Background - Concessional leases

The Australian Capital Territory (ACT) is the only Australian jurisdiction where Crown leasehold land tenure is the primary form of tenure.  Under the Crown leasehold system, land remains the property of the Commonwealth of Australia and is managed by the ACT Government on behalf of the Commonwealth.  

Land may be leased from the ACT for various purposes.  

A concessional lease is a lease granted by the ACT for less than market value, usually on the expectation that the lessee will provide a community benefit to the ACT, in return for obtaining the lease discount.

Given the beneficial nature of their terms, concessional leases usually include very restrictive purpose clauses that severely limit commercial activity on the land.

Exception to indefeasibility

Indefeasibility is a key concept in the operation of the Torrens property system throughout Australia.  

Until recently the Planning and Development Act 2007 (ACT) (Act) provided an exception to indefeasibility arising from some dealings with concessional leases in the ACT.  

In particular, section 265(2) of the Act states that any dealing in a concessional lease without consent from the relevant authority had no effect.  The purpose of this section is to prevent concessional leases being transferred to entities which are not able to use the land for the limited purposes permitted under the concessional lease.

This concept, however, is in direct conflict with section 58 of the Land Titles Act 1925 (ACT) which states that the holder of a certificate of title registered in the ACT Register of Land Titles has valid title that is paramount over other interests.

Confirmation of indefeasibility

In NSW the primacy of the legislative concept of indefeasibility was recently confirmed by the NSW Court of Appeal in Koompahtoo Local Aboriginal Land Council v KLACL Property Investments Pty Limited & Ors1.

That decision confirmed that registration of a dealing in the NSW Register of Land Titles is valid and effective despite contravention of legislation other than the Real Property Act 1900 (NSW).

Although not determinative in the ACT, the decision in Koompahtoo cast doubt over the effective application of  section 265(2) of the Act, where a dealing in a concessional lease is registered at the ACT Register of Land Titles in contravention of the consent requirements under the Act.

In response to the decision in Koompahtoo and the uncertainty created by the existing legislative conflict, the Act has been amended by the Planning and Development (Concessional Leases) Amendment Act 2010 (ACT). A new section 265(3) has been introduced which makes it clear that the indefeasibility principle stated in Koompahtoo applies in relation to concessional leases in the ACT.  

Accordingly, section 265(2) no longer applies to any dealings registered in the ACT Register of Land Titles in conformity with the requirements of the Land Titles Act 1925 (ACT).

The Act has also been amended to:

  • make it easier to identity whether a particular lease is concessional; and
  • introduce a new category of lease in addition to concessional and market value leases called "possibly concessional" in order to warn a person that the lease might be concessional and to encourage proper due diligence.

Please do not hesitate to contact the writers if you have concerns regarding the use of concessional leases in the ACT.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Footnotes

1 [2008] NSWCA 6