6.5 Financial consequences of non-use

101. The right holder could be subject to financial consequences of ‘not using’ in addition or as an alternative to loss of a contractual right to renew rights. Possible forms of financial consequence include:

1. A monetary charge payable by the right holder upon failure to use, based on an estimate of the damage to the Crown from failure to build infrastructure. A loss to the Crown might be the cost of building the infrastructure, or funding some other person to provide the infrastructure.
2. A “buy-out option” under which the right holder has the option to buy more time to implement (e.g. an additional one-year management right). The amount payable on exercise of a buy-out option might be a proportion of the original purchase price, an estimate of the damage to the Crown from delay in building infrastructure, or some other amount.
3. Deferred payment of a proportion of the purchase price pending implementation, with the deferred payment payable by the right holder if services are not implemented by the “use” date.

102. The Ministry considers that a buy-out option might be attractive to right holders, as it might be a lesser consequence of failing to use (although the right holder would still be required to meet the use test). Under any of the above options, the amount and basis for calculation of any charge is likely to be an important issue.

Question 6: Use or lose provisions

Do you prefer a date of December 2012, 2014, or 2016, for applying the use or lose test? If not what alternative date would you prefer to implement the Cabinet decisions on use or lose? Please explain.

Do you prefer Option A or Option B or some other option regarding the test for ‘use’? If you do not agree with the proposals, what ‘use or lose’ provisions do you propose? Should financial consequences result from not using rights, either in addition or as an alternative to loss? How should the amount of any financial consequence be calculated?