Land Matters with Alan Mcneil: Land Rent

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By ALAN MCNEIL, Commissioner of Lands

Everyone who holds a Fixed Term Estate or a registered Lease is required to pay annual land rent.

In this article I explain more about these fees, how they are calculated and their importance.

When a Fixed Term Estate or Lease is purchased, it usually comes with a Premium price and an ongoing annual rental payment.

The way in which these fees are calculated varies according to the situation.

The fees attached to the lease of a parcel from a Solomon Islander who owns the Perpetual Estate to another party will depend upon the negotiations between those two parties, and they may refer to a land valuation as the basis to determine Premium and land rent.

Where the Perpetual Estate is owned by the Commissioner of Lands on behalf of the Solomon Islands Government, the Land Board has an established policy that guides the calculation of the Premium and land rent.

The policy states that the Premium is calculated as 10 per cent of the unimproved value of the land, except for churches, schools and non-government organisations in which case the Premium is 2 per cent of the unimproved value of the land.

The land rent is then calculated as 10 per cent of the Premium, meaning that for most cases the amount to pay each year is 1 per cent of the unimproved value of the land.

There may be special circumstances where the Land Board departs from the standard calculations, and these cases are recorded in the Board’s Minutes which are publicly available on the Ministry of Lands website.

It may seem like a bargain that rights over government land can be obtained at an initial up-front price (Premium) of just 10 per cent of the actual land value, but consider the fact that there is an ongoing annual Land Rent to pay.

After 90 years the full land value would finally have been paid, i.e. 10 per cent as premium plus 1 per cent multiplied by 90 years for land rent.

Fixed Term Estates issued in the last few years though only run for 75 years, after which the Fixed Term Estate holder would need to apply for a “renewal” of the Fixed Term Estate and a new Premium and annual land rent will be calculated and be payable at that time.

So, a Fixed Term Estate owner keeps paying for the rights over the land over and over again, but with reduced and stretched-out fees.

Unlike Council rates, no services are rendered in return for the payment of land rent.

It is simply a way of spreading the cost of buying the rights over a parcel of land over time, so that the initial price (Premium) is not such a large financial burden, and the price is spread out over time in the form of annual payments.

Rents can however be revised over time, either in accordance with conditions in a lease agreement that allow for increases over time, or in the case of Fixed Term Estates, to match updates in the Valuation Roll maintained by the Valuer General.

Lessees and Fixed Term Estate holders must remember to pay their land rents annually, otherwise they face the real prospect of having their Lease or Fixed Term Estate forfeited.

The Ministry of Lands does not mail out statements each year, and it is incumbent on the Fixed Term Estate holder to be proactive and come forward to pay the land rent each year.

If you don’t know your annual land rent figure or if you have lost track of when you last paid the land rent, please visit the Ministry of Lands customer service section to obtain a statement.

Land rent payments can be accepted at the cashier’s office adjacent to customer services.