SunGold kiwifuit attract a premium price at retail; a premium reflected in market prices on sale of orchards. This premium impacts on rating valuations where councils assess rates on ‘capital value,’ even though Zespri licences to grow SunGold are held personally in the name of the grower, the Court of Appeal ruled in a test case.
Bushmere Trust grows SunGold on just over half its 5.86 hectare property near Gisborne. In 2020, valuers nationwide implemented new guidelines on valuation of SunGold orchards. Bushmere was one of the first affected. Its rating valuation jumped by some forty per cent to $4.1 million.
SunGold is grown under licence from Zespri. Zespri is a monopsony, being the sole buyer of SunGold production. Marketing and sales are co-ordinated by Zepri. It controls the number of licences and specifies the areas to be planted. Licences are personal to the grower, with Zespri approval needed for sale or transfer of any licence.
Given this background, Bushmere argued the right to produce SunGold lies with the grower personally and cannot be assessed as part of the land for rating purposes. Bushmere land should be valued at $2.8 million, not $4.1 million, it said.
Rating legislation allows local authorities to use one of three possible methodologies to assess rates: capital value, land value and annual value. Gisborne District uses capital value.
‘Capital value’ broadly equates with market value, the Court of Appeal ruled. If Bushmere were to be sold, its 2020 market value would be $4.1 million, it said. The right to grow SunGold on the property was directly relevant to Bushmere’s market value.
The court was told Zespri has never refused consent to the sale or transfer of an existing SunGold licence.
The Court of Appeal indicated value of SunGold licences is to be deducted where a local authority instead uses ‘land value’ for rating assessments. Value of vines is deducted because they can be removed at any time, not forming part of the land.
‘Land value’ is often described colloquially as assessing rates on unimproved value. By contrast, ‘capital value’ has property valued at its highest and best use. This captures as part of a property’s value not only the right to plant SunGold on a rural property, but also new zoning rules in an urban environment permitting more intensive development.
Bushmere Tust v. Gisborne District Council – Court of Appeal (11.07.21)
23.113