existing leases. That would, of course,

RURAL AND REGIONAL AFFAIRS AND TRANSPORT Monday, 23 March 1998 SENATE—Legislation RRA&T 27 would be proportionally a very small number. So the uncertainty would have been wiped away by that single act of creating the longer leases, or at least very substantially wiped away. Senator LUNDY—If that option is in fact the one pursued. Mr Humphries—That is right. Senator LUNDY—I just need to clarify this issue of conversion. I understood you said earlier that it was not an automatic conversion, that it was actually on application. Is that what you mean when you talk about conversion, that upon application they will be transferred from a 99 to a 999, or whatever term you so desired? Mr Humphries—I think that is a bridge we have not yet crossed. Senator LUNDY—So you do not know how it is going to work? Mr Humphries—No. There are two possible ways. One is to provide some legislative provision, or maybe regulatory provision, pursuant to legislation that has been passed already, that would convert leases automatically to 999 years. Alternatively, we could have an application based system, and I suppose the technical strength of either of those positions is a matter we have yet to weigh up, and that is a matter which I think the ACT should do, if it gets to the position of being able to do so. Senator LUNDY—But you have not got the answers as yet. Mr Humphries—No, I have not, but can I emphasise I believe that is a question for the ACT to answer. With great respect, I do not think it is an issue for the federal parliament to be concerned about. How we administer our leasehold system or our system of land tenure in each state is a matter for the states, and ought, in the case of the ACT, to be a matter for the ACT. Senator LUNDY—With respect to option 2 cited in the explanatory memorandum, it describes the introduction of a regulation under section 29(3) of the Australian Capital Territory Planning and Land Management Act, prescribing a period of 999 years for all, or a specified range of leases over territory land. Can you, for the benefit of the committee, describe how that option fits in relation to option 1, and if they actually sit consecutively or concurrently, and what the relationship is between the two points? Mr Humphries—Sure. The regulation under 29(3) would be an act of the Commonwealth minister, not of the ACT minister or ACT government, and it may well be that such an administrative instrument would achieve a result very similar to option 1. It would provide for possibly a wholesale conversion of those leases to 999 years. The ACT government has very firmly argued that it should not be the way that we proceed, for the reason that we believe this is an argument and a debate which ought take place within the ACT Legislative Assembly. The use of a regulation power by the federal minister obviously will not make that possible. I suppose it is possible for the Commonwealth both to legislate in this way, and to regulate, to follow up some details, but I would think it is again better, from the point of view of giving the ACT parliament the right to have this debate, for it to simply legislate, as provided in paragraph 1. Senator LUNDY—Mr Humphries, one of the significant areas of concern that has certainly been expressed to me about this issue was that the 999-year lease concept was raised first, I think, or expressed first most vehemently by yourself in the midst of the federal government debate about the Wik legislation and the relative fear campaign that argued or that tried to present a viewpoint that leasehold in some way presented a greater exposure to native title claims. Can you explain to the committee why you chose to raise this particular debate at that

RURAL AND REGIONAL AFFAIRS AND TRANSPORT RRA&T 28 SENATE—Legislation Monday, 23 March 1998 point in time, and to what degree you have subsequently found out the impact the native title bill, the Wik legislation, the Wik bill, has on ACT leasehold, so we can get it on the public record. Mr Humphries—Can I first of all correct this information that you supplied there. The debate about longer leases in the ACT was first raised by my party back in 1989, long before the Wik legislation or the Wik decision was brought down by the High Court, and we have consistently argued that case for some time since then. In the context of what I think was not the Wik decision but the Mabo decision of the High Court, there was a debate about the impact of leasehold in the ACT, and at the time I expressed the view that there was concern in the ACT that the existence of a leasehold system may give rise to similar questions about the applicability of native title, just as pastoral leases have given rise to that same debate in other parts of Australia. We argued that the ACT government of the time—it was then the Labor government—ought to settle any uncertainty by legislating to extinguish native title over residential parts of the ACT at least. Indeed, subsequently it did just that, and that was the extent of our concern, which was addressed in that way. I do not believe that the native title debate or legislation really has any impact on this particular debate. I do not believe that any legislation that either the Commonwealth parliament would pass or the ACT parliament would pass would infringe the right of native title holders to be able to enforce their title, if there is such a title in existence in the ACT, and I believe that even if it was our intention as a parliament or a government to extinguish it—and it is not, in respect of areas that have not already been extinguished—then the application of the Commonwealth Native Title Act in the ACT would prevent us from doing that. Senator LUNDY—And have you sought legal advice on the impact of the current legislation before the federal parliament on the ACT? Mr Humphries—The Commonwealth legislation on native title claims in the ACT? Senator LUNDY—Yes. Mr Humphries—I have not sought that advice, no, because it is the clear intention of the ACT government not to allow native title claims to be affected by this process. CHAIR—Can I just expand on that a little. You did not hear my earlier questions. In terms of the issue in changing the title, which is something that is very relevant in Kalgoorlie right now, for example, which has an almost identical leasehold system to what Canberra has, almost down to the last dot, as I am sure you are aware, in terms of creating a new leasehold title, which is what will happen if this legislation goes through, have you sought legal advice in terms of the question of revival? Mr Humphries—I have not personally sought any advice. CHAIR—Or the government? Or if you have any position, would it be possible to forward that to the committee. Mr Gilmour—We have not got formal written legal advice. The indications we have had are that no problem will occur. CHAIR—Thank you. Senator LUNDY—Just going back to the range of options that would be available to the assembly if in fact this legislation was passed, what is your preferred process, Minister, if the federal parliament indeed passes this through? We have already made reference to option 1,

RURAL AND REGIONAL AFFAIRS AND TRANSPORT Monday, 23 March 1998 SENATE—Legislation RRA&T 29 but I am interested particularly hearing perhaps from the department as to what the actual processes would be in taking this to the next step. Mr Humphries—I am happy to have you ask questions of my department. I really do not know that they can answer any questions about the detail of that process. It is a matter we have not yet invested much bureaucratic effort in determining, given that the legislation at either level has not yet passed. Do any of my colleagues here have anything to articulate before the committee? Mr Gilmour—I think that is an appropriate position to have it in. The process, as we see it, is that there is consideration in the federal parliament; when that goes forward, then there is debate within the assembly, and that will bring forward the appropriate administrative arrangements to give effect to whatever transpires there. Senator LUNDY—Could I just draw to the attention perhaps of the committee more so than yourselves that the federal parliament is being asked to legislate to open a door to quite radical change to the ACT leasehold system but at this stage the ACT government cannot give a clear picture as to the path that they will pursue. Can I perhaps ask what your arguments are to actually convince us in the federal parliament why we should open that door at this point in time, given you cannot provide the answers or the detail about the course or the path you wish to follow, particularly as a government. I acknowledge the fact that it still has to pass the assembly, but certainly for federal consideration I do not think it is an unreasonable call that we have at least a very clear idea of what the ACT government’s intentions are. Mr Humphries—Senator, let me put the argument I put before, that this is a matter for the ACT parliament and government, not a matter for the federal parliament to be concerned about. It would not be concerned about such matters in the case of any state or the Northern Territory, and I would argue it in a sense has no business having any concerns about those details in respect of the ACT. I do not understand how one option over another has any bearing on the debate. If, for example, we propose to convert the leases wholesale from 99 to 999 years, what implications would that have for the federal parliament? I cannot understand what they would be. If we decide to do it on an application basis, again, what implications would there be? Senator LUNDY—Can I put to you, Mr Humphries that the issue is this: currently this committee has heard a number of hours of evidence this morning and we will continue to hear evidence after this particular session, and the vast range of submissions we have had have been on the issue of providing for 999-year leases for the ACT. We have not had submissions on the merits of whether or not the ACT assembly should actually be empowered to change the leasehold system per se. The political debate, therefore, in the federal parliament is about the merits of a 999-year leasehold system as opposed to a 99-year leasehold system. What we are hearing from you today is that you cannot actually provide the answers that we are looking for in terms of how a 999-year lease system will in fact operate in the ACT. What we are hearing is that you have not done that work, and that in fact you changed the basis or premise upon which this whole debate has been entered into in the federal parliament to one, as you claimed, of sovereignty or the right or the autonomy of the ACT government to actually decide these issues legislatively and do it themselves. I put to you that that is quite obviously a very important and fundamental issue, but one that at this point is outside the broad parameters of what we have been asked to contemplate— or be intrinsic in terms of the process. So I am a bit stumped, Mr Chairman, about how to proceed with my questioning, given that I had hoped for the opportunity to explore the various administrative mechanisms within the departments—and you have three departmental

RURAL AND REGIONAL AFFAIRS AND TRANSPORT RRA&T 30 SENATE—Legislation Monday, 23 March 1998 representatives with you here today—and explore the merits and otherwise, and abilities of the departments, and processes that they would actually implement, and try and ascertain all of the various costs associated with that, the time frames and all the other things that many of the witnesses are here to question with respect to this bill. Perhaps I can leave it there; if you could respond, I would appreciate it. Mr Humphries—I might just make a small comment on that. You say we cannot describe the process by which 999-year leases will operate. That is not true. The basis on which 999- year leases will operate will be exactly the same as they now operate, except with longer leases. The extended control by the ACT government over the way in which leases are administered will remain the same. The ways people buy and sell their leases will remain the same. The rights people have in respect of those leases will remain the same. There is no material difference between the present system and the proposed system with respect to the administration of the leasehold system. The only thing I cannot describe to committee in detail this morning is how we actually propose to convert from one to the other, but I believe that will be a relatively minor part of the exercise, and, particularly if it is done on a wholesale basis, it could be done literally by the stroke of a pen over an instrument of delegated legislation, potentially. That ought not to be a concern in respect of either the cost to the ACT or anything else. Senator LUNDY—So going to what you have and have not looked at, you describe it as a relatively simple process. Perhaps I could ask some of the technical questions that have been raised by previous witnesses and that are contained in a variety of submissions. One concerns the actual impact on land values and improvement values on that conversion process, and how it is your intention to deal with those issues? Mr Humphries—The question of taxes generally on leasehold land is an issue which I do not believe will change at all with this conversion. Obviously there are ongoing charges on the use of land, such as rates and land taxes and so on. They will not change as a result of this transition. There are fees, what we now call a change of use charge, in respect of a leaseholder who wishes to change the lease purpose clause. That kind of conversion from one sort of lease purpose clause to another will continue to be in place, and the ACT will continue to derive revenue when somebody upgrades the nature of the leasehold that they hold. Again, that is not affected at all by the conversion to 999 years. There is one potential source of loss of revenue and that is where, when the lease expires at 99 years, the potential for the Territory to levy a fee or charge for the issue of a new lease is lost, or at least it is spread out much more by making the leases 999 years. I would argue very strongly to the committee that the political reality is that no ACT government is going to be in a position to be able to collect very much revenue at all from that particular source. Citizens of the Territory, for example in a residential setting at the present time, are buying and selling their houses, even with relatively short periods left on the leases, as if they were buying freehold as in another state of Australia. I certainly would not propose to be the minister who would go to those leaseholders at the expiry of the first of those leases and say, ‘We’ll charge you X thousand dollars for the right to renew your lease.’ There is an assumption in the ACT community, certainly in residential, and very substantially with commercial leases as well, that those leases will be renewed at little or not cost. Senator LUNDY—For residential leases? Mr Humphries—Residential leases certainly.

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Senator LUNDY—That is already established, is it not? Mr Humphries—No, there is provision for automatic renewal of the leases and a charge has been set for those. I forget what the charge is—$200. That is a position we adopted in expectation of being able to move down the path of having legislation of the kind we are now considering in the federal parliament passed to allow us to convert the leases. I do not expect that even that would be easy to collect in the event that those leases begin to expire. Senator LUNDY—But at the time it was not expressed in that political context. That automatic renewal was expressed as providing that security of tenure. Mr Humphries—It was never expressed by us, and we enacted the provision. It was never expressed by us to be a provision that provided for security of tenure. It provided for some security. Senator LUNDY—Can I suggest that that was the public’s perception. Mr Humphries—I do not think it was. We certainly put an argument for it at the time that said, ‘This is a measure to offer some security while we move down the path of getting more security, more tangible security.’ Obviously the decision to provide for an automatic renewal at the end of a lease period is only as good as the government concerned, or the legislation concerned, lasts. That may change according to policy in the future. Citizens cannot rely on that, particularly if the government changes and takes a different view about the amount they should be collecting on the reissue of those leases. We believe that the citizens of the Territory deserve more security than that, and we believe that those longer-term leases will provide it. Senator LUNDY—So you think that in terms of that security—and you have acknowledged the fact that these provisions are contingent on the government of the day supporting them— Mr Humphries—The government of the day, when the leases are converted, supporting them, yes. Senator LUNDY—Yes, I think it is a point of distinction—the actual argument that the ACT assembly should be far more greatly empowered to deal with these issues, and yet at the same time we have heard the complaint that indeed it is the assembly’s ability to change the provisions with respect to the leasehold system that actually fuels that uncertainty, given the nature of the minority government and the nature of the assembly generally. Apart from the blunt approach of barrelling the legislation through and locking in 999 years or 200 years or 300 years, or whatever you pluck out of the air, how do you propose to resolve what largely seems to be a problem with perception about the distinction between leasehold, freehold, or 99-year leases and 999-year leases, given that seems to be the hub of the problem—the blockages to investment in Canberra? Mr Humphries—You talked about the question of stability within the parliament. In a sense that is made irrelevant by the issuing of longer leases. If the particular parliament of the day is, for argument’s sake, badly divided— Senator LUNDY—If this legislation is passed, it is really open slather because we have not got, even at this point, a clear process on behalf of the ACT government, assuming you get the numbers. Mr Humphries—There is one clear thing that we would put on the table, and that is that we want to convert the system to 999 years—not to 200-year leases or 300-year leases, but to 999-year leases. If we are successful in passing the legislation through the parliament, and then we administratively provide for that to take place, for the conversion to take place, that is the end of the uncertainty. Regarding any further uncertainty in a political sense in the

RURAL AND REGIONAL AFFAIRS AND TRANSPORT RRA&T 32 SENATE—Legislation Monday, 23 March 1998 parliament, I think it has been somewhat exaggerated, I might say. It is no worse, in a sense, than uncertainty generated by the government of the day not having a majority in the Senate. That uncertainty will not have a bearing on the nature of investment in the land, because the leases are 999 years. I accept that there is still an element of uncertainty in having only a leasehold, but that would surely be very small given that a person can now acquire, particularly in a commercial setting, a leasehold of 999 years. I do not think many business people or corporations are projecting much beyond that these days, so I do not think that would be a problem in any realistic sense. Senator LUNDY—Regarding a technical point that was raised by previous witnesses, can you describe what the opportunities are in the ACT at the moment for the compulsory acquisition of land under leasehold, or indeed the processes by which you would refuse to renew a lease? Mr Humphries—At the present time the Territory has the power to acquire leases compulsorily for public purposes, in much the same way that governments generally have that power. There is an interesting legal question as to what would happen if the Territory decided it wanted to acquire, say, a row of houses to widen a road, and at the very point when it came to acquire those blocks one or more of those blocks had a lease that was expiring. Now, in theory, the Territory under that provision that was referred to before by yourself, Senator, has the power to be able to reissue a lease, unless it is required for some public purpose. But if at the time it proposes to reissue the lease it does require the house for that public purpose, I would think there would be a strong argument that says, ‘You can’t issue a new lease’ and you also do not pay any compensation because the lease is expiring. Now, that is a very real concern given rise to by the uncertainty in our system. That maybe only applies when the coincidence arises of someone needing to renew their lease at the time when it is required for public purposes, but it illustrates the uncertainty we face under this present system. Senator LUNDY—Politically, would your government allow that circumstance to occur? CHAIR—Before you answer that, I just want to ask a question on this, because we have gone over time, and I know that Senator Calvert wants to ask some questions. We do, as a committee, have the option of asking the federal department to come back tomorrow night so we can continue this for a little longer. Or do you want to wind up? Senator LUNDY—I would like the answer to at least this question. CHAIR—It is a management thing. Certainly I will allow this question to be answered, but we cannot go beyond 12.30 because once the Senate sits we have to get up, and we have other witnesses. Do you want to come back tomorrow night, or do you want to wind it up today? Senator LUNDY—I might be able to deal with the remainder of my questions on notice if the witnesses are amenable to responding to them in that way. But I have one follow-up question. CHAIR—Right. We will see how we go. Mr Humphries—We would not wish to see a situation like that occur. We would prefer to compensate somebody who had a lease in that circumstance. Senator LUNDY—But would you allow it? It is a pretty straight-up yes or no question.

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Mr Humphries—No, I do not think it is, with respect, Senator, because it would depend on the legal position the government was in. If the government was effectively giving somebody a gift of, say, a sum of money representing the value of that lease before it expired, then there would be a real question as to whether the government had the—well, certainly the capacity to do that. There would be a political question about whether it should be doing that, if indeed there was no value in the lease that was being compensated for, because it had expired. So again that question of uncertainty is given rise to, and I do not think it should be given rise to. We should settle the question, not rely on the goodwill of the government of the day. We should settle it on a long-term basis by creating the certainty of longer leases. Senator LUNDY—With respect to the current compensation, if the lease is resumed in any way, that relates, as I understand it, to the value of the improvements and not the land value. Can you confirm that with respect to your departmental advice or legal advice? Has your government given any consideration to ensuring that such a compensation package also contains provisions for compensation for land value, not just for the value of improvements? Mr Humphries—Are you talking about under the new system or the present system? Senator LUNDY—No, under the present system, but also as a factor under any contemplated new system. Mr Humphries—We would certainly want to compensate people for the market value of whatever they were surrendering. If we were acquiring a block of land we would want to pay market value for it. That would be our expectation and our desire. But it is a question there of whether we would have the capacity to if the lease itself has expired. So it is a question of not just what we want to do but what we can do. Senator LUNDY—No, I am not talking about it necessarily in the context of the expiry of a particular lease, but more as a general comment, given it has been raised as a specific concern about the compensation payable if leasehold land is compulsorily acquired. Mr Humphries—Again, Senator, I think that is a question— Senator LUNDY—Or that you do choose not to renew. Mr Humphries—I’m sorry, what was that? Senator LUNDY—Or that you also choose not to renew a lease, even though— Mr Humphries—Yes, well, we do not want to be in that position, frankly. We want to have a situation where that does not arise. Again, these leases are being treated effectively as freehold land. I do not think I would want to come back to one of my constituents or somebody else’s constituent and say, ‘Look, you thought you’d bought that land for $300,000 and you’d have it for as long as you want it, but it’s now expired, and we happen to need it for a particular purpose and, sorry, you don’t have any interest in it because your lease has expired. Thanks very much. We’ll take the lease back.’ That, no doubt, is the reason that your former colleague Ros Kelly said back in 1980, ‘The ALP support the change from 99 years to perpetual leases for residential land.’ Senator LUNDY—Would you like to cite the source of that particular speech, Minister, seeing that you are going to use it out of context? Mr Humphries—Well, it is a speech to a seminar on ACT leasehold reform on 8 May 1980 by Ros Kelly, as she was then, the ALP candidate for Canberra. Senator LUNDY—Thank you. She was not actually in a decision-making position, Mr Humphries.

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Mr Humphries—No. I have no idea whether she still takes that view or not, but that was certainly the view she expressed then. Senator LUNDY—I am glad that you are now speaking on behalf of Ros Kelly. Thank you! Mr Humphries—Actually, I will quote the full paragraph. She says, the whole sentence— Senator CALVERT—Chairman, is anybody else allowed to ask any questions around here, or do we have to sit and listen to this all day? I mean, it is getting into political stuff now, and quite frankly I have been sitting here listening to part of it and watching part of it on television, and I would like to ask Mr Humphries what is the downside to what the government is trying to do, to increase the leasehold from 99 years to 999 years, and give your government similar sorts of powers to every other state government in Australia? I mean, isn’t that the intention, that you have more control over Territory land? The national land that people get hung up about will still remain, I believe—and tell me if I am wrong—under the jurisdiction of the federal parliament, but all this legislation is doing, apart from the technical matters that Senator Lundy has raised, is providing more certainty for the people who live here— leaseholders, including myself; and I declare an interest, because I believe I have got a lease, though I do not own the lease, of a unit. It is providing for the people of Canberra the same sort of rights as other states have. I cannot see why anybody would argue against that. Mr Humphries—I am not the person to articulate any arguments, if there are any against this proposal. Senator CALVERT—Could I ask you, have any matters been brought to your attention or your government’s attention that would seriously put doubts in your mind about what we are trying to do? Mr Humphries—There are arguments I have heard which sound to me very much as if people are saying, but not saying it very expressly or explicitly, that they believe there is a point somewhere in the future where the government, whether it be the Commonwealth or the ACT government, ought to take back the leases as they expire, and they ought to be able to collect the land that people now have, and have built houses on and whatever, and take them back for some kind of national purpose, perhaps to redesign the city, or perhaps to provide for a further windfall to the government of the day by being able to resell the leases or whatever. It seems to me that there is an argument to that effect somewhere in the background of those that say that there ought to be a capacity for the government to take a lease when it expires. Senator CALVERT—Surely the powers of acquisition that apply in all other states would have the same effect, and why should the people of Canberra be discriminated against? Mr Humphries—Well, indeed. The people who would win in that setting, of course—well, there would be no winners, I would argue, in the setting where the government simply took back the lease. Obviously the taxpayers, the householders, would be the ones who would lose out very badly. My view is very simply that if the Territory, or the Commonwealth, for that matter, wants to acquire Territory land for a purpose to do with the affairs of government— roads, or whatever it might be—it should do what it would do in any other part of Australia: buy it and pay for it. Senator CALVERT—Yes. How would it affect rights of way and all those types of thing? It would not affect any of those, would it—rights of way and all the technical things that you have in developments?

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Mr Humphries—That is right, all the present planning controls, all the rights that accrue to the land, all those things would remain much the same. If you converted from a leasehold system to a freehold system, there may be some loss of control, but we are not proposing that. The ultimate landlord ought to remain the Commonwealth, at the expiry of whatever period leases might be. The enforcement capacity, the rights pertaining to the land, remain the same, but there is simply more security for those with the leasehold in that their use of the land is not to be interrupted by the expiry of a lease. Senator CALVERT—You should not have too many troubles with your planning. You have got two authorities here, and every other state has got one. Mr Humphries—Let the record show my raised eyebrows. We have more than enough control, in my view, at the present time. We do not need any more. There has been some argument that in 500 years time we will need more control, and we will need to let the leases expire so we can build in more controls. Well, I think those problems are the same, handled by any government across Australia. We should handle those problems in the same way, not by some special device which disempowers the people of the ACT. Senator CALVERT—We have had a minority government in my state for quite some time now, and it does not seem to have affected any land decision. Who’s to say? CHAIR—It is quite obvious that we are not going to finish today. I do not want to cut it terribly short at all, because it is of vital importance to the Territory people in the way you handle this, but my question comes back to the question of compensation. It has been indicated to us by the previous witnesses that in actual fact if land is resumed under your public works resumption act, and compensation has to be paid on just terms of compensation, people are actually better off in terms of that regime than they would be if a lease was not renewed for some other particular reason. Do you have any evidence one way or the other to support that particular proposition, particularly in view of the fact that earlier on you made the point, Mr Humphries, that, for all intents and purposes, when leaseholders sold in residential form—I am not sure whether you included commercial in that as well—in fact it might as well be freehold in terms of the price that is paid for the property and the house that is on it. Mr Humphries—To that second part of your question, yes, I think it is treated in that way, and there is not any valid distinction between those two things. CHAIR—Does that also apply to commercial property? Mr Humphries—I think it does, yes. Obviously, there have been on occasions some land which has been leased in the conventional sense, and it usually has a rent component attached to it. But where a premium is paid for the land—that is, a purchase price is paid for the land— it is paid at a rate which you would expect would be reflected by something like a freehold block in the same circumstances. Certainly that appears to be the case. I think valuers would confirm that that has been the general expectation around the territory. In terms of problems with the comparison of compulsory acquisition versus an expiry of a lease, well, in the circumstances again where a lease expired and the Territory had some pretext to take back the land, certainly the leaseholder would be much better off by having the land acquired by compulsory acquisition than by simply having the Territory take back the lease when it expires, and saying, ‘Thank you very much, no compensation payable.’

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Senator LUNDY—How many examples of the coincidental expiry of a lease in that public use requirement have occurred? Are you not creating uncertainty to fuel your political campaign by refusing to provide the appropriate assurances in that specific circumstance? Mr Humphries—I do not know if there have been any situations where a lease has expired. I do not know if any of my colleagues know of any cases, either. But the point I am making, Senator, is not that there is uncertainty because we choose to create any uncertainty. There is uncertainty because of the nature of the system. As you pointed out, there has been political instability in the ACT because of the reality of a minority government. It is impossible to say what a future government might consist of, or what it might be made up of. I cannot guarantee that there would not be uncertainty in the event that that situation arose. It is not a case of me generating that situation. It is a case of me saying that is the reality. Senator LUNDY—Have you identified, with an intention to proceed, what legislative or regulatory change is required to provide for land values to be included in the compensatory package, both at the expiry of the lease, or the non-renewal of the lease, and indeed in doing a compulsory acquisition, and, if not, why not? Mr Humphries—In terms of compulsory acquisition we have a land acquisition act which governs those matters, and the formula for determining the value is governed by that legislation. Senator LUNDY—But you have said that land values as opposed to improvement values are not included in that. Have you looked at amending that to rectify that complaint by landowners or leaseholders? Mr Humphries—The balance of the term of the lease is included in the valuation. If it was right at the end of the term, then presumably it is not included. We have not looked at that question, Senator, because we hope to settle the question by the passage of this legislation. That resolves the issue completely. If the legislation does not pass through the Commonwealth parliament, I suppose we will have to come back and revisit the issue. Senator LUNDY—And what about with respect to the expiration, the end of a lease, if in fact you were to not renew a lease? Mr Humphries—There is no formula, as far as I am aware, that governs that situation. It has not been provided for. Again, if the Commonwealth parliament did not pass this legislation and we were not able to take this reform on, then we would certainly have to look at some solution to that problem. Senator LUNDY—But you have not taken any legal advice on what the situation would be? Mr Humphries—I have not sought any advice about that subject, no. CHAIR—Can I get a point clarified in terms of this debate, being an outsider from Canberra by about as far as you can get away and remain in Australia. This actual debate in terms of the problems of title in Canberra, and the lack of security and various things, actually began three, four or five years prior to self-government here, and it has gone continuously through the inquiry process regardless of who has been in power in Canberra. Is that a fair assessment? Mr Humphries—Yes, it is. It has not exactly been on the lips of every member of the community all the time, but certainly it has been an issue which has raged backwards and forwards through the pages of the newspaper and other places for some time. I am told it really began back in 1970 with a decision by Prime Minister Gorton to abolish the requirement for land rents to be paid. I suppose that was the threshold. That was where ACT leaseholds

RURAL AND REGIONAL AFFAIRS AND TRANSPORT Monday, 23 March 1998 SENATE—Legislation RRA&T 37 became much more like freehold. Ever since then the debate has been about how we complete the circle by providing for the leases to be of a long-term nature. CHAIR—Even with this it leaves the ACT in a lesser title position than either the Northern Territory or any of the states. Mr Humphries—Certainly any of the states. I think also the point about the Territory is true. CHAIR—The Territory as well. Mr Humphries—I assume they have freehold in the Territory, yes, so our position would be much different from other states and the Northern Territory. CHAIR—Let me ask another one. Is there any freehold in Canberra? Mr Humphries—No. CHAIR—Thank you. Senator LUNDY—Have you done an assessment of who will benefit from these changes? Mr Humphries—Again, I see in the explanatory memorandum an assessment of beneficiaries in this process. That would be our assessment as well. We certainly have had the view expressed by many people, many businesses and others, that their businesses would be better off by having a certainty created by this. I spoke to one owner of a commercial property in the ACT who had a major sale lined up with a consortium from Korea, and he says that the sale fell through late in the negotiations on the basis that he was only able to offer them a leasehold on the premises. He tried to assure them that there was every expectation that the lease would be renewed at the end of the time but he could not of course prove that. Senator LUNDY—Do you think it is a reasonable analysis that, because you have not been able to describe the actual operation and that conversion process from old leases to new leases, if this system was introduced there could in fact be a far greater benefit to new leases as opposed to converted leases? Can you tell the committee what will ensure that businesses with current leases will not be at a disadvantage compared with new businesses that are taking out new leases? Mr Humphries—I think if there are businesses which believe they might be disadvantaged, they have not expressed that view to us. We have had a uniformly positive view about this proposal from businesses around the Territory. Again I believe the process of conversion is a relatively minor part of the exercise and, having made the conversion, there would not be a great problem. I do not believe there would be any difference between new leases and existing leases in those circumstances. They would all be for 999 years. CHAIR—We are going to have to wind up. We have gone 25 minutes over time. If there are any further questions I will have them put on notice. Mr Humphries—I think Mr Ross Cook had one small thing to add. CHAIR—Thank you. Mr Cook—Senator, regarding the conversion of existing commercial leases, we have found from our experience that many commercial lessees take the opportunity not only to put in the new term of the lease but also to make other changes to the lease at the same time, to widen the purpose clause, indeed, to take on additional land or whatever. That is more normally the process that goes on with converting an existing lease, rather than coming in simply to change

RURAL AND REGIONAL AFFAIRS AND TRANSPORT RRA&T 38 SENATE—Legislation Monday, 23 March 1998 the term from this term to 99 years. So there is quite a different and separate process involved there. CHAIR—Could I thank you, Mr Humphries, and the officers at the table with you. If we need to get you back for any further information or any questions that are put on notice we will forward them to you. The only small request I would make is that if anything does come forward you will answer as quickly as possible because this legislation is in the process of going through the parliament at the present moment. Mr Humphries—I understand that, and will keep it in mind. CHAIR—Thank you very much. There are officers of the department here, are there? Mr Humphries—Yes. CHAIR—We are going to have to call you back, probably tomorrow night, I would suggest, because we have to get up at 12.30. We have no choice with regard to that but you are most welcome to stay. [11.25 a.m.] NEUTZE, Professor Graeme Max, 52 Bindaga Street, Aranda, Australian Capital Territory TROY, Professor Patrick Nicol OA, 14 Amaroo Street, Reid, Australian Capital Territory ACTINGCHAIR (Senator Calvert)—Would you like to make any opening statements? Prof. Troy—I appear as an individual, but as an individual with some expertise in this area. I am not appearing on behalf of the university. Prof. Neutze—Can I just very briefly summarise my position. I oppose the proposed amendments, firstly because I believe that they are unnecessary. In my view there is no evidence that 99-year leases inhibit investment. Renewal for an administrative charge is already provided for and therefore, de facto, the leases are perpetual in any event. It can hardly be argued that an administrative charge reduces the uncertainty. Secondly, I believe that the proposed changes, which I assume are designed to encourage investment, are at least as likely to inhibit it because they are likely to increase the price of land and increase the rent for commercial land. Both of those things will inhibit investment in the ACT rather than promote it. Thirdly, I believe that they are inappropriate, that effectively this is an attempt to subvert the objectives of the constitution which provided that land in the ACT shall not be sold in a state of freehold, for very good reasons. Finally, I would like to say that they are likely to effectively preclude the use of a source of revenue or the availability of a source of revenue to the ACT government in the future. I cannot help just making a comment about some of the arguments that were going on beforehand. It seems to me that if it is argued that people are currently paying freehold prices, this implies that no bidder for land is willing to pay anything for the increased security which this legislation is designed to provide. If that is true, it seems to me that the security is not worth very much to them. So there really is an inconsistency in the arguments that are being put to the committee from that point of view. Thank you. ACTING CHAIR—Professor Troy, do you have anything to add to that? Prof. Troy—I would just endorse the remarks that have been made by Professor Neutze, but simply also would go on to point out that the Stein committee, which was established by the present and previous government to inquire into lease administration, actually reported that it was the problems with lease administration itself rather than the leasehold system which was

RURAL AND REGIONAL AFFAIRS AND TRANSPORT Monday, 23 March 1998 SENATE—Legislation RRA&T 39 causing some of the uncertainty and some of the problems which were being referred to, and, indeed, some of the inconsistencies in relation to that administration were the major reason why the present leasehold system does not produce much in the way of revenue for the government. Furthermore, that inquiry found that there was no evidence led to it at all that business confidence was affected by the leasehold system. Of course, one can always find people who will say that they would like a greater gift at the expense of the taxpayers of this country, to be given a greater title in the land. That is human nature, but it is not a function of the leasehold system itself. It is actually not just a function of human nature; it is a function of the interests of those private commercial interests in the main that take that view. As regards the powers of acquisition comments, there seems to have been almost a deliberate attempt to obfuscate the process that has been talked about. Turning this to a 999-year lease would actually make the situation more difficult here than in the states and not put it on the same basis at all, and would give the landowners in this state, the leaseholders in this place, a much greater stake in their assets than would actually hold in the states. Furthermore, the point that would immediately be raised is that at the moment, whenever there is an issue of business confidence, it is always open for the government to issue a new lease. One way around the so-called problems of transition which would immediately raise itself would be problems of people simply asking for a new lease to be issued so that you would end up with wholesale renewals of leases converting out from 99- to 999-year leases. I would just like to make one comment in passing, that if it was true that the leasehold system itself inhibited or led to reduced confidence of the private sector in investment in the ACT, one would have to ask, ‘What has gone wrong with those who simply just recently bid for a 50-year lease for the airport?’ which is a part of the ACT—and not only that, offered to double their amount of investment in that period. So I do not see that there is much in the way of empirical evidence to support the proposition that businesses have reduced confidence in investment in the ACT as a consequence of the leasehold system itself. Senator LUNDY—Professor Neutze, I was interested in your comments about what you perceive as a contradiction between the arguments about a higher level of security for investors in the ACT, and yet you point to a contradiction in that because land is currently purchased in the ACT on the basis that it is freehold anyway, it is basically a moot point that any advancement or any change at this stage would lead to a perceived greater degree of security. Going to that point, where do you see the advantage then, and to whom, if there are such changes—and as you heard from the previous witness, we have no detail—as are loosely described as a general transition from a 99- to a 999-year lease. Prof. Neutze—The advantages accrue largely to existing leaseholders, and particularly I would suggest to non-residential leaseholders. But I do not believe that it is true that people pay the same amount for leaseholds in Canberra as they pay for freeholds elsewhere, that 999- year leases are worth more than 99-year leases. While it may be argued that many residential leaseholders do not distinguish between the value of their leases and the freehold value of the property, I do not think that is true of commercial leaseholders, and in fact they themselves make arguments to that end, and therefore a change from a 99-year lease to a 999-year lease is of value, and those people would be the main beneficiaries. As I said in my opening comments, it is not at all clear that that would encourage investment, because in fact the relatively low price of land in the ACT is one of the things

RURAL AND REGIONAL AFFAIRS AND TRANSPORT RRA&T 40 SENATE—Legislation Monday, 23 March 1998 which attracts investment. So I think that there is a contradiction in the arguments that have been put before you, because I think one of them is wrong. Senator LUNDY—I know this is probably asking the impossible, but are you prepared to speculate as to what sort of proportional value can be attributed to a 10-fold increase in the leasehold period? Prof. Neutze—I cannot give you a figure for it without doing some fairly detailed calculations, because of course the 10-fold increase is not reflective of anything like proportionate land value, because that increase is so far in the future that it is heavily discounted. Senator LUNDY—I appreciate that. Prof. Neutze—If you are at the beginning of a 99-year lease, then the increase in its value to 999 years is not great. If you are 50 years through that lease, then the increase in the value of the remaining lease of 49 years to 999 becomes significant, and the closer you get to expiry, the closer you get to it. In my view if the administration of leasehold was being handled appropriately in the ACT, it would be possible to establish that through normal valuation processes. So that is a sort of qualified answer, but it is as much as I can give you. Senator LUNDY—I might be able to refer that question back to the Institute of Land Valuers. Prof. Neutze—Sure. Senator LUNDY—Thank you. I have just a general question, and I am not sure whether to refer it to yourself or Professor Troy. In the ACT there is a reasonably regular phenomenon when land grants are given to national associations and other such bodies. Can you, for the benefit of the committee, describe what you perceive as the impact on those land grants, or any land grant that the ACT government may choose to give—a given organisation, be it corporate or an association—with respect to the changes to these leases in this bill and the proposed changes to a 999-year lease. Prof. Neutze—I am not very clear that it has any very direct implication, but it has been true in relation to the fact that those leases have been granted quite frequently for less than 99 years—because that is quite appropriate; the airport is one case; very many non-profit organisations have had leases for less than 99 years—that any movement towards 999 years as a general phenomenon would make those grants of leases at concessional rates, or often at zero premium, something which was an even greater erosion of the ACT revenue base. Prof. Troy—It is also a great loss to the Australian people, because it is an asset that actually belongs to the people of Australia and has been paid for by the people of Australia, and they do not get this back. At the moment the ACT government is simply the steward of those national assets, and it should operate—it does not, because, we would have argued in the Stein report, maladministration has been occurring—to the continued interests of the population of the nation. Senator LUNDY—So where the ACT government has granted at no cost a lease to, for example, a corporation for a certain period of time, you do not see that that discretionary ability will remain if the current proposals go through? You do not see them impacting on that at all? Prof. Troy—One of the problems with this whole process, Senator, is that the administration of the system has been so appalling and so clouded with secrecy, and we would have argued a degree of incompetence, that the fact that there are no public accounts means that it is

RURAL AND REGIONAL AFFAIRS AND TRANSPORT Monday, 23 March 1998 SENATE—Legislation RRA&T 41 extremely difficult to find out what the values of those leases are, and of the conditions under which those leases have been allocated. This does not inhibit the government from continuing to allocate leases to industrialists, or anyone else for that matter, under terms which they think are appropriate. The only question which is at issue is whether or not those terms and conditions and performance conditions attached to them should be made public. They have not been to date. The land management accounts have not been constructed; there have been many promises that they would be constructed. Many of these issues would have been easier to discuss with better information had there been any commitment to the production of those land management accounts. It is almost three years since the Stein committee, for example, reported, but there is no evidence of any action in that area, so we are still in the dark in terms of the actual figures in this regard, but it goes to the heart of those questions that you are raising, not only about community leases but also about concessional leases given to entrepreneurs, for a variety of good reasons. There is no argument that they should not continue to be given. The question is that they should be made to be transparent; that is all. Senator LUNDY—And has the public scrutiny of these land management accounts formed part of the set of proposals that the ACT government is currently articulating that they will push through if the process proceeds? Hypothetically if this bill goes through federal parliament, and then they introduce— Prof. Troy—I am not privy to what the present government is proposing to introduce. Senator LUNDY—We could certain refer that question to them. Prof. Neutze—But could I say that in the 1988 inquiry in which I took part, the then ACT administration, I think it was—I cannot remember just how it related to self-government, but I think it was the then ACT administration—said that— CHAIR—It was prior to self-government, wasn’t it? Prof. Neutze—It was prior to self-government. They said that land management accounts were in the process of preparation. So 10 years ago they were promised, and we still have not seen them. Senator LUNDY—In terms of the chief processes under this legislation we have heard that any changes in lease purpose clauses will remain unaffected by this legislation. Can you provide some comment or your views about the impact on the lease purpose change and what is proposed with the extension of current leases to 999 years. Prof. Neutze—The problems with the lease use charges is that they have been very ineffective, and I think that in general terms the proposed changes which will make leases in the ACT more like freehold are likely to increase the pressure which the ACT government has been under to actually do away with or further reduce those charges. Those charges, which have been set at a proportion of the increase in value, by their nature just do not work. I tried to explain very briefly in my submission why that occurs. It is because they are set at 50 per cent of the increase in value, which means that a property with a prospect of a change in use increases in value by 50 per cent of that difference, so that the increase in value as a result of the permission to change use becomes only 50 per cent. So you then get a charge of 50 per cent of 50 per cent; you can go on with those steps and, quite frankly, you can see the results of that in very small amounts of revenue. Compare that with the Hong Kong government, for example, which also has a leasehold system. Its revenue from lease purpose variations, I think they call it, is really a very

RURAL AND REGIONAL AFFAIRS AND TRANSPORT RRA&T 42 SENATE—Legislation Monday, 23 March 1998 significant proportion of the public revenue of Hong Kong. I think, apart from the fact that making leases 999-year leases will increase the perception—which I agree is already out there, especially among residential leases—that all leases are just like freehold, that the one remaining major difference, which will be financial—the charge for any permission to change the purpose clause in the lease—will be increasingly seen to be anomalous. We heard some discussion when we came in here that really the objective is to make Canberra land much more like land everywhere else. So it seems to me that the likely political effect is to further water down the effectiveness of such charges. Prof. Troy—That is inconsistent with section 125, and the issue about revenue from changes in lease development rights is dealt with extensively, not only in the 1988 report, but also in the Stein committee report at some length. I would refer you to that because it is a quite clear argument about how the economics of that works, and is the explanation for why the government does not actually raise much revenue from the writing and reissuing of leases to new development. CHAIR—I have to say that I am at a total loss to understand why you would be opposed to Canberra having a title that at least goes some of the way to the same tenure that other Australians enjoy in other states and the Northern Territory. I am really at a loss to understand why you would be opposed to that. I happen to be a farmer and a freeholder. There is no problem or inhibition against our shire council in terms of raising money from us for rates and the necessary community services we have to provide, and what have you. Can you expand on your real fundamental objection to people who are living in Canberra having the same rights as other Australians have in terms of land tenure, and the variety. Once again I will just mention Western Australia for a moment, where I come from. There is a variety of leasehold titles. There is perpetual lease, and then there is freehold title. There is no doubt from the individual’s point of view, and their security and their capacity to raise money and develop businesses, that the strongest title is freehold, and then you come down through the various types of titles. What is the major objection to, if you like, allowing Canberra to become more like the rest of Australia? After all, Canberrans are Australians—at least, I think they are! That was said tongue in cheek for anybody who is listening. Senator LUNDY—I am glad of that qualification, Mr Chairman. Prof. Neutze—Revenue is one part of it. The ACT government has been granted really what is a large potential source of revenue in the fact that it has been made the beneficial owner of land in the ACT. The more raised from the leasehold system and designed to be raised from the leasehold system, the less revenue will need to be raised from other purposes, from other sources for the ACT government. Second, I actually believe that the leasehold system is a great advantage to the ACT. While I accept your point that a freehold is of course the most secure form of title, I think leases which can be renewed at almost any time by payment of the difference between the value of, say, a 49-year lease or a 30-year lease and a 99-year, are as secure, and have been shown to be as secure in many other parts of the world, as freehold, and therefore are not an inhibitor of business or anything like that. So I put those two together, as both a leaseholder in Canberra, and as someone who is a taxpayer in Canberra, and also as someone who is very interested in land use planning— because I do believe that lease purposes are a much more effective implement in the control of land use than are zoning controls. For all of those reasons, I believe that the ACT is better served with a leasehold system than it would be with something that was much closer to freehold.

RURAL AND REGIONAL AFFAIRS AND TRANSPORT Monday, 23 March 1998 SENATE—Legislation RRA&T 43

CHAIR—Can you point us to where there is, in fact, in any of the states under the various titles the capacity of state governments—or, in the Territory, their government—to actually raise money, or a differential between what is raised against a freehold title or perpetual lease title, or any of the different forms? Prof. Neutze—I am not very familiar with the various leases in other parts of Australia, although I do believe the state governments have behaved in much the same way as the ACT government has, and that is that they have not taken advantage of the possibilities of leasehold. Certainly historically that is true. They have not used leaseholds as a form of revenue raising in the way that they may have done. I think this is becoming increasingly important, actually, because in a period when we are finding capital moving internationally very readily, there is pressure on all governments to reduce tax levels. If we tax income, we are told we will be driving out the most able people. If we tax capital, we will be driving out investment. The one thing that we can tax which is not likely to move anywhere is land, and I think that is quite an important aspect, and becoming more important to a country like Australia which is competing internationally for investment. Senator CALVERT—What is the difference between taxing freehold land and leasehold land, though? Every other state has got land tax in some form or other, so really— Prof. Neutze—In the case of leasehold land, you do not just have to tax it. Because you already own it you can charge—ideally you can charge a land rent on it, or you can charge to renew it. What many people, including the ACT government, seem to ignore is the fact that the Commonwealth actually owns the land in the ACT, and what it is not doing is charging the users of that land for the land use rights that they had. The users of that land, through this kind of legislation, are claiming that they actually own the same rights as in freehold, whereas in fact what the Commonwealth government largely, and the ACT government, has done is to sell to them, at a premium, the right to use that land for a certain period for a certain purpose, and therefore the ACT government wants to give away, in effect, increased land use rights, namely for the difference between 99 years and 999 years, for nothing. What I am saying is that that is a potential source of revenue, particularly from non-residential land, which it is proposing simply to give away. CHAIR—In terms of Western Australia, we have got the lot, if you like. The shire councils have no trouble at all applying rates; they have no trouble at all in putting them up. The state government applies the land tax on all forms of title, and they have no problem putting that up. I am sorry, I am not going to pursue this, if this is the case, because it is nothing to do with that. Senator CALVERT—I asked a question, and can I finish it off by asking: why is the ACT government then charging $500, or whatever it is, land tax on a normal unit at the moment? Prof. Neutze—I am not saying that the ACT government cannot charge land taxes and so on. Senator CALVERT—They are. Prof. Neutze—I know they are. All I am saying is that the fact they can charge taxes does not mean to say that they should give away what they already own rather than charging a reasonable price for it. You would not expect— Senator CALVERT—I would have thought those people, long-time residents of Canberra who have built houses and improved their properties here over 20, 30, 40 or 50 years, would

RURAL AND REGIONAL AFFAIRS AND TRANSPORT RRA&T 44 SENATE—Legislation Monday, 23 March 1998 probably say that they have done just as much for the land, or more, as the ACT government, wouldn’t they? Prof. Neutze—But their improvements are protected. If the lease is determined and taken back into public ownership, their improvements are rewarded. The asset that they have put into it has actually improved in value and they get a higher compensation as a consequence. So that part of it is okay. Senator CALVERT—But do you think the people of Canberra would like to know that further down the track their land might be taken off them again, even though they have done all these improvements to it? Prof. Troy—But the attempt to focus on the residential side of things is actually to miss the point. This is not about residential leases. Nobody has argued about that. This is about the commercial and industrial leases. Then you have to ask yourself the question: if the boot was on the other foot, would you expect the people who are leasing industrial and commercial land to give some increase in the value of that lease when the sublessees’ leases run out? They do not turn around and say, ‘You’ve actually improved the value of this asset because you’ve run a successful business in this sublease.’ No, they keep that for themselves, and that is exactly the same point; that is part of their asset, and this should be part of the asset of the population of the ACT, who are then only acting as the stewards for the nation. That is the point that is at issue here. The argument is that someone puts in a lot of effort and then wants to get a reward from that, but they get the reward from the operation they run on that particular lease, with the conditions that have been laid down, for the period that has been laid down. There is nothing wrong with that. What this is doing is a backhanded way of trying to undermine something which was written into the constitution at the very outset, and the citizens of the ACT, including those investing in the ACT, were able to invest in it at a lower level simply because they had to have less capital, simply because it was a leasehold system. So that is an important part of this. People are now turning that around and saying, ‘That’s not what happened.’ That is exactly what happened. What we are facing here is people trying to give away an asset. I am a Canberran, and I am also an Australian, and I actually find it ethically repugnant to do that. It just seems to me to be wrong. I will, however, say to you that if you turn around and turn my lease into a 999-year lease I will not object because I will be like the rest of them—all citizens will do that. That would be not the right thing. You would be regarded as not acting in your own best interests if you turned that down. So that is the way to see this. This is people who are saying, ‘This has got nothing to do with good administration.’ It’s actually a gift at the expense of the nation to a relatively small number of people. We have already made the concession about the residential stuff. This is largely for the commercial and industrial lessees, that is where the major source of revenue is being lost, and that is where it will continue to be lost once this transfer takes place—if this transfer takes place. CHAIR—Can I just say there—and we have got to keep moving—that certainly some of the previous witnesses today put a lot of emphasis on the real estate or the residential side of it. Senator Lundy, you have a couple more questions and then we have to move on to the next witnesses. Senator LUNDY—I would like, first of all, to turn to the issue of the actual process of conversion. We heard from Minister Humphries, the previous witness, that the detail of that

RURAL AND REGIONAL AFFAIRS AND TRANSPORT Monday, 23 March 1998 SENATE—Legislation RRA&T 45 conversion process under the broad description of this bill and the subsequent actions that will flow from this bill has not yet been established. But Mr Humphries did say he saw that as being a relatively simple process. Could either of you comment on what your view of that process of conversion would entail, and its degree of simplicity or otherwise? Prof. Troy—It can be a simple process. It can be as simple as passing a piece of legislation to convert all present leases to 999-year leases. It can also be a simple process of individual lessees coming in, in a queue, to the department and asking for a new lease, and under the present sort of arrangements they would get that new lease simply for the payment of a reregistration fee. That is the source of the contention. That is the point at which all control is lost. Senator LUNDY—Going to your point about the loss of revenue for the ACT government, we certainly understand the focus on the commercial leases that are currently in place under the 99-year leases and their proposed extension to 999. To what detail have you made assessments of revenue lost and what points of pressure do you think will be brought to bear elsewhere within that commercial leasehold system in terms of costs and potential revenue sources from the ACT government? Prof. Troy—Senator, you are raising one of the very big questions which we have already drawn attention to; that is that there is, in fact, and was all through the Stein inquiry, great difficulty in getting information of this kind, simply because the records are not kept, which goes to the point about administration of the leasehold system itself. One would suspect that some of the reason for that is that there is something that people do not want the public to know about, so they do not keep the records properly; you do not reveal this kind of information. Nonetheless, the suspicion is and the evidence is that with the amount of the value of the land, and the commercial and industrial leases in particular that we are talking about, the revenue that comes off that and the renewals that are related to that are so small that it has to be a function of maladministration of the system. Remember that this is the only thing, other than taxes and rates, that is a resource available to the ACT administration. It does not have mineral royalties or things of that kind which the state governments have. So this is the one big asset that it has which it can continue to benefit from as the good steward for the nation, and it is giving this away. That is something which I find incomprehensible, for a start. I also find it is a way of undermining section 125 of the constitution, because going to 99 from 999 years would actually have the effect, in operational terms, of undermining that commitment to hold the land forever in freehold. CHAIR—Thanks very much. If there are any further questions, we will have to put them on notice because we have got Mr Moore to hear before 12.30. I thank both professors for appearing before us today. If there is any other information you want to give to us, you can forward it to the committee, or we reserve the right, if we decide to, to call you back. Thank you very much for being here with us today. [12.00 p.m.] MOORE, Mr Michael, Member, Australian Capital Territory Legislative Assembly, Canberra, Australian Capital Territory 2601 CHAIR—Mr Moore, I welcome you to the table, and invite you to make an opening statement.

RURAL AND REGIONAL AFFAIRS AND TRANSPORT RRA&T 46 SENATE—Legislation Monday, 23 March 1998

Mr Moore—I have taken an interest in leasehold matters since long before self-government, and I think I have been largely elected—certainly in my earlier years—on my involvement in those matters. I think it is very important to understand that most of this debate is not so much over the use of land but, rather, over the development rights. It is those development rights which provide us with the ability to add revenue to the Territory. It is important to understand that the ACT currently faces a $150 million operating loss each year, every year. It is an issue that we have great difficulty in dealing with, and for us to give away any area where we may be able to raise revenue seems to me to be a ridiculous method of dealing with the Territory. I must also say that there is an irony in that those who argue for an increase in the leasehold period are invariably landlords themselves, and the irony is that, should their tenants argue the same way, they would find it laughable. I think that we as a community should find it laughable that they argue in this way. It seems to me that there are two main issues for the Senate and senators to deal with here. The first one is this issue of the leases themselves. The second issue, though, that I drew attention to in my submission was whether or not we should transfer power from the federal parliament to the ACT Legislative Assembly. When the debate was on here in the Senate about the euthanasia laws I argued that it was appropriate for the assembly to be able to make its own decision. In this case I argue that there is a reason why senators ought take an interest and the federal parliament should retain an interest in this, and that is that there is a constitutional issue here. Section 125 of the constitution—I have heard a number of other speakers mention it—puts an obligation on the federal parliament to ensure that they retain an interest in this matter. In the moral issues there is no such constitutional obligation. So there is a major difference in that area. I would recommend to senators that they oppose this legislation. Senator CALVERT—Senator McGauran took the particular section that I was looking at. You heard what Professor Neutze said; that leasehold is an advantage as far as land use planning is concerned. Have you got any views on that? The fact that you have got two planning authorities here in Canberra I would have thought would have been sufficient to make sure that your planning is carried out in an appropriate way. I wonder why having a difference between a leasehold and freehold, given that you have got two planning authorities, would make any difference. Mr Moore—If I can digress for just one second, I think it is a significant disadvantage that we have two planning authorities. In fact, there has been a motion to that effect that was carried without dissension in the ACT Legislative Assembly that we really should have one planning authority. That having been said, it seems to me that the difference between planning with the leasehold system and without a leasehold system is the difference between a zoning system for planning and the ability to make decisions based on lease purpose clauses. Where you have planning based on lease purpose clauses, you can narrow your decision on planning issues down to a single property. In zoning systems it is almost impossible to do that, and it is a significant advantage in terms of planning and control of how land is used within the ACT. But there are also revenue implications, of course. As far as the planning implications go, review after review into the leasehold system has said that it is a significant advantage in planning terms to have a leasehold system, provided, of course, that the leasehold system is administered correctly. Senator CALVERT—You have raised a matter that was raised by the previous witnesses about the real winners out of this being the business and commercial people. Conversely, do

RURAL AND REGIONAL AFFAIRS AND TRANSPORT Monday, 23 March 1998 SENATE—Legislation RRA&T 47 you think that the old system has been a negative for business and commerce? Has it kept businesses away from Canberra—forgetting about the Commonwealth, because they make up quite a large amount of that. Mr Moore—Residential leases are not in question here. Already there is the ability in legislation to automatically renew on request, and I think we can actually improve on that and have automatic renewal for residential leases without request. That I do not think is in question. It is about commercial leases. I think the best argument in terms of commercial leases is to look at Capital Property Trust, which was one of the most lucrative and successful property trusts in Australia for quite a number of years under the leasehold system. That is a credit, first of all to the people who managed that, particularly George and Terry Snow, but it also shows clearly that the leasehold system is not a disincentive to investment. It can be used under the old system without these changes, without business loss; in fact with clear business advantage, because they managed very well compared to the rest of Australia right through that period. I would have to say, of course, that that is in the context of a time when Canberra was being developed due to an influx of public servants. So these things are never so simple. You can say, ‘Well, this happened in one spot and this happened in another spot,’ but there was huge development going on in other parts of Australia at the same time. Senator CALVERT—But businesses in Canberra, I believe, are generally supportive of extending it. Mr Moore—There are clear advantages to businesses who are involved in this, and that is because what they get is better control over the development rights. If you have a 999-year lease as opposed to a 50-year lease, then when you go to apply for a change to the lease purpose, there is a stronger sense of ownership rather than a sense of rental, and that changes the tone from the fact that we as a community are the landlord—when I say ‘community’, I am talking about the community of Australia as a whole as the landlord—and the business people who have use of the land at the time are, in a sense, the tenants on that land. These same people would never increase the rights of their tenants when it came to a change in the way their particular property is going to be used, and it is really about that critical issue of what happens when there is a change to a lease purpose clause. The Stein committee report and the 1988 Langmore committee report and others have indicated very clearly that this change is inappropriate, and it will undermine the value of the leasehold system. It will undermine the ability of the territory government to raise revenue from the leasehold system, not so much in a taxation sense, because, as Senator Crane pointed out, governments, local councils, whatever, can lift the rates in terms of their properties any time they wish. It is specifically about development rights. It is about changing the use of a particular piece of land from being able to do one thing to doing another thing, and perhaps I can give an example to make that clearer. Where a lease has been given to a club for the purpose of playing snooker or some other thing, for sporting purposes, then they decide that they would prefer to use that land to build an office building, the value of the land changes very rapidly. For a club, the land in downtown Civic is only worth what it can be sold to another club for— perhaps $10,000—but as soon as it is available to be used as an office block, it would increase its value to perhaps $10 million. The difference between that $10,000 that it is worth to the club—to be sold to the club—and the $10 million that it is worth to be changed into office blocks belongs with the community, because it is the community that has that development right, not as in a freehold system, where

RURAL AND REGIONAL AFFAIRS AND TRANSPORT RRA&T 48 SENATE—Legislation Monday, 23 March 1998 the individual who owns the land has the development right. Where you are talking about 999- year leases or perpetual leasehold there is a much stronger sense of owning that land and owning that development right, and it will make it much harder for governments to extract revenue. It is already difficult for governments to extract revenue, and hence it is very rare, in spite of the recommendations of a series of reports, for us to take 100 per cent of that increase in value. CHAIR—Can I just clarify a point there—and I am going back to my West Australian experience to clarify it. If land use changes—if the house becomes a corner store or something like that—a different regime applies under the law, regardless of the title. Why wouldn’t that apply in this circumstance in terms of the Territory? Mr Moore—If you have a house changed to a corner store, where we are entitled to revenue but where you are not entitled to revenue in a freehold system, when you apply to change from a residential lease to a business lease we would expect that business lease to be worth a value, so we ask a valuer to give you the value of the residential lease and to give us a value of the corner store lease. The difference—let’s say it is $100,000—belongs not with the person who owned the lease, as it would be in freehold, but with the community as a whole who owns the development rights and who says, ‘You can now use it in that way.’ CHAIR—But that is not my question, or maybe I have explained it badly. My question is: if the land use changes, at that point in time when the land use changes, regardless of the title, why can’t a fee be charged at that particular time for that land use change? Mr Moore—I presume we could— CHAIR—I am just told it is. Senator LUNDY—Sorry, my understanding of that point relates to the question of improved usage charges by the ACT government, and that they are currently levied. Mr Moore—It is what we used to refer to as betterment, but we now refer it to as change- of-use charge. We do charge, but in fact there is a sliding scale as to what we charge. Personally, I believe that ought not be a sliding scale, it should be 100 per cent, but you are saying if there is a 999-year lease, why don’t we just charge it anyway. CHAIR—No, it could be a 20-year lease, it could be 99, but at that point in time when the land use changes, in your case from a club to a major development site, regardless of the length of the lease, why would the government not apply that principle? Is that not a political decision not to do that? Mr Moore—Indeed. The point that has been made by a series of inquiries is that when you change to a perpetual lease or a 999-year lease, it is another incremental step in undermining the leasehold system. The community perception is that it is their lease, it is their land to use for the next 1,000 years as they like, therefore they have the prerogative, and it is part of an incremental system of changing the way people perceive leases and undermining the ability of governments therefore to raise revenue in this way. That is the difficulty, and as I think most of us know, changes that occur in terms of public revenue and public perception are almost always about incremental change, rarely about major revolutionary change, and this is about part of that incremental change. CHAIR—It has not stopped West Australian governments. Senator CALVERT—I just want to follow up with the example that Michael used. Going from say a club, where you would get $X amount of value from that for your rating purposes and land tax and everything else, to a $10 million office block, I think you said, do you not

RURAL AND REGIONAL AFFAIRS AND TRANSPORT Monday, 23 March 1998 SENATE—Legislation RRA&T 49 have a rating base? Wouldn’t the rates and everything else be increased because of the value? Is it not based on valuation in the Territory? Mr Moore—It is based on valuation. You have a valuer— Senator CALVERT—Surely, then, if you have got people who want to invest in commercial property, they are more likely to build the sorts of properties that you get more income from if they know they can get a property that has got a decent length of lease on it, rather than a short-term lease. They are more likely to come in and spend that sort of money. Do you think there would be a difference in the standard of building and the quality of building and the sort of money that developers would spend on these buildings if they had a difference between a longer tenure than a shorter tenure? Surely they would be more inclined to spend more money on a more substantial building if they knew they had better tenure. Mr Moore—If we were to take a more laissez-faire approach to the control of our development rights in that way, I think you would see largely the difference between the development of a city like Canberra and the development of a city that went on at almost the same time at the Gold Coast, and whereas we have quite clear control in Canberra over how development occurs, they have less so—they have some and, of course, it is a matter of degree—in the Gold Coast. I think the magnificent city that we have today is largely due to the fact that planners did have control. They had control through being able to control each and every individual piece of land, and that is what will be undermined by this change. Senator LUNDY—Just to clarify something, we have heard from previous witnesses today that in fact the change of use aspect of the leasehold system in the ACT is not actually going to be directly affected by this bill, given it is enabling legislation, but also in the subsequent intention of the ACT government. Is that your understanding? Mr Moore—That is my understanding. It would then go to the ACT assembly, which would have the responsibility of changing the legislation. Senator LUNDY—Indeed. Mr Humphries raised earlier in his presentation a scenario which I would like to explore with you. He implied that there was some insecurity still relating to residential leases in the circumstance where at the precise moment, a coincidence, where a residential lease expired and the land was required for public usage, there would be a risk in fact for that leaseholder in losing, or not obtaining compensation, and that that actual scenario had not been explored in terms of obtaining a legal opinion. Mr Moore, can you provide the committee with your view on what level of insecurity exists for residential leases? Do you believe that the current automatic renewal for the 99-year residential lease is adequate assurance and security for ACT residents? Mr Moore—There is adequate security for ACT residents, there is no question about that, as far as residential leases go. I think it can be improved. Remember, this is still 30 years away. ACT residents will still have to apply for it. To my way of thinking, there is absolutely no need for that, but what we should do is simply have them literally automatically renewed, which means that as they are approached, a stamp is put on the lease that refers to a piece of legislation that we have passed that says, ‘Under the legislation, this lease is automatically renewed for another 99-years.’ Senator LUNDY—So a legislative remedy is available to the government that Mr Humphries is a part of to resolve that remaining ambiguity that he— Mr Moore—Mr Humphries and I have had a number of private discussions on this particular issue, and there is some debate as to whether or not making action automatic for renewal of

RURAL AND REGIONAL AFFAIRS AND TRANSPORT RRA&T 50 SENATE—Legislation Monday, 23 March 1998 a residential lease would require the sort of legislation that is now before the Senate, and that may be the case. We still have 30 years to go before that is necessary. I have seen legal opinions both for and against, saying that that is necessary and, as is always the case, it seems to me that you can get a legal opinion for whichever way you want to argue. It seems to me that there is a very good level of security under the current system, under the current legislation. It could be improved. It may require some change of federal legislation, although I believe it does not. Senator LUNDY—And the same can be said for the renewal of the commercial leases for an administrative fee of $200. Can you provide the committee with your opinion on to what degree any insecurity or ambiguity remains out of that administrative process Mr Moore—I oppose that legislation, but I think there was a significant increase in security. I think it is appalling that we are allowing commercial leases to be renewed for an administrative fee, changed from 50 years to 99 years, because I think there was an opportunity for us to gain significant revenue from this. Businesses that make a purchasing decision on a lease do so over that period of time, just as the business decision has been made to spend $57 million—I think it is $57 million—on a 50-year lease for Canberra airport. The business decision to do that will be a business decision over a 50-year period, and should be seen as separate from the lease. None of these people would allow any of their tenants to change their term of tenancy from 10 years to 15 years without reconsidering how that is going to be handled. Senator LUNDY—And finally, who do you see as the main beneficiaries of this particular piece of proposed legislation, albeit again not this bill, because this is enabling, but in the bill that has been loosely described by the ACT government to date? Mr Moore—If we actually have 999-year leases, those people who own commercial properties at the moment will clearly be the main beneficiaries of this system. Senator LUNDY—And have you put a figure to the loss of revenue that would result? Mr Moore—No. I heard Professor Neutze say how difficult that would be to calculate, but I would think that almost the same arguments would have applied in 1970 when we changed from a rental system to paying a premium system, and we probably said, ‘Well, what will this mean in revenue terms?’ and probably at the time it meant very little in revenue terms. However, we do know that if we had those rentals in place now, rather than having allowed people to change to premiums, the ACT would not have a problem in terms of its revenue raising. We would have a constant rental coming in that would mean that we had no operating loss whatsoever. These are long-term revenue issues. Senator LUNDY—Thank you. CHAIR—Thank you, Mr Moore, for being here with us. Committee adjourned at 12.22 p.m.

RURAL AND REGIONAL AFFAIRS AND TRANSPORT