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Can you buy land in the ACT?

By birder - 17 October 2012 17

This is going to sounds like a dumb question. But I’ve been told that if you purchase a house in the ACT, you don’t actually own the land – you will get something like a 100-year lease from the ACT government. However, if this is true, I don’t understand the land rent program, in which you can rent the land from the ACT government and at any time purchase the land from them. See here.

If you don’t actually own the land when you buy a house, then what do you get if you are in the land rent program and then decide to buy the land from the government? And if you can’t actually own land in the ACT, why would anyone buy here? Why not go to NSW where you actually own the land you live on?

Thanks for any help you can give me in clearing this up. We are from the US (via a 3-year stint in New Zealand) and the idea of paying the exorbitant prices for houses in the ACT, without actually owning the land that it’s on, is hard to understand.

What’s Your opinion?


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17 Responses to
Can you buy land in the ACT?
BobGrrl 1:17 pm 18 Oct 12

When I bought earlier this year, my conveyancer had paperwork regarding when the Crown lease was due to expire. I don’t know if this is a standard requirement of the sale/purchase process, but you could certainly ask about it at the time. That way you know whether you’d potentially have to deal with the lease ending while you ‘own’ the place.

allyroger 12:55 pm 18 Oct 12

a little off topic, but I didn’t find this out until recently. Due to the leasehold system in the ACT, if you purchase an investment property (ie rent it out), the stamp duty paid can be claimed as a tax deduction.

birder 12:16 pm 18 Oct 12

This is EXTREMELY helpful – thank you very much! As a comparison, in the US, you do actually own the land. The government can “take” it, reimbursing you fair value, but it’s not particularly easy for the government to do. However, it sounds as though within the ACT, the government is not particularly interested in saying to people who’ve built houses, “sorry, your lease is up, please move your house elsewhere.”

Leo61 10:46 am 18 Oct 12

The Land Rent Scheme works well for those having difficulty raising a deposit to cover land and house but the only negative I have experienced is that very few lenders will finance the build if you choose the Land Rent option. The information sessions do advise which lenders are happy to participate.

pezza 5:21 pm 17 Oct 12

I highly recommend going along to the Land Rent information session if at all possible. It’s free, but does go for a couple of hours, and you must have attended to buy under the land rent scheme.

The main purpose of it is to reduce the amount of up-front capital you need to buy a home. Basically you own the land but have a low-interest, interest-only loan from the Government with no up front deposit required. Then you just need your deposit for the house (as opposed to house and land). As you can buy the land at any time (at the current unimproved value), once you’re into the home and established, you can refinance and buy the land as well.

It’s definitely not for everyone, but saving a 10% deposit for $550,000 home while renting is damn hard, no matter what money you’re on.

Dante 3:34 pm 17 Oct 12

All land in the ACT is Crown (Commonwealth) land. All of it is leased from the Crown to leaseholders.

Leaseholders used to pay rent on their land up until the early 70s. The idea was that individuals shouldn’t be able to profit from their land which is increasing in value as a result of the Federal Government’s financial outlays, and because they pay ‘rent’ that increases as the value of their land increases, the Government continues to profit.

From my understanding, leaseholders that have reached the end of their lease are offered another lease at the same terms. The inference that you don’t own the land is a bit of a furphy… you might not technically own it, but you’ll pay rates on it, and for all intents and purposes you’re treated as if you own it.

The concept of “owning” land anywhere is a bit of a laugh to be honest.

poetix 3:13 pm 17 Oct 12

You are quite right, we only seem to own the land. But the seeming is good enough for most of us, being simple and trusting types, unlike the hard-headed New Zealand folk.

I don’t understand the specific land rent program at all.

Grrrr 3:10 pm 17 Oct 12

Buy or lease – it amounts to about the same thing. As I understand it, the lease just makes it slightly easier for the Government to get the land back from you if they decide they really want it.

This is a) unlikely to happen and b) can happen to “buyers” of the land in other states anyway.

watto23 3:02 pm 17 Oct 12

For all intents and purposes you do own the land. Thius article highlights the reasons for the 99 year leasehold plan.
http://www.prosper.org.au/2008/01/16/canberra/

I think I spotted in there something from the mid 90’s reducing the fee to renew the 99yr lease to 0% instead of the 10% originally proposed.

Other states in Australia have a perpetual lease. Not sure if you ever “own” the land. Maybe some states you do…

In Canberra you buy the land for $XXX,000 and then build on top. The Land Rent scheme, allows you to not pay the large sum of money for the land up front and rent that land for a smaller monthly rate/fee. The scheme had issues with lenders willing to provide finance for it and insurers willing to insure. I think its still limited.

Pedrose 3:01 pm 17 Oct 12

The 99 year lease is correct. A land rent lease is something entirely different.

99 year leases are effectively freehold leases, if such a thing exists in Australia. As the territory is 100 next year, leases will be coming up due and it is expected that the government will just sign off on them all again.

A land rent lease means you commit to pay rent to the government for such time until you convert the lease to a standard lease i.e. 99 year lease. With land rent leases, you still get title, and are subject to most of the privileges standard leaseholders are allowed in terms of land use.

Land rent is hard to get your head around, and you are required to attend a CIT course on the topic before you sign a land rent lease.

Also, vacant land is hard to find in the ACT, as the government only releases it in dribs and drabs. And coming from the U.S, you would find our blocks tiny.

Keijidosha 2:57 pm 17 Oct 12

The terms you need to research are ‘leasehold’ and ‘freehold’. Land within the ACT is ‘leasehold’ for a term of 99 years.

bd84 2:57 pm 17 Oct 12

When you buy property in the ACT, you are provided a 99 year crown lease over the land. The “lease” has a peppercorn rent of $1/year (from memory) and it effectively allows you to own/control the land and do whatever you want with it (within regulations), including selling. At the end of the 99 years, it will be renewed for another 99 years.. Given that Canberra is 99 now, I’d assume that there would be only a very small number of pieces of land that are remotely close to the 99 years.

With the land rent scheme, you are also provided with a “land rent” crown lease, which is essentially the same as a normal one, except that it has additional terms and conditions stating that you need to pay rent on the land above the usual $1, being the 2% or 4% of the land’s values and that you need to pay it or they can take it from you. Other than that, your legal rights over the land are pretty much the same as normal land. It’s just more complicated with the mortgage arrangements of the land and property between the bank and government if you fail to make payments. You also need to repay the market value of the land to exit the scheme and stop paying rent or when the house is sold, the new owners will need to buy out the land or assume responsibility for making land rent payments.

enrique 2:49 pm 17 Oct 12

Opening up a can of worms with this one…

(grabs popcorn)

mezza76 2:39 pm 17 Oct 12

It’s not just confusing to you… but all said and done – the land tenure is much the same in practice as other States – you have a property right on the lease and should the ACT Government remove your lease, you would be entitled to fair and just compensation under the Constitution.

This webpage sets out pretty much the deal on ACT leases.
http://www.actpla.act.gov.au/topics/property_purchases/leases_licenses/leasehold

I’ve never heard of anyone not having their leases not renewed but that’s largely because developed in the ACT did not really occur until about 1924.

A bit of a history is here to help you get the vibe of leases and why they exist.
http://www.prosper.org.au/2008/01/16/canberra/

I dont begin to understand the land rent program. It looks like someone rents the land at a annual rate – without the need for upfront costs and then can build a house on it. My concern would be that the ability to sell and capture any capital gains (the real reason anyone would buy land/houses) is severely curtailed – consigning low income earners to forever not owning their own house/land. But again, I dont really know the score on this.

pirate_taco 2:19 pm 17 Oct 12

Leasehold is a system of land tenure. You buy the right to use land under a lease for a term of 99 years. In every practical way, though, you build your house and own it just as you would anywhere else in Australia.

Provided that the land is not required by either the Territory or Commonwealth, the Territory will grant a new residential lease towards the end of the 99 years, to the person holding the old residential lease, without payment (other than an administrative fee)

Source: http://www.actpla.act.gov.au/topics/property_purchases/leases_licenses/leasehold

Glen Takkenberg
Pirate Party ACT for Ginninderra

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