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Forestry Rights - A Way To Generate Extra Cash?

20 May 2013

Farming can be a tough enterprise on its own, so it is worth considering other ways to generate extra income or capital from your land. A forestry right could be one option.

 

What are forestry rights?

Forestry rights are rights granted by the owner of land to someone else to establish and/or maintain and harvest a forest. There are three ways which may give you the right to cut and remove trees from land. They are:

  1. If you own the land you also own the trees growing on the land and have the right to harvest the trees.
  2. You may hold a commercial forestry lease which allows you to harvest the trees.
  3. You may hold a profit a prendre which allows you to harvest the trees. (A “profit a prendre” is a right to enter land and remove for your own use part of the land that is capable of ownership. Common types of profits a prendre are the rights to cut and remove timber or flax; or to remove coal, gravel, clay, sand, stone or iron sands.)

 

Why grant a forestry right?

Forestry rights are a useful mechanism. Some of the advantages are:

  1. You can retain the right to harvest the trees on your farm after you have sold your farm.
  2. You can generate extra cash by selling forestry rights over your farm.
  3. You can use a forestry right to regulate a joint venture with someone else who has the capital and expertise to establish a forest if you don’t have that capital and expertise yourself.
  4. You can grant yourself a forestry right and then use that forestry right as security for a loan. If you default and the mortgagee or security holder exercises its power of sale, only the forestry right itself can be sold. You get to retain your land.

 

Forestry Rights Registration Act 1983

In New Zealand a profit a prendre to cut trees is commonly registered against the titles to the relevant land under the Forestry Rights Registration Act 1983.

The area of land subject to a forestry right can be shown on a plan included with the forestry right. The plan does not have to be a proper survey plan. The forestry right can also give rights of access and rights of construction and use of tracks, buildings and other works ancillary to and necessary for the enjoyment of the forestry right. The forestry right may state what payments are to be made in respect of the harvesting of the trees.

The forestry right should set out the parties’ rights and responsibilities in respect of the Emissions Trading Scheme. Many of the old forestry rights do not address ETS obligations because they were created before the scheme came into existence.

 

Restrictions on the grant of forestry rights

If the land is mortgaged, then the mortgagee (usually a bank) will need to consent to the registration of the forestry right.

If your land is indigenous forest, then any forestry right may be subject to compliance with the Forests Act 1949. This Act covers the sustainable management of indigenous forests and places controls on the milling and exporting of timber from indigenous forests.

Forestry activities are subject to the Resource Management Act 1991. Different types of resource consents may be necessary depending on the relevant district plan.

 

Getting the right advice

If you decide to grant a forestry right or enter into any commercial arrangement in respect of the trees on your land, then you should take advice from professionals experienced in this field to ensure that your interests are properly protected and you achieve your desired outcome.

 

Please email me at barbara.mcdermott@nwm.co.nz with your ideas for future articles.  Keep an eye out for next month’s column, where I will discuss another relevant rural legal issue.


Barbara McDermott is a partner of Norris Ward McKinnon, specialising in commercial and rural law.  With offices in Hamilton and Huntly, we have friendly, expert legal advisors ready to help you with your business and personal legal matters.   Find out more about us at www.nwm.co.nz