Frank Newman: Rating Maori land

The collection of rates on Maori land is a problem that local councils have been wrestling with for many years. The problem is a large amount of the rates due on Maori freehold land is never paid - estimated at $65 million nationwide. That's a $65 million hole other ratepayers must fill - otherwise worthy community projects that should happen, don't.

Maori freehold land is land classed as such by the Maori Land Court. It is subject to special rules around how the land can be sold, transferred or passed on to family members. Those rules are intended to retain the ownership of land by Maori.

The way things work with general freehold land is that if a landowner does not pay their rates, council goes through debt collection proceedings and if necessary forces the sale of the property to recover the arrears.

That is not the case for Maori freehold land. A council is prevented by law from selling the land to recover unpaid rates. It must instead go through debt recovery from each of the multiple owners, and it can only demand the rates in proportion to their fractional ownership. This makes recovery impractical.

Where the land is being used, a local authority may attempt to recover the rates from the person using it. I say may because there is no requirement for the owners of the land to disclose who is using it!

Special rules also apply where the Maori freehold land is owned by a trust. In this case the trust only has to pay rates from income it receives from the land - so if it does not receive any income it does not have to pay rates. This is not the case for a trust  owning general freehold land on behalf of multiple owners - income does not matter in the slightest and a council would pursue the trustees for unpaid rates and potentially force the sale of the land.

Papers tabled to the Far North District Council in 2010 say this, "Much Maori freehold land in the Far North is owned by trusts. Land can be used but managed so trusts receive no revenue - no revenue no rates. Occupiers of land owned by trusts cannot be made to pay rates. Trusts can be used by Maori land owners to avoid paying rates."

In practice councils have been going through the farcical process of sending rate demands for Maori freehold land, but not enforcing it. As a consequence every year they write off those rates that have been unpaid for six or more years. In effect, the payment of rates on Maori freehold land has become voluntary.  An example of this in the Whangarei District is a well-to-do family owning Maori freehold land not paying rates despite the property having multiple baches and permanent residences.

Now central government is reviewing that situation.  According to Local Government NZ:

"Cabinet is considering a number of changes to the rating and valuation of Māori freehold land.  These are intended to create a valuation and rating framework that more fairly reflects the social, cultural and general heritage factors associated with Māori land and include:

Providing councils with the discretion to:

•        Non-rate Māori land that is unoccupied and unused.

•        Remove rates arrears on that unoccupied and [un]used Māori land.

Cabinet is also proposing to:

•        Remove the 2ha limit for non-rating of marae and urupa...

•        Develop a new valuation process for Māori land."

In other words, instead of working on solutions to enable the collection of rates on Maori freehold land, the intention is to legalise the non-collection, permit local councils to exempt Maori land from rates, and allow councils to write off the existing arrears immediately rather than wait six years.

The issue regarding a "new valuation process" for Maori land is an interesting one. The Auckland City Council has this to say:

"An adjustment to the council valuation of Māori freehold land is made to align with the 'Mangatu' court [of Appeal] decision...The adjustment to value reflects the difficulty of selling the land due to multiple owners and sites of cultural significance. The guidelines set down by the Valuer-General allow up to a 15% discount to Māori freehold land."

The same concessions should apply to land owners generally, where the circumstances are similar. In a colour-blind society all land owners would be rated equally - where  the rules for rating general freehold land are the same as those for Maori freehold land. That seems more like an ideal than a reality.