Stand Alone Early Childhood Centres

Background

The kindergarten and playcentre associations that manage stand alone early childhood centres requested that the ministry provide security of tenure for their stand alone centres so that they may engage in long-term property planning.

Under the current property occupancy document ("POD") for stand alone centres, the ministry may require the association to vacate the premises with three-years notice. Due to this termination clause, some associations have been reluctant to invest in their facilities for fear of losing that investment if required to move. Also, under the current POD, associations are responsible for capital and operating costs, as if they owned the building, but do not enjoy either long-term security of tenure or ownership rights.

In 2003, the ministry responded to the association's request by developing a long-term lease that grants the requested security of tenure. Associations also have the option of purchasing a stand alone centre.

This section details the long-term lease and purchase options available to associations to obtain security of tenure over their stand alone centres.

Lease option

The most effective way for an association to obtain security of tenure over a stand alone centre is to enter into a long-term lease with the ministry. The ministry has drafted a template lease for stand alone centres that may be accessed by clicking here.

The key features of the lease are:

• Term: 35-year lease term, less one day
• Rent: Annual rent of $10 plus GST for life of lease
• Costs: Associations are responsible for the following costs:
• Repairs, maintenance, and utilities
• Insurance premiums
• Rates and taxes
• Compliance costs
• All other costs relating to the use and occupation of the centre
• Termination:
• The ministry can terminate the agreement early under certain circumstances such as if an association breaches the agreement or loses its licence
• An association can terminate the agreement by mutual consent
• Subletting: An association may sublet the premises in certain circumstances with the ministry's approval
• New Construction: An association may add to or upgrade a centre at its cost with the ministry's approval

This description is advisory only and the lease document itself should be consulted for the actual terms of the agreement. Associations may want to seek legal advice regarding the terms of the lease.

Purchase option

An association may purchase its stand alone centres. Also, if an association enters into a lease with the ministry and then later decides to purchase a stand alone centre, it may do so.

The ministry has a specific process it must follow when it sells its property. Like all Crown-owned property, the former owner (or their beneficial successors) may have priority rights of purchase under the Public Works Act 1981. In addition, as second priority, Government policy requires surplus Crown-owned land to be assessed for Treaty of Waitangi claims. This process may result in the subject property being "landbanked" pending settlement of a claim. If the claim is successful ownership will transfer to the claimants.

If the property passes through the Public Works Act 1981 and Treaty of Waitangi processes unclaimed, it may then be sold on the open market. The ministry is required by law to sell property at market value so the association must have sufficient funds to pay for the centre. Also, a centre does not have a preferential right to purchase the property. If the ministry receives a higher offer, the property may be sold to another party.

More detailed information regarding the sale of ministry property can be accessed by clicking here. Associations should carefully consider the risks and responsibilities involved with this process before attempting to purchase a stand alone centre.

Establishing equity upon sale of a stand alone centre

Many associations have acquired equity in a stand alone centre building equivalent to past capital contributions. Centres on Crown-owned land were established on a subsidy basis pre-1989 (when Tomorrow's Schools came into effect) and the percentage equity held by an association in a stand alone centre generally reflects past capital contributions.

An association's minimum equity interest in a stand alone centre's building, and the reasoning behind this calculation, are recorded in the Second Schedule to the existing POD. A centre's equity interest may also be increased if the centre has made substantial capital improvements to the building.

This same schedule will be attached to the new lease. The proposal to replace the existing PODs with leases will not change an association's equity interest in a stand alone centre building, nor will it affect any other association interest in a stand alone centre.

Click here to check the information that the ministry has regarding a particular stand alone centre.