What Are Improvement Conditions on a State Lease?

A State lease is not simply a purchase of time on land. It is a bargain: the State grants the land at a prescribed rent, and the lessee undertakes to develop it. Improvement conditions are that undertaking, and they are enforceable.

Where improvement conditions come from

Three sources in the Land Act 1996:

• Section 82(2) — in addition to such reservations, covenants and improvement and other conditions as are prescribed, a State lease shall contain such other reservations, covenants and conditions as the Minister considers proper. This is the general source, and it applies to every lease type.
• Section 88 — an agricultural lease shall contain conditions prescribing the minimum improvements to be carried out by the lessee. Mandatory.
• Section 90 — a pastoral lease shall contain conditions as to the minimum stocking required. The pastoral equivalent, also mandatory.

For urban development leases the equivalent obligations are the development covenants in section 108 and the twelve-month planning deadline in section 109.

Section 81 — when the clock starts

What improvement conditions typically require

The detail is in your lease document, not in the Act. Conditions commonly specify:

• What must be done — buildings of a stated type, clearing, planting, fencing, water supply, access;
• To what standard or value — often a minimum expenditure figure, or a minimum area planted, or a minimum number of stock;
• By when — a period running from the section 81 date; and
• Continuing obligations — for example maintaining the improvements, and, where you have not yet paid for pre-existing improvements, insuring them under section 85 and maintaining them in good order and condition under section 86.

What happens if you do not comply

Failure to comply with a condition of the lease is a ground of forfeiture under Part XV. In practice, unsatisfied improvement conditions are the most common reason State leases are forfeited — particularly agricultural and pastoral leases held speculatively at low rent without being developed.

Forfeiture is preceded by a notice to show cause, and the Act also allows a fine to be imposed instead of forfeiture in appropriate cases.

Proving compliance

Compliance is a question of fact, and in practice the lessee has to satisfy the Department. Keep, from the beginning:

1. Dated photographs of the land before work started and at each stage;
2. Invoices, receipts and contracts for materials, contractors, plant and stock — these evidence expenditure figures;
3. Records of area cleared and planted, and for pastoral leases muster and stock records;
4. Survey and building approvals, and any certificates of occupancy;
5. Correspondence with the Department, including any inspection reports; and
6. Evidence of anything outside your control that delayed the work — weather, access disputes, supply failures, a collapse in the market for the crop.

The last category is what supports an application for relief.

If you cannot meet the conditions in time

Do not wait for a notice to show cause. Two provisions are available, and both are exercised on the lessee’s application, after a Land Board report:

• Section 118(2) — the covenants and conditions of a State lease may be relaxed or modified by the Minister where it seems to him that special hardship would otherwise be caused. Relaxation and modification do not require your agreement; variation does. See relaxation of lease conditions.
• Section 118(1) — where the difficulty is that the intended use has changed rather than been delayed, apply to vary the purpose, within the two statutory limits.

Separately, section 83(5) allows the Minister, for any special reason and on the lessee’s application, to remit or postpone rent in whole or in part — useful where the same difficulty has produced arrears as well as unfinished improvements.

Improvements at the end of the term

Improvement conditions and payment for improvements are two different things. The conditions oblige you to build; section 119 determines whether you are paid for what you built when the lease expires — and it turns on whether you applied for a further lease. A lessee who complies fully with the improvement conditions and then simply lets the lease run out without applying receives nothing under section 119, though severable improvements may be removed.