Post-earthquake, Christchurch landowners run roughshod over by the Crown

Ben Kepes
The Litchfield St building co-owned by Mr Kepes, pre-demolition

GUEST COMMENT

When the blueprint for the future Christchurch was announced with great fanfare by Gerry Brownlee, the minister of all things ground shaking, back in August, much made of the fact there were a handful of key projects of strategic importance in the rebuild.

These projects included the convention center, the stadium, the sports center etc.

Zoned for acquisition
We have the dubious distinction that our commercial property (read it’s sorry tale here) is situated within the precinct penciled down for the new stadium.

We resigned ourselves to the fact that our land would be lost to us, but were buoyed by the stated intention to quickly and fairly manage the land acquisition process and were happy that the body tasked with managing the process, CCDU (Christchurch Central Development Unit), was making comments about potential land swaps for effected parties. We dutifully gave CCDU all the required information about our property within the week of the announcement of the blueprint. And then we waited. And waited.

It’s taken three months and this week we received notification that the Crown has obtained a valuation on our land and that valuation would mark the starting point for a negotiation about land purchase. We raised the potential of a land swap and where told that there was virtually zero chance of this occurring and the mention of this when the blueprint announced was something of a “pipedream”.

Low-ball offer
First some context. Our land has a Government valuation of $480 per square meter. This dates back to 2007 and obviously in the years since, land prices have appreciated markedly. Add to this the fact that immediately following the announcement of the blueprint, and the fact that it included a huge reduction in buildable land, that basic economics created a reduced supply/increased demand loop and that land prices have risen correspondingly. Therefore one would expect that valuations would take this into account, and that the price offered would, to a greater or lesser extent, allow landowners to replace their lost land with something comparable.

Alas not, the Crown’s assessment, based on a allegedly thorough valuation, was set at $433 per meter - less than the value back in 2007. Far less than the price for comparable properties selling in the current market and, most importantly, less than we’re going to have to spend to get a replacement piece of land anywhere similar.

Secretive response
But here’s where it gets interesting. The Crown contracted valuers Colliers and Telfer Young to perform all the valuations. As would be expected, we requested from CCDU’s agent a copy of the valuation. Strangely we were told that:

Unfortunately we are not allowed to hand out the Crown valuations. The reasoning behind this is that we have made an offer at market value (based on the Crowns valuation) and it is up to the property owners to provide evidence contrary to that of the crown if they disagree

This is highly unusual – in usual negotiations, be they rental or buy and sell ones, both parties have access to valuations and hence negotiations can happen in an open and transparent manner. In this case that is not the process and the Crown, despite its stated intention to act fairly, honorably and flexibly with landowners, would seem to be taking the role of commercially-driven land banker, while at the same time sheltering under the protection of an unprecedented piece of legislation which puts all the power in their hands.

I discussed this fact with some independent valuers working in the Christchurch market and was told that the rumor among them was that the independent valuations the Crown has obtained are actually higher than the offers being presented, and that the Crown is going in with low offers to give itself some negotiating room. No one would go on-record saying this, people are shaking in fear at the power that CCDU and CERA are wielding in this city. What we have here then is a situation where the crown is demonstrably acting in a prejudicial manner that is designed to minimize the amount they have to pay for land. In other words, the Crown is using subterfuge to duplicitously rob land owners of fair value for their land, and in doing so, is furthering its intention to make an economic windfall from the future sale of acquired land.

There’s another aspect to all of this and that is the suggestion that the Crown is intending to acquire land, ostensibly with the aim of most effectively ensuring the consistent and coherent rebuild of the city but that in fact it is finding ways to roll up land at an artificially deflated price and to later sell that land at inflated prices.

Under the terms of the Public Works Act, affected landowners must be offered first right of refusal to re-acquire the land should the stated project go ahead. There is no clarity as to whether this will occur in this event – CCDU has been largely silent on this first-right of refusal in the event that the stated projects don’t occur and this increases the perception amongst landowners that this is an opportunistic way for the Crown to profit at the expense of those in Christchurch who have already suffered so much over the past couple of years.

Alas, yet again, it would seem that something is rotten in the state of Christchurch.

Ben Kepes blogs at Diversity.net.nz

 

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24 Comments & Questions

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I have followed your case since the beginning and I regret that you are now one of the thousands of true victims in NZ of the duplicitous methods used by the government under the guise and method of the public works act. I am a victim of old and I can promise you I have never found a single person who has endured the process with a kind word to say. Maurice Williamson a few years ago huffed and puffed a bit and then strangely went all quiet. The rumours you are hearing will be true. Further you will find the bureaucrats will be enjoying the sport of negotiation justified in their own minds they are saving taxpayers money yet will be boasting how they shafted adjoining property owners. Its a fact I promise you. NZ might be the worlds great socialist empire with all things fair but until we get to a point whereby private property owners suffering theft of land by the state have to be compensated with extreme generosity (such as in France) for having their rights trampled on. Then the state will do anything it cares without a second thought.

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This is rather one-sided. You don't mention insurance. Christchurch was massively over-insured and the majority of commercial property owners will come out a long way ahead. For some the revenue from the Crown is pure windfall gain. Secondly, since when has one party to a commercial transaction had to hand over all its valuation documents? Never, especially not in property transactions. Thirdly, there are ways to challenge the valuation, and the valuers - some of whom I know personally - are receptive to this. Lastly, of course the Crown is not going to disclose exactly what it's prepared to pay for a private asset, otherwise people like you will take them to the cleaners. I for one would rather my tax dollars were used fairly but sensibly.

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You think it's sensible for the govt to compulsorily acquire vast tracks of land, in many cases destroy function buildings, some brand new, built since the earthquake, displace functioning businesses, so they can grass over parts of the centre of a city. All with taxpayer money?

Seems like an utterly insane, counter productive use of tax dollars to me.
Certainly doesn't aid the recovery of ChCh, infact, it hinders it, big time.

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Yes I do Layton think it is sensible for the Government to compulsorily acquire vast tracks of land.

It might not be an ideal situation, but in my view the alternatives are even worse.

If the development were left solely to developers and existing land owners then I am of the view we would see a hotch potch of developments that has no central theme and would be a complete bulls up.

Unfortunately theire are costs both financial and social that some land owners will have to suffer.

As long as a fair market price are paid to those holders of land being compulsorily acquired then I believe we have to take a long term approach to develop the new type of city Christchurch citizens and business owners want.

I have seen all the new buildings you refer to Layton built since the quakes and that only adds further proof that the design of the new city can not be left to existing land owners to control.

A minority can't hold progress up for a majority.

Some of the buildings built since the quakes in my view are a eyesore and obviously built to a budget rather that what they might contribute to the whole scheme of things. No aesthetic value what so ever.
.No qualms from this tax payer to date.

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Isn't it strange how as history has created the hotch potch developments without the interference (and before the time of planners) places that are so popular with locals and tourists. Rarely do I visit anything planned by the socialists and feel in any way awestruck. Egotists and other peoples money makes for a lousy combination.

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Perhaps you are unfamiliar with the role of urban planning.The purpose of such planning rules is to provide a framework whereby certain fundamental desired outcomes are inevitable, without unlawful confiscations of property.

Alas we have abysmal, horrendously outdated planning rules (which incidentally have not been addressed by CERA or CCDU, in fact they actually reinforce several worst practices in modern urban planning)

The hair brained schemes the CCDU have come up with lack any sort of modern or creative response to the situation. What we've got is a tasteless, draconian, destructive, simpleton response from uninspiring people who are clearly well out of their depth.

These authorities need to be worry about the public infrastructure, not private. The biggest being transport. But they've glossed over that, and have no aspirations to deliver the radical overhaul this infrastructure needs for the next 100 years for the city, and could make the city an infinitely more pleasant and desirable place to live, like no other. But seems that opportunity has flown well over their head.

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Layton you may well be right in your comments in regards to "uninspiring people who are out of their depth"

But the question remains is how do you achieve what the public would like to see happen to their city if you have pockets of land owners who are only interested in doing their own thing based on the mighty dollar rather than what is best for the city.

I would like to see your views in more detail on the radical overhaul the infratructure needs for the next 100 years as you appear to have a real interest in the city and a certain knowledge on urban planning which this writer certainly does not have.

Maybe I am being too simplistic in my approach . I do appreciate your time to respond to my original comments and other like minded contributors.

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Thanks a lot for your comments. (I made the original comment above). I was under the impression though that the CCDU framework was exactly that - a framework - designed to shape the city and ensure there are large green spaces (the cornerstone of any great city, look at London etc). Private development will not generate such spaces, nor will it ensure there is any coherency in the city. I would rather central and local govt err on the side of caution (i.e. provide more guidance, rather than less) so that we don't end up with something like Queen St in Chch.

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Actually, yes. In most non-optional situations (for example a rent review process) both parties are privy to valuation documentation....

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Thanks - wasn't aware of that. (I made the original comment).

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There’s a certain irony in the stated purpose of ‘The Frame’ land buy up and the market price for land in the central city.

The CCDU have stated on numerous occasions that the number one challenge above anything else when developing the Blueprint was the ‘oversupply of land’ in the city. IE they wanted to prop up land prices of other owners in the CBD at the expense of others.

Don Miskell said at one of the CCDU Blueprint meetings that they proposed some small parks, and the CCDU economists came back and said it had to be much, much bigger. Hence ‘The Frame’ was born.

So they got their wish, inflated land prices, but now they don’t want to pay the true market value to those who’s land they need to acquire to make this whole bullsh*t scheme ‘work’.

Then they try and pass the whole banal 'frame' concept off as a response to the share an idea consultation because people said they wanted a ‘green’ city. Idiots.

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Rather than feeling sorry for yourself I think you need a reality check.
Why do you think your land has increased in value from 2007 afer the earthquake devastation of the CBD? In 2007 your land was valued based on similar but small in number development land sales within the then well-built CBD.
This land is now forever flaged as earthquake prone and there are now hundreds, if not thousands, of similar properties vacant and available for development and were it not for the Govenment mopping them up would take 30 or more years for them to be rebuilt but which rates would still otherwise be payable. Do you really think London development land prices were worth more after World War 2 than immediately before? In addition, from my discussions with Chch commercial investors who were prudently insured is that they have experienced a once in many lifetimes insurance financial windfall AND the govenment is now buying their vitually unsaleable liability which is the remaining vacant land.
And since when did purchasers give their valuations to vendors and if they did would you be so niave and foolish as to rely on them? Stop bleating.

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In regards your point about valuations - in other non-optional settings (for example a rent review between lessee and lessor) the norm is for valuations to be given by both sides to avoid dodgy rent hikes.

With regards your valuation question - I believe our land is worth more today than in 2007 because similar land is selling today for more. Like for like...

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Ben, the other option is the the Government does not buy the land with taxpayer funds. And ensures that it cannot be built on because of risk. Where would owners be then? Insurance pay out, pay out by the Government for land. Be thankful for any payout, its your lucky day.

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Well, hold them to their position: go and get another valuation. Pull apart the only base premise their valuation is based upon: recent sales. The details are all readily available. Also, they will have authority to go above their valuation figure.

Then take your cash and run screaming from Chrustchurch. Learn your lesson and seek to invest in a jurisdiction that has regard for the concept of private property. Let this be a lesson in what happens when you invest in a fascist hell hole.

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There are too many errors in Ben's article to correct here. He needs to get advice from a good property professional and realise that the offer is pretty fair, the land could never have been sold at $480/sqm and the offers are at earthquake date values, acknowledging this is liquefaction prone and taking no account of the new CCDU plan.

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There is an element of windfall in relation to some insured buildings in Christchurch. Generally this is where the buildings were old but large, and insured for full replacement.

There are a lot, however, where there will be no windfall - either because the insurer is maintaining a "we can fix it" approach (as many are), underinsurance (which is likely the owner's fault, but sometimes the broker's or a body corporate's), or the insurer is arguing that the value of a rebuild is now off the table as a result of the designation of the land under the blueprint.

The value of the land that is left at the end of that process, however, has nothing to do with whether or not there has already been an insurance windfall.

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There has been a massive life changing event in your insignificant little patch of the world. That was bound to result in winners and losers. Stop whinging , take the money and move on. If you are any good you will spot the opportunities.

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The biggest issue facing CERA here is that they do not want to acquire 800 insurance disputes, they just want the land, but that is exactly what they are going to end up with.

The insurers know they will be in a better position to negotiate with the Crown which will not be entitled to any 'rebuild' option under the insurance policy so they are stalling the process. If the owner can't settle the claim and the Crown won't buy the claim with the land then CERA's timetable is never going to be met.

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The answer for many property owners is that they will be better off forcing CERA to compulsorily acquire the land and then making an application for compensation under the Act.

There are good grounds for the Courts to award a lot more than CERA is offering as many of CERA's interpretations designed to limit the 'current market value' (which is the standard to assess compensation under the Act) will not stand up to judicial scrutiny.

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Ben, surely the answer here is for you to get your own valuation.

If comparable bits of land are selling for more than what the govt have offered, then it should be straightforward to get a valuation for your bit of land in line with these sales values.

Can you not present this to the govt and say "My land is worth $x, here is the evidence. I will not be selling for less. Especially since you are not showing me any rationale for a lesser amount"

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Perhaps it's worth remembering that ultimately the seller here has absolutely no choice.

Many don't want to sell at all, but ultimately their land will be stolen from them at whatever price the government wishes. They have no choice in the matter whatsoever.

Also worth remembering this is not being done under the far more rigorous Public Works Act, but wide reaching dubious laws passed under urgency.

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Would be interesting to compare Govt land valuation with Rating valuation of the land.

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Can someone who thinks land swaps are a good idea tell me how the government will get the land to swap? By compulsory acquisition, I assume, or do you expect a bit of Hagley Park?

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