Leasing out Custom Land

A lease is an agreement made between a custom land owner and another person, which gives this other person the right to use the land in question.

This agreement often requires the lessee to pay some money to the custom land owner.

The custom land owner is the 'lessor'. The person who leases the gound is the 'lessee'.

 

Can custom land be leased?

Yes. A custom owner may lease a plot of land or a part of it to any person for a number of years.

 

Why should you lease a customary land?

Custom owners may receive money from the lessee under the lease agreement. Moreover, the custom owners might not know how to use the land they have leased for the full period of the lease term. The lease term may be set at up to 75 years.

The custom land owners may lease out their land to other people for a variety of uses such as:

  • Building construction/estate development with many houses for sale.
  • Starting a shop or other business.
  • Farming cattle or other kinds of livestock.
  • Gardening.
  • Setting up a tourist resort.

 

How long is a lease term?

A lease may be set at up to 75 years but not all leases are required to run for 75 years. The lease term depends on the use required by the lessee and the number of years the lessor is prepared to let the land.

When a lease term has expired, the plot of land in question is returned to the custom owner.

However, customer owners need to be aware that quite often, lessees like to include conditions in the agreement that require land owners to pay for the cost of improvements carried out on the plot of land leased. These improvements include buildings, factories, houses, roads, electricity or water supply. This means that the custom owner will be required to pay a large sum of money to recover the land.

The lease may be renewed if mutually agreed on by both the custom land owner and the lessee.

 

What if the lease agreement did not include a lease term?

In such a case the lease will continue until the lessee ceases to pay the land rent. Such a lease is called a 'periodic tenancy' and does not need to be registered at the Department of Lands.

For instance, if a lessee pays a monthly rent, the lease would be called a 'month to month tenancy'. Each time the lessee pays the rent, the lease is renewed.

In such a lease, the custom owner and lessee may end the lease at any time. In order to terminate the lease, they must inform the other party of their intention to end the lease. This is called 'giving notice'. If the lessee pays a monthly rent, the lessor or lessee must give a one-month notice.

 

Lessor's right to forfeit a lease

The lessor may forfeit a lease before the end of the lease term, if the lessee has breached the terms and conditions of the lease they signed. For example, the lessor may forfeit the lease if the lessee fails to pay the rent, or has used the land for a use contrary to what was agreed under the lease.

Before a lessor forfeits a lease, he must notify the lessee and any other person with a registered interest in the land concerned (example, the bank which has a mortgage on that particular plot of land). This notice must indicate:

  • The terms and conditions of the lease that have been breached by the lessee.
  • How the lessor would like the lessee to rectify these matters if possible.

If the lessee fails to comply with this notice, the lessor may proceed with the lease forfeiture.

If you wish to forfeit your lease agreement, you should consult a lawyer or an Officer of the Lands Department by phone or in Vila or Luganville.

 

Can I use my land after I have leased it?

When the lease commences, the lessee has the right to stop anyone from using the land, including the land's custom owner.

However, custom owners are allowed to use this land, if this provided for in the lease agreement. For example, maybe the agreement allows the custom owner to harvest food from the plot of land.

 

In what circumstance should a lease be registered?

Any lease with a lease-term below three (3) years does not need to be registered.

Lease terms above 3 years must be registered at the Department of Lands and the lessor and lessee must complete the required forms and pay the related fees.

 

How do I register a lease?

1. The custom owner(s) or person who wishes to lease a land must make a lease application to the Department of Lands.

2. When the Department approves the application, they will provide a Certificate of Negotiation. This allows the custom owner to negotiate the terms and conditions of a lease to establish a lease agreement. The lease terms must contain: the rent cost; how often this rent should be paid per year; the lease term and what the lessee is allowed to do on that particular land and what they should NOT do.

3. The Department of Lands must then ensure that the custom owners who applied for the lease are the rightful custom owners of the land in question. The Department asks the chief responsible in the area concerned to complete a form called the Custom Owner Identification form.

4. When the Certificate of Negotiation and the Custom Owner Identification form is with the applicant, he must have the land surveyed. This can be carried out by the Lands Survey Section of the Department of Lands or a private surveyor.

5. A lease agreement document must then be prepared. The Department of Lands or a lawyer can assist you with this.

6. After the lease is approved by the Minister of Lands, the custom owner must pay stamp duty. The Vanuatu Financial Commission in Vila (Telephone: 22247) can inform you as to the amount to be paid in stamp duty.

7. Then the Minister will sign the lease. After this signing, the lease documents are entered into the Lease Registry Section system.