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  • Aruba A. T. de Groot Cham

Was the Enforcement of Lessor’s Benefit a Violation of Your Constitutional Rights?

Updated: Dec 1, 2021

Are you entitled to compensation?


Read on to find out!


One of the most significant developments in the field of civil rights litigation has been the emergence of damages as a remedy for the enforcement of constitutional guarantees. What fundamental rights and freedoms are individuals provided under the Constitution of the Republic of Vanuatu?


Article 5 of the Constitution provides:


5. Fundamental rights and freedoms of the individual

(1) The Republic of Vanuatu recognises, that, subject to any restrictions imposed by law on non-citizens, all persons are entitled to the following fundamental rights and freedoms of the individual without discrimination on the grounds of race, place of origin, religious or traditional beliefs, political opinions, language or sex but subject to respect for the rights and freedoms of others and to the legitimate public interest in defence, safety, public order, welfare and health –

(a) life;

(b) liberty;

(c) security of the person;

(d) protection of the law;

(e) freedom from inhuman treatment and forced labour;

(f) freedom of conscience and worship;

(g) freedom of expression;

(h) freedom of assembly and association;

(i) freedom of movement;

(j) protection for the privacy of the home and other property and from unjust deprivation of property;

(k) equal treatment under the law or administrative action, except that no law shall be inconsistent with this sub-paragraph insofar as it makes provision for the special benefit, welfare, protection or advancement of females, children and young persons, members of under-privileged groups or inhabitants of less developed areas.


Land Ownership

At independence, in 1980, the Constitution restored perpetual land rights to “indigenous custom owners and their descendants” by abolishing all existing land titles. The subsequent enactment of the Lands Reform Act (1980) differentiated the land of Vanuatu as either being under Custom land holding, in rural areas, or under Government holding, in urban areas. Therefore, since Independence, Vanuatu real property works within a leasehold tenure system. 1984, saw the introduction of the Land Leases Act [Cap 163] which laid out provisions with respect to the creation, registration and disposition of land leases.


History of the Lessor’s Benefit

A Lessor’s Benefit is a sum of money paid by the Lessee of a title, to the Lessor for a transfer of lease. Initially, the Lessor’s Benefit only concerned rural leases.


The Land Leases (Amendment) Act No. 11 of 2004 which came into force on 27 December 2006 provided:


"6. After section 48

Insert

"48A Payment for sale of a rural lease

(1) This section applies only to leases of rural land

(2) If a proprietor of a registered lease sells a lease, the lessee must pay not more than 18% of the amount the lease was sold for to the lessor unless the lessor and lessee have entered into other arrangements".


At the time of the Lessor’s Benefit introduction into legislation in 2006, Section 48A (2) did not compel the Lessee of a rural lease to actually pay a Lessor's Benefit to the Lessor due to the rights provided under section 60(i) of the Land Leases Act [Cap 163] to “transfer his registered lease…to any person, with or without compensation.”.


Section 48A (2) was further amended in 2007 however, the amendment still did not compel the Lessee to pay a Lessor’s Benefit if they transferred their rural lease.


The Land Leases (Amendment) Act No. 5 of 2007 which came into force on 10 September 2007 provided:


"Subsection 48A (2) If a proprietor of a registered lease sells that lease, the proprietor must pay to the lessor, not more than 10% of the difference in amount between the unimproved market value of the land at the time it was purchased and the unimproved market value of the land at the time of the present sale, unless the lessor and lessee have entered into other arrangements".


In 2015, section 48A (2) was again amended and the new provision compelled a Lessee of a rural title to pay a Lessor’s Benefit, if they transferred their lease. The Lessor’s Benefit was to be paid regardless of whether the transfer was for consideration or no consideration and was calculated by reference to the unimproved market value of the land.


This 2015 amendment also saw the introduction of section 48B which stipulated similar Lessor’s benefit terms on urban titles. As urban titles are Government land holdings, no provision for the Lessor and Lessee to enter into other arrangements was made under section 48B (2).


The Land Leases Act (Amendment) Act No. 35 of 2014 which came into force on 27 February 2015 provided:


“Subsection 48A (3) If the proprietor of a registered lease sells a lease that is created by a subdivision, the proprietor must pay to the lessor, 5% of the unimproved market value of the land at the time of the sale, unless the lessor and lessee have entered into other arrangements. "


"48B Payment for transfer of urban lease

(1) This section applies only to the transfer of an urban lease.

(2) If a proprietor of an urban lease transfers that lease, the proprietor must pay to the lessor 5% of the difference in amount between the unimproved market value of the land at the time it was purchased and the unimproved market value of the land at the time of the present sale.”


In 2017, section 48A (2), was further amended to increase the amount of Lessor’s Benefit that the Lessee had to pay the Lessor if they sold their rural lease. Section 48B (3) and (4) were added to allow the Government and a Lessee to enter into other arrangements as long as prior approval of the agreement was obtained by the Council of Ministers.


The Land Leases (Amendment) Act No. 2 of 2017 which came into force on 30 June 2017 provides:


Subsections 48A (2)

Subject to subsection (2A), if a proprietor of a registered lease sells that lease, the proprietor must pay to the lessor 10% of the difference in amount between:

(a) the unimproved market value of the land at the time it was purchased or the purchase price at the time it was purchased, whichever is lower; and

(b) the unimproved market value of the land at the time of the present sale or the sale price at the time of present sale, whichever is higher.

(2A) Subsection (2) does not apply where the lessor and lessee have entered into other arrangements.”


Subsection 48B (2)

“(2) If a proprietor of an urban lease transfers that lease, the proprietor must pay to the lessor 5% of the difference in amount between:

(a) the unimproved market value of the land at the time it was purchased or the purchase price at the time it was purchased, whichever is lower; and

(b) the unimproved market value of the land at the time of the present sale or the sale price at the time of present sale, whichever is higher.

(3) Subject to subsection (4), subsection (2) does not apply where the lessor and lessee have entered into other arrangements.

(4) The Minister must obtain the prior approval of the Council of Ministers before entering into any other arrangements under subsection (3).”

BEFORE The Lessee of a rural and urban lease could transfer their lease without paying a Lessor’s Benefit.

27 February 2015

AFTER The Lessee of the same land had to pay a Lessor’s Benefit to transfer their lease.

A Violation of Constitutional Rights

Does the application of Lessor’s Benefit to existing leases amount to retrospective legislation which is beyond the Constitutional Power of any legislature that is subject to a Constitutional Bill of Rights?


To answer this question, we must first acknowledge that a lease is a contract between the lessor and the lessee and any subsequent transferees of the lease.


Basic reasoning indicates that, subject to the Constitution, an enactment of Parliament is made for present and future situations. If Parliament intends for a provision of an Act or Law to apply to past situations, occurring before promulgation of said law, it remains subject to the Constitution.


So, how can the implementation of the Lessor’s Benefit be interpreted as to not contravene the Constitution?


The Supreme Court of Vanuatu stipulated that laws relating to the Lessor’s Benefit must be interpreted and applied to the extent of its validity pursuant to section 9(2) of the Interpretation Act [Cap 132].


“9. Acts subordinate to the Constitution

(2) Where a provision in an Act conflicts with a provision in the Constitution the Act shall nevertheless be valid to the extent that it is not in conflict with the Constitution.”


On 9 March 2021, the Supreme Court declared that:


“(c) A declaration that section 48A applies only to leases entered after 30/06/2017, is granted;

(d) A declaration that for urban leases entered between 27/02/2015 and 30/06/2017, the version of section 48B introduced into law on 27/02/2015 but since amended, applied, is granted;

(e) A declaration that section 48A of the Land Leases Act, applied only to leases that were entered into after 30/06/2017 but that the amendment to section 48A dated 27/02/2017 applies only to leases entered into between 27/02/2015 and 30/06/2017, is granted;”.

BEFORE 27 February 2015

Both rural and urban leases owned during this period DO NOT require the Lessee to pay a Lessor’s Benefit to transfer their title.

27 February 2015 - 30 June 2017

Rural titles entered into during this period require the lessee to pay a Lessor’s Benefit of “5% of the unimproved market value of the land at the time of the sale, unless the lessor and lessee have entered into other arrangements.” Urban titles entered into during this period require the lessee to pay a Lessor’s Benefit of “5% of the difference in amount between the unimproved market value of the land at the time it was purchased and the unimproved market value of the land at the time of the present sale.”

AFTER 30 June 2017

Rural titles entered into after this date require the lessee to pay a Lessor’s Benefit of “10% of the difference in amount between:(a) the unimproved market value of the land at the time it was purchased or the purchase price at the time it was purchased, whichever is lower; and(b) the unimproved market value of the land at the time of the present sale or the sale price at the time of present sale, whichever is higher. (2A) Subsection (2) does not apply where the lessor and lessee have entered into other arrangements.”


Urban titles entered into after this date require the lessee to pay a Lessor’s Benefit of “5% of the difference in amount between:(a) the unimproved market value of the land at the time it was purchased or the purchase price at the time it was purchased, whichever is lower; and(b) the unimproved market value of the land at the time of the present sale or the sale price at the time of present sale, whichever is higher.(3) Subject to subsection (4), subsection (2) does not apply where the lessor and lessee have entered into other arrangements. (4) The Minister must obtain the prior approval of the Council of Ministers before entering into any other arrangements under subsection (3).”

If you paid a Lessor’s Benefit in retrospect, you are entitled to seek damages for the violation of your Constitutional Rights. Contact Yawha & Associates today, so that we can assist you with your claim.


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