Esplanade reserves and strips
Under the RMA, compensation must be paid by a council for taking esplanade reserves or esplanade strips where:
- the width of the esplanade reserve/strip exceeds 20 metres on a lot of less than 4 hectares created when land is subdivided; with compensation being payable only for the land additional to the 20 metres (s237E)
- any esplanade reserve/strip of any width is required to be set aside or created on a lot 4 hectares or more, created when land is subdivided (s237F).
Compensation is not required to be paid by the council for taking esplanade reserves or esplanade strips where:
- a lot of less than 4 hectares is created when land is subdivided where the land is within 20 metres from the mark of MHWS of the sea or from the bank of any river or from the margin of any lake (s237E)
- a lot of more than 4 hectares is taken under a plan rule developed under s77(1) of the RMA.
There is no legal requirement to provide compensation when an access strip is created. However, as the formation of access strips is based on a voluntary agreement between the land owner and the council, compensation may be payable. Similar mechanisms of compensation to those used for esplanade strips would be appropriate, as the access strip creates an interest in the land.
Valuing land and interest in land
The process for the valuing of land for esplanade reserves is established under s237H of the RMA. This section enables the applicant and a council to reach agreement as to the amount of compensation payable. The section sets out a further process under the Rating Valuations Act 1998 to determine the value if the initial process is inconclusive.
The Courts have established that the 'land value' of the land means:
"the sum which the owner's estate or interest therein, if unencumbered by any mortgage or other charge thereon, might be expected to realise at the time of valuation if offered for sale on such reasonable terms and conditions as a bona fide seller might be expected to impose, and if no improvements (as herein before defined) had been made on the said land".
Some councils require the applicant to provide a valuation of the land from a registered valuer, while other councils employ their own valuer. Sometimes two different valuations are used (one provided by the council and one provided by the applicant) and a midpoint agreement is reached. Some councils allow the cost of the compensation to be offset against any reserve's contribution that may otherwise be payable by the applicant.
However, unlike esplanade reserves, the registration of an esplanade strip does not change the ownership of the land; instead it registers an interest in the land. As such, the compensation paid should only be in relation to the interest transferred - the value of the interest lost by the land owner and the value gained by the council. As this value of the interest may be less than the 'land value', an esplanade strip can provide cost advantages to a council when compensation is payable.