No. 13 Land tenure may appear simple - but beware the issues
NZFFA Information leaflet No. 13 (2005).
Land tenure essentially means ownership or occupancy rights in respect of land. This tenure can take many forms from simple, such as outright ownership of the land and everything on it, to more complex, like ownership of trees with implicit access rights, Crown forestry licences and forestry rights.
While outright ownership of the land and everything on it is the most straightforward form of forestry ownership, issues can still arise. Legal access is not always practical which means access arrangements have to be sorted out with neighbours. Other problems can arise when trees are not planted within legal boundaries, and don’t forget resource management constraints – they apply regardless of the form of land tenure. Furthermore, if a lease is not requested, it is possible for bonafide third parties to obtain an interest in the land and trees.
More than one person can, of course, have ownership of a piece of land. This gives rise to issues of how different interests are to be dealt with should death or other circumstances require that a party’s interest be dealt with in isolation.
It is common for the land and trees to be owned by different parties. Usually in these circumstances, there is a lease, Crown forestry licence, forestry right or some other form of written legal arrangement in place. It is also possible to obtain a separate certificate of title for trees in the same way as it is possible to obtain one for minerals such as coal.
Cutting rights are a generic term often used in the industry to describe a range of relationships. If you exclude forestry rights granted under the Act, these relationships are often only contractual in nature. For example, they may simply be the right to come on to land for the purpose of harvesting existing mature trees. At the other end of the spectrum, they can be directly analogous with a forestry right granted under the Act in that they contain the usual rights to plant, maintain and harvest.
Again, there are issues as to when ownership of the trees actually passes and, if payment is to be made in advance, as is often the case in these circumstances, particular care needs to be taken to deal with that and other risks such as damage to crops.
The issue of a certificate of title can secure absolute ownership of trees providing any regulatory consents are obtained. This is not, however, done very often and still requires collateral agreements dealing with issues such as access over other land, replanting issues, payment for use of the land and management of the crop if payment is related to stumpage.
Leases and forestry rights granted under the Forestry Rights Registration Act 1983 are two of the most frequent ways in which tree-growing arrangements using someone else’s land are entered into.
Maori Land Court consent may be required for the granting of interests in Maori land. Territorial Authority consent may also be required for the granting of a lease depending on its terms and whether or not it relates to all the land in a certificate of title. The use of forestry rights granted under the Act can simplify the process and avoid the need to incur survey expenses if the lease is to be registered. If a lease or other occupation arrangement is not registered it is possible for other parties to obtain an interest in the land and/or trees. Furthermore, the proper creation and documentation of these rights is extremely important as the general law is ‘that which is attached to the land is part of the land’. Protecting the rights of the ‘owner of the trees’ is therefore an issue.
Leases and forestry rights granted under the Act offer protections which contractual licences such as cutting rights (a term often used interchangeably with forestry rights) do not. For example, they give the forest owner an interest in the underlying land and consequently the trees. If a simple contract is terminated, the forest owner will be treated like any other unsecured creditor of the land owner.
Even with leases and forestry rights, actual legal ownership of the trees may not pass until they are harvested. Care should be taken when preparing these documents and efforts made to protect the forest owner’s rights should the landowner get into financial difficulties.
The other type of interest is a Crown Forestry Licence or CFL issued under the Crown Forests Assets Act. These are granted by the Crown in respect of former Crown forests sold to the private sector. They contain detailed provisions relating to the rental payable for the land occupied and termination in the event that the underlying land is returned to Maori. Because Crown Forestry Licences are in the main held by large public investors it is not proposed to go into them in any detail here.
Although land tenure and its many forms may appear to be complex, it is a vital part of the forest industry. Whether you are a small private forester or a major international player, land tenure is an important part of forestry production.
The key is deciding what land tenure arrangement is best for you and how to go about implementing it.
This article by Jeff Morrison, a property partner in Russell McVeagh, appeared in the November 1999 issue of the New Zealand Tree Grower.