Brian Rudman: Founder's great gift may need rethink

The land rent on this property is now more than $70,000 a year. Photo / Greg Bowker

A century on from the Cornwall Park subdivision, sprawling houses on big sections may not be economic.

Call me heartless, but over the years, each time there are flurries of outrage from groups of tenants facing a 21- year land rent review, my first thought is, what did they expect?

Anyone who buys a property on leasehold land should know that there will be a day of reckoning - in the case of the latest round of publicity, the day the Cornwall Park Trust Board writes to its tenants and says it's 21 years since we last reviewed your land rent, it's now time to bring it up to market value.

In a Maungakiekie Ave property featured in these pages a few weeks ago, the owner has abandoned the house after the land rent jumped from $8300 a year to more than $70,000.

Yet the owner admits to knowing in 2005, when they purchased the place for just $450,000, that any day soon the trust board would come knocking. It is a substantial property, sitting on 1297sq m - more than a third of an acre in the old language - alongside Cornwall Park.

You only have to look at how old villas on pocket-handkerchief sections across much of the inner-city have been selling for two to four times that price, to know the signals were clear. That the low price was for a reason. They were buying just the property, not the land below, just a perpetual right to the lease.

It's reported that owners have abandoned eight properties in the area over the past two years, while others have sold for very low prices, one for $70,000. It's hardly fair to blame the trust board. As one expert points out, the 5 per cent lease fee that's now been brought up to a market level can be seen as the equivalent of mortgage interest the buyer would have had to pay if they'd been buying the property at its freehold value. And if Auckland properties continue their historic trends skyward, the $70,000 land rent will still seem like a bargain as the 21-year term of the lease ticks by.

It's the compromise you make when you buy on leasehold land. It enables you to get into a property and location you would not otherwise be able to afford. The downside for New Zealanders who see property as an investment is that by fast-tracking your road up-market, you forgo any hope of the capital gain Aucklanders have come to expect from residential property.

The Cornwall Park Trust Board is a registered charity which owns the park, along with 23.4ha of surrounding land gifted to it by Auckland's founding father, Sir John Logan Campbell. The residential land was subdivided from 1910 to 1923 into 110 sections to provide leasehold income to pay for the upkeep of the park.

Cornwall Park director Michael Ayrton says he's concerned about the abandoned homes and the financial pressure some are facing, and says the board is "actively looking at options for addressing these issues".

One obvious solution would be the better use of the valuable land the trust owns, nestling as it does alongside Auckland's premier parkland. As the Auckland Plan advocates, the city needs to intensify by accommodating more people within the existing city. What a perfect place to begin.

One sprawling bungalow on a third of an acre is hardly a good and economic use of land, especially in such a bucolic setting. Particularly not for the trust board, which faces no income from it, and the other abandoned properties.

One suspects there might be other lessees who would be interested in escaping the new land rents as well if a development plan was put forward. Some might be keen to retain their leases, and join in a co-ordinated redevelopment of the park edge. One which would create a new terraced or town house environment, worthy of its wonderful setting.

Maintaining an adequate flow of money into the trust board to ensure the upkeep of Cornwall Park is vitally important. The poor condition of our other volcanic reserves is warning enough that leaving it to the local politicians would be a disaster. Sir John Logan Campbell, a former mayor, was obviously aware of that when he gifted the property.

Now seems a good time to make the trust land work harder.