Surplus school properties

What types of properties are disposed of?

The Ministry of Education, like any other government department, is obliged to release surplus properties that are no longer needed for a "public work" which is the purpose the land is held for. In the case of a school this means that once it closes it is assigned to the disposal process as the need to retain it for a state school has ceased.

However, closed schools are not the only type of property disposed of. Boards of trustees are regularly releasing surplus properties such as houses or parts of school sites no longer needed. For these types of properties boards of trustees receive 50 percent of the net proceeds under what is called the Surplus Property Disposal Incentives Scheme. This funding can only be spent on:

1. capital works projects, in addition to the funding available in the school's 5 year programme
2. capital purchases like ICT equipment
3. as an investment with the interest used for operational objectives.

What does the disposal process actually involve?

Once any Crown owned property is declared surplus the disposal process is largely determined by the requirements of the Public Works Act 1981 and existing government policies. The four key sequential steps in this process are:

1. Transferring the property to another government department or territorial local authority if required for another public work.
2. If the property is not required for another public work then it may have to be offered back to the previous owner (or their beneficial successors).
3. If the property is not sold through the offer back process then it is assessed for any related Treaty of Waitangi claims or claims under the Sites of Significance (SoS) process. Treaty claims are assessed under the Māori Protection Mechanism (MPM). If any claim is successful, then usually the property is "landbanked" which means it is purchased by the Office of Treaty Settlements and held pending settlement of the claim by government. Ownership may eventually transfer to the claimants. The SoS process protects surplus Crown land of particular significance to Māori. It is administered by Te Puni Kōkiri and operates in tandem with the MPM.
4. A sale on the open market if the property clears the three steps advised above.

How long does the process take?

Properties usually fall into two categories in terms of the length of time it takes for them to be sold.

1. Complex disposals - these are properties with difficulties such as subdivision, multiple titles (requiring amalgamation or separate offer-backs) and Māori land claims involving disputed or collective ownership, often requiring Māori Land Court decisions. These properties can take up to 38 months to sell.
2. Straightforward disposals - these are properties with no such complications and usually take 16 months to sell.

Communities often paid for capital improvements to schools - how is this equity recognised?

When a school closes or merges, the surplus site reverts to the Ministry of Education for disposal. The community has no ownership interest. However, the Ministry will recognise the present value of any past capital contributions by communities to school property assets through any of three ways:

1. The buildings and facilities that the community have an interest in can, if practicable, be subdivided off and sold to a recognised community trust (or the territorial authority on its behalf) at current market value. Any past capital contributions by the community to these assets will be taken into account, in terms of their value proportionate to the total current market value of the property, and offset against the purchase price. Costs associated with the subdivision are also added to the purchase price. The same situation applies if the community is interested in the total site. However, before any negotiations can take place with the community, the property may have to be first offered back to the previous owners and then referred to the Māori Protection Mechanism. Should a property be sold in either of these two steps the Ministry receives the proceeds and therefore the community can still be compensated for its equity.
2. The community is compensated for its equity if it decides not to buy any of the assets. This happens either:
   1. once the property has been sold and the proceeds received by the Ministry; or
   2. preferably at the time the decision is made to close the school and declare it surplus. In this situation an independent market valuation is prepared (this can be organised by the contractor managing the sale process) net of selling costs. The amount to be paid can be agreed at this time, included in the Memorandum of Agreement with the departing board of trustees and paid out from the disposal costs (NB: amounts must have prior Property Management Group National Office approval).
3. Legal agreement to be made with the new owners that will allow the community continued access to certain facilities. This option is not always possible as it depends on the new owner's wishes.

In practical terms, the Ministry of Education prefers the second option which has the following conditions:

1. Equity is recognised by assets that are tangible (fixed) and discrete (easily identifiable). Typical examples are a swimming pool, tennis court or hall that are usually stand-alone. Contributions to items such as library shelving or furniture and equipment are not eligible as these assets are either not fixed and/or lose their value over time and become an integral part of the school.
2. Equity has to be proven by documentary evidence.
3. Equity is not community funded maintenance or other such operating costs.
4. Equity is not school funds provided by the Crown. For example, if a school has used savings in its operations grant to fund a building project this does not count as community equity.
5. Equity is calculated as the value of the asset(s) proportionate, as a percentage, to the total value of the property. For example, the tennis courts may represent 2% of the total value of the property - therefore the equity is calculated as 2% of the net sale proceeds.
6. Equity is paid either when the property is sold or upon the signing of the Memorandum of Agreement and includes disposal costs.
7. Equity is paid preferably to a continuing school or, failing that, a recognised community trust or incorporated society.

Where can I find a list of properties under disposal?

The spreadsheet below provides a schedule of properties currently in the disposal process and the contact person for any enquiries. This person represents either DTZ New Zealand Ltd or OPUS International Consultants Ltd who have been engaged by the Ministry of Education to coordinate the disposal of all surplus properties on behalf of the Ministry.

The "Status" spreadsheet column indicates current progress for each property. "Offerback" means that the property is currently being offered back to the previous owners (a requirement of the Public Works Act 1981). "Other Public Work" means that the property has been identified as being required for another government department or by a local authority. "Protection Mechanism" means that the property is currently is being assessed for any Treaty of Waitangi claims while "Open market" means that the property is for sale on the open market.