Page 1052 - Week 04 - Tuesday, 6 May 2014
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the government’s changes to the extension of time system as announced. It makes a number of important changes and shows that the government has listened and responded to industry concerns. The reforms will reduce the burden of accrued debts and remove complex fee structures but also encourage the timely completion of developments.
There has been a lot of debate around extension of time fees. It is important to note that the system and fee structure are an integral part of the territory’s leasehold land tenure system. Commence and complete provisions have been in place in the ACT since well before self-government and, as I say, have always been an integral part of the land administration system. Crown leases issued by the territory have included both a commencement and a completion clause, which provides a time frame for lessees to adhere to in the development of their blocks.
The provisions are, of course, a mechanism to encourage development in a timely manner. Those lessees who breach the time frame set out in their crown lease are required to extend the time frames and required to pay a fee to do so. This is known as the extension of time fee, which is set out in the 2008 Planning and Development Regulation. The territory uses the EOT fee as the primary mechanism to discourage land banking and to encourage timely development. There is no doubt that there is a very high community expectation that leaseholders develop their properties in a timely way. We can all recall, over the years, numerous motions on private members’ day raising issues around timely development, most particularly of commercial leases but from time to time of residential leases.
Extension of time fees are only required to be paid by those who do not develop within the required time frames. There are many leaseholders who have never had to pay extension of time fees or who only pay modest fees because of the arrangements they have put in place.
A number of industry groups have argued that a developer would not land bank because it is not in their financial interests to hold valuable land assets. To the extent that the developers do not hold on to undeveloped land, no EOT fees apply. At present, land is a scarce resource in the territory, and it is going to become increasingly scarce in the future. It is important that appropriate mechanisms are in place to address the potential for land banking but also to ensure that there are adequate incentives for timely development in the city.
Residential crown leases typically require lessees to commence development within 12 months and to complete development within 24 months of the commencement date of the lease. Extension of time fees become applicable once these time frames are exceeded and are calculated at a multiple of the lessee’s general rates for every year of breach. In 2012 the previous one to five multiple structure was abolished and replaced with effectively an additional four years after the breach of the crown lease where no charge was payable. On the fifth year after the breach, so potentially seven years after a particular development was meant to be complete, a fee of five times the lessee’s general rates applied in each year. This escalating fee structure has seen the build-up of fees for some developments in the territory. The government’s reforms in this bill will simplify the system and significantly reduce the EOT fees payable by lessees.
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