INFORMATION ABOUT THE LEASEHOLD LAND FOR WEST QUAY

Land can be held under two types of ownership, freehold land and leasehold land. While freehold land was traditionally the most common form of ownership, leasehold land is becoming more common, particularly for waterfront properties.

The West Quay development is situated on the freehold land owned by the Napier District Council. The Council has granted a lease which is now owned by the vendor, Romanos Limited, and will eventually be owned by the Body Corporate (ie: owned by all of the unit owners). This amounts to a leasehold estate.

The leasehold estate is governed by the lease which is registered on the Council's freehold title. Unlike some leases which are for fixed terms the lease for West Quay is in perpetuity. This means that it is, as of right, renewable on a continuing basis for terms of 21 years. The advantage of this is that there is no final expiry date for the lease and therefor it avoids completely any uncertainty as to what will occur once that expiry date has been reached.

There is rental payable under the lease to the Council. This is currently set at $8,500 plus GST. On renewal the rent is reviewed. Once reviewed the rental is fixed for the following 21 years. The rental on review is determined by criteria that determines the annual rent as 5% of the improved value of the land. Once fixed that annual rent is payable for the following 21 years. The current rent is nominal especially when divided by the proposed number of unit owners. It is expected that with natural progression of inflation the rental will remain nominal in relative terms. The next rent review is scheduled for 20 June 2007.

The rental payable under the lease will be shared by all of the proposed 103 apartment and retail unit owners based on the attributed unit entitlements. Each unit will be assigned a unit entitlement which is effectively based on the net value of that unit expressed as a percentage so that outgoings can be apportioned on a fair basis.

Leasehold land is becoming increasingly common for waterfront properties and apartment complexes. It is particularly common in the Napier region as well as Auckland and Wellington where waterfront properties once used for port and other activities are now being used for creating apartment dwellings.