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Property resource rights not automatic

By Hans van der Wal, Associate

First published in The Press, 23 July 2008

When buying a property, as long as you’ve signed the right contracts and the land’s been transferred to you, you get the whole property – with all the necessary resource consents. Right?

Wrong. Enter the Resource Management Act 1991, with its various consents. If you buy land needing irrigation water, you cannot take the water unless you hold or are authorised to use a water permit.  If you buy a boat shed or a coastal property with a jetty, they’re not yours until you have a coastal permit.

All are types of resource consents that do not merely become yours because money has changed hands or title has been registered in your name. Unlike city or district council consents which pass with the land, with these consents, a formal transfer needs to be lodged with the Regional Council. If no consent exists, that Council, which doesn’t own any of the resources itself, has to decide whether to allocate the resource to you through the consent process. This is irrespective of whether there is someone else out there, who could make better or more efficient use of it.

Once you have your consent, you clearly have something valuable. Ask any prospective dairy farmer whether he or she would pay more for land with or without a water permit and the answer becomes clear. There is even a water trading website, where those with excess “allocated” water can arrange for it to be transferred, at a cost of course, to one without that resource. Try and get a marine farmer to transfer his/her coastal occupation permit to you and you will find you also need to part with a lot of money.

The RMA says that a resource consent is not property but, in practice, it’s hard to get an accurate line on this view. The High Court, in the Aoraki Water Trust decision, said a consent is an economic right, like a licence. In another High Court case, this time involving the Public Trust, the Court allowed a coastal permit to pass as if it was property. All of these valuable assets, that councils have to allocate, are effectively de facto property rights in the water, sand, gravel, sea space, etc. However, because consents are under the RMA, the protections and assurances of property rights we have come to expect in normal property law do not apply.  A couple of illustrations from recent experience follow.

A couple bought a lifestyle block “with water rights” some years ago, but on transfer of the land, the water permit was not transferred to them. After several years they found out that the previous owner, who was the permit holder, had surrendered (cancelled) it. Because the permit, unlike all the other property rights they bought, did not pass to the new owner with the land, they were effectively left without water. Only after expensive proceedings was a resolution reached.

In another instance, a prospective dairy farmer bought land “with water rights”. When he tried to change the use from crop to dairy pasture, he was told this could not be done, because the bore was in the wrong spot – despite five years worth of fully compliant monitoring reports from the Council. Again, he had no recourse in terms of the property rights he thought he had bought and had to apply to the Council to have the bore location changed - at his own cost.

While, of course, it is right for a consent to be required before activities that may have significant environmental effects occur, like building a marine farm, or taking water from a river, the RMA does not stop at the effects, but also hands out property rights. In other Commonwealth countries, many of those rights are dealt with under leases or licences and the environmental effects are separated out in another process.

The New Zealand approach seems unlikely to change soon. The upshot is that we have to be live with the unique problems that arise from trying to drive the square property rights peg into the round resource consent hole.

In practical terms that means making sure that before you buy, you know what rights you can get through the purchase – be they rights to build, to take water discharge sewage, or any other “consented” or “permitted” right. Further, when the land is transferred, make sure you have done everything you need to do to have yourself recorded and recognised by the appropriate Council as the rightful holder of those consents and rights.  In the interim, watch the Courts for more complex resource consent property rights cases.