Land valuers had been taking a "pragmatic approach" by not including amenity values when assessing pastoral lease land for rent, even though the law says it should be, the Crown claimed yesterday.
Brendan Brown QC was opening the case for the Commissioner of Crown Lands before the Land Valuation Tribunal in Dunedin over the rent-setting methodology for the Minaret Station pastoral lease at Wanaka, and said the Crown was taking the case to uphold the law rather than change the system.
"The issue is, and always will be, about how the existing law is being applied."
The case was expected to take two weeks, with the Government saying it was treating this as a test case for the way it sets all pastoral lease rents.
Mr Brown said the case centred on two issues: the appropriate methodology to ascertain the value of land exclusive of improvements (LEI), but more significantly, whether the LEI should include amenity values such as views, access to lakes, rivers and mountains, values for which he said buyers were now paying a premium well in excess of the land's pastoral earning capacity.
The tribunal would also ascertain who owned those intrinsic values for the purpose of setting rents, with lessees maintaining the Crown gave away its rights to those values by granting perpetual rights of renewal.
Lessees have exclusive rights to the pasturage on their lease, rights to perpetual renewal of their lease and rights to privacy, but say that because they are not allowed to benefit financially from amenity values, they cannot be charged rent for them.
Minaret Station, a 22,000ha property with a 25km frontage on to Lake Wanaka, is appealing a proposed more than doubling of its rent to $118,000 a year.
Mr Brown said the Crown had valued Minaret's LEI at $5.980 million and improvements of $4.840 million to give a capital value of $10.820 million.
The rent is calculated on the difference between the capital value and improvements. He said there were three points of difference in the rent-setting methodology. The first was how to calculate amenity values.
The lessee had two capital valuations for the property of $12 million and $9.38 million and Mr Brown said the difference was the value attributed to amenities.
The difference between the parties on the figure on which rent is calculated was up to $2 million.
The second was the approach to valuing improvements, including development potential, and the third was the value of what was legally allowed to be excluded from LEI.
The Crown disputed lessees' claims vegetation burning was an improvement.
Mr Brown said the Crown also did not agree it was fairer to assess rent on stock units carried or productivity.
Such a system was viewed as a way of removing amenity values from LEI.
