Leasehold or freehold – What is the difference?
Agricultural property can be held by landowners a few different ways. It’s important for those landowners or those wanting to become landowners to know the differences and their rights and obligations.
The occupation of land in Queensland may be defined under two broad tenure headings:-
1. Freehold, and
2. Leasehold.
Freehold Land (or fee simple) provides people with the most complete form of ownership of that land, in perpetuity (forever). It allows the land holder to deal with the land however they want (providing it is allowed under the existing Planning and Environment Laws). An owner of Freehold land can sell it, lease it, licence it out or mortgage it. Though their ownership to the land is not absolute as the State retains the power to withhold certain rights, such as the right to any minerals or petroleum found under the land.
Leasehold Land is land under the control of the State of Queensland which may be subject to a lease, licence or permit granted to a person/corporation, reserved for a community purpose, dedicated as a road or subject to no tenure at all.
Leasing Unallocated State Land
Unallocated State land may be made available for people to lease by either auction, tender, ballot or in priority.
Before the land may be allocated, the land must be evaluated to assess its most appropriate tenure and use. The evaluation must take account of State, regional and local government planning strategies and policies, as well as the object of the Land Act.
Leases are granted for a purpose, for example business, grazing, tourism, residential development and pastoral activities.
Although a lease is issued for a primary purpose, the Minister has the power to approve the conduct of additional or fewer uses on the subject land for the term of the lease, provided any amendments complement the original purpose.
The Minister may also make a lease subject to conditions it considers appropriate.
Different types of leasehold tenure:
On a basic level, there are 4 different types of leasehold land, namely -
A Term Lease - granted for between 1 to 100 years;
A Perpetual Lease - held by the leaseholder in perpetuity (forever);
A Road Licence - when a road has been temporarily closed, allowing the licensee to use the land until such time as the licence is surrendered or cancelled, and
A Permit to Occupy - for short-term occupation of State controlled land. This tenure cannot be sold, sub-let or mortgaged.
1. Term Leases
A term lease is a tenure issued for a specific purpose (e.g. agricultural or commercial) for a term of years over State land.
These leases ‘expire’ at the end of the last day of the lease term, whereby the landholder loses possession of the land. Unless otherwise stated in the conditions of the lease, any improvements on the land become the property of the State on expiry of the lease.
The maximum term of the term lease is 50 years, except for:
State leases over reserves, which have a maximum term of 30 years, or
a lease for a significant development or timber plantation, which may be granted for 100 years.
2. Perpetual Leases
A perpetual lease is an ongoing tenure issued for a specific purpose (e.g. agricultural or commercial) over state land in accordance with the Land Act.
Because perpetual leases do not expire, they have a level of security equivalent to that of freehold.
3. Road Licences
A road licence is the tenure granted for the use of a road which has been temporarily closed. A road licence provides a right to exclusive occupation of the road within the conditions of the licence but only while the rent continues to be paid. Titles Queensland may however, after giving reasonable notice to the licensee, cancel the licence at any time with no compensation.
The Minister may issue a road licence over a temporarily closed road to an adjoining owner.
All licences are subject to the following conditions:
• There is no covenant, agreement or condition to renew the licence, convert it to another form of tenure or to sell the land.
• No structural improvements other than fencing, pipes or channels across the road are permitted.
• If adjoining land held by the licensee is sold, the licence must also be sold or surrendered.
• A road licence cannot be mortgaged, subleased or subdivided. However it may be transferred with the consent of Titles Queesnland.
4. Permit to Occupy
A permit to occupy is a permission to occupy or use a specified parcel of unallocated state land, reserve or road. It cannot be issued over freehold or leasehold land.
A permit to occupy is not an interest in the land (such as a lease) as it does not allow for exclusive possession of the land and cannot be transferred, sublet or mortgaged.
A permit to occupy is issued for a specific purpose for minor or temporary matters including:
grazing
pump sites, or
apiary sites (beehives).
As a Permit to Occupy is for uses of a minor nature, no major structural improvements, other than boundary fencing, are allowed. In addition, the reason for occupation must be one that can co-exist with the purpose for which the land has been set aside (e.g. use as a road, stock route or reserve). Ie - If a permit is granted over a part of a road, the area remains open for use as a road. If the permit is over a reserve, the land remains available for the particular community purpose it was reserved for.
The person, to whom a permit has been issued, may surrender a permit, and Titles Queensland can cancel a permit. If a permit is cancelled or surrendered, any improvements to the area become the property of the State and no compensation is payable. However, the person to whom the permit was issued may be allowed to remove improvements.
The above briefly describes the most common types of leasehold land/licences available in Queensland.
Next article we will discuss what a leaseholder’s rights and obligations are while occupying leasehold land or a licenced area and whether or not they can apply to Freehold it.
When dealing with property, you should always engage an experienced property lawyer to guide you through any land dealings – contact our team today.
The content of this column is to provide a general guide on this topic. Professional advice should be sought about your specific circumstances.