Land Management

Lessor's 5% Benefit

Land Leases Act requires registered proprietors of urban leases to pay five percent (5%) on increases in unimproved values to the Minister of Lands (Lessor) on transfers.


  1. As of 27 February 2015 a registered proprietor of an urban lease must pay to the Minister of Lands, on behalf of the people of Vanuatu, a payment representing five per cent (5%) on the increase of unimproved value of his or her land at transfer. The payment is imposed by section 48B (1) and (2) of the Land Leases Act [Cap 163]. The relevant section reads as follows “48B Payment for transfer of urban lease (1)… (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 value of the land at the time of the present sale.”
  2. The payment to the Lessor (lessor’s benefit) was first enacted by Parliament in Land Leases (Amendment) Act No. 11 of 2004 but was restricted to the transfer of rural leases. By that amendment a lessee of a rural lease was to pay not more than 18% of the transfer consideration to the lessor unless the lessor and lessee have entered into other arrangements.
  3. After it was effected for 6 months Amendment no. 5 of 2007, not only reduced the rate to not more than 10%, but also it was considered fairer to restrict it to the difference in the unimproved value of land at last sale and current sale.  Still it was restricted to rural lands.
  4. By Amendment no. 35 of 2014 the rate was fixed at 10% for rural lease transfers and the lessor’s benefit policy was extended to transfers in urban leases.
  5. The rationality of the policy, amongst others, are:-
  • The Minister of Lands, by discretion or on account that an occupier had occupied a land prior to Independence, had leased land without premiums. This is considered unfair to the people of Vanuatu. Unfair land dealings were a fundamental issue in recent land reform exercises.
  • It was only recent (2004) that Land Leases (Amendment) Act no.11 of 2004 required the Minister of Lands to charge premiums at 35 % of unimproved values for grant of new leases and premiums for extensions at 10%. From 2009 premiums are assessed using contract rents and full rental values prescribed by Order of the Minister dated 19 August 2009.
  • Once land enters the public domain in the form of lease it could be sold on the open market at market value. Market value of lands continues to increase in almost all subsequent lease transfers. Most leases have had changed hands multiple times, many without any development whatsoever. Comparatively lessors do not receive economic benefit from subsequent sales except minimal fees and annual rents.
  • Hence the payment to the Minister of Lands (Lessor) on urban land transfers is part of the matrix to address the obvious economic deficiencies to lessors in land leasing.
  • Why 5% and not 10% as fixed for rural leases? The reason is that the Minister of lands collects registration fees on transfers and holders of urban leases have to pay other taxes, including property tax, unlike rural leaseholders.
  1. The Lessor’s benefit is applicable to any urban lease at date of transfer and whose unimproved value at the present sale is higher than the unimproved value at date of last sale. “The unimproved value definition assumes that a land is notionally in its natural or virgin condition but it possess whatever advantages that exist as a result of extrinsic circumstances, such as roads, public services, amenities, land settlement in the neighbourhood, potential utility, and any other benefits that are not due to operations on the land itself by its past or its present occupiers”. That is all elements should be considered excepting any structural development or improvements (excavation or filling) on or to the subject land.
  1. How is “unimproved value” determined?
  • The market determines the basis of values. Hence registered land values, and valuers at the Valuation Unit for this exercise, determine unimproved values from sales. As a process land valuers are required to analyse recent market sales and after making adjustments for relevant variables such as date of sale, size, topography, structures and improvements on or to land, aspect, locality detrimental factors, etc, using their experiences and skills, should arrive at the unimproved value of a land. In view of the above definition the “unimproved value” of an unimproved land may be the same as its “market value”. A valuer should consider case by case.
  1. How do valuers determine 5% Lessor’s benefit on sales of improved land?
  • This is straight forward. Valuers look at vacant land sales in the area to determine the value of the land portion and apply it. The residue in the improved sale should represent the value of structures and/or improvements to or on the land. Where there are no vacant land sales in the locality a valuer could look at relevant and recent vacant land sales in other localities, making adjustments for variables mentioned above to arrive at the unimproved value of a subject land.
  1. How could the Director of Lands find out if a lease is transferred significantly less than its unimproved value?
  • Clause 3(g) of Schedule in Section 112 of the Land Leases Act empowers the Director to require a valuation report from the Valuer- General determining the unimproved value. If the valuation is in excess of the price or declared value the cost of the valuation shall be borne by the registered proprietor. Accordingly the Director shall apply the    5 % benefit on the unimproved value as assessed by the Valuer-General.
  1. Is it against the law to under-declare lease transfer prices or values?
  • It is against Section 47 of the Stamp Duty Act [Cap 47] to wilfully evade duty. Every person who wilfully and fraudulently evades or conspires to evade, or assists another person to evade, payment of duty to which any instrument is liable under the Stamp Duty Act shall commit an offence punishable upon conviction by a fine not exceeding VT 300,000 or imprisonment for a term not exceeding 2 years, or by both such fine and imprisonment.
  1. Are there any classes of persons exempt from paying 5% Lessor’s benefit on transfers?
  • Section 48C of the Land Leases Act exempts a registered proprietor who transfers his or her lease to a member of his or her nuclear or extended family.
  1. Could a registered proprietor ask an independent registered land valuer to assess the unimproved value of a lease?
  • However the Minister of Lands prefers to have the Valuation Unit assess unimproved values on his or her behalf. Where two different valuation reports arrived at two significantly different unimproved values, and the parties could not reach consciences, the matter should be referred to the Valuer-General for determination on which of the two reports is credible.
  1. Does the 5% Lessor’s benefit apply on new leases and extensions?
  • New leases or extensions literally are not transfers. In new leases and extensions the Minister collects premiums assessed in accordance with subsection 32D (2) of the Land Leases Act.
  1. How could the Valuation Unit know the unimproved value of your lease if you have paid only a premium for the grant of the lease to you?
  • If you obtained your lease after December 2004, and the Valuation Unit did assess the premium you paid, the premium would have represented 35% of the unimproved value of your Mathematically the Valuation Unit knows that you did not pay 65% of the unimproved value. Hence 35% plus (+) 65% equals the unimproved value of your lease the date it was granted to you.
  • Example: Premium paid Vt350,000 (35%), Unimproved value at last sale: Vt350,000 x (100/35) = Vt1,000,000
  1. What if the premium you have paid had been decided arbitrarily [by the Minister] and less than what you should have paid?
  • If you have paid a low premium other than the amount you should have paid then the Valuation Unit would take it that the premium you paid represented 35 % of the unimproved value of the land at the date the lease was granted to you when assessing the lessor’s benefit. The unimproved value of the past sale would be assessed as in paragraph 14.
  1. What if you did not paid any premium at the grant of the lease and you are transferring the lease for the first time?
  • Unleased state land or customary land held without a lease is said to have no value unless they become available in the public domain and could be traded in the market. This was the presumption for leases granted without premiums by the Minister in the past. Accordingly the unimproved value of the land at date of lease was zero. Effectively the difference in the unimproved value between the last sale and the current sale is the current unimproved value. Accordingly the 5% lessor’s benefit will be assessed based on the unimproved value at current sale.


For further enquiries contact the Principal Valuation Officer, Department of Lands, PMB 9090, Port Vila, Vanuatu: Email: This email address is being protected from spambots. You need JavaScript enabled to view it. ; VoIP 2611