With both the Federal and NSW government’s legislated commitments to achieve net zero emissions by 2050,1 the NSW government’s interest in supporting renewable energy developments on Crown land has never been greater.2 With Crown land accounting for approximately 42% of NSW’s land area, renewable energy developers are equally seeking to capitalise on the abundance of generally vacant, agricultural land.
The Crown Land Management Act 2016 (NSW) (Act) permits the State to grant ‘special purpose leases’ concurrently with general purpose leases over Crown land, including for renewable energy purposes. Given its concurrent nature, special purpose leases are seen as complex and this fact alone, often deters renewable energy developers from utilising this structure.
Despite those complexities, Crown land can offer significant opportunities for renewable energy projects, provided developers understand and navigate the unique structure carefully from the outset. This article explores the concept of special purpose leasing and the strategies that renewable energy developers may utilise to alleviate common concerns with the structure.
What is a special purpose lease?
As the name suggests, a special purpose lease is a lease granted over Crown land for a defined ‘special purpose’. Under the Crown Land Management Act 2016 (NSW), the Minister for Lands and Property (Minister) may grant a special purpose lease for several development purposes, including the construction and operation of facilities that harness and convert energy from any source (including the sun or wind) into electricity energy.3
What distinguishes these leases from private leases is that they are granted over Crown land already subject to an existing lease called a ‘general purpose lease’, being a lease granted by the Minister over Crown land usually for agricultural purposes.
In essence, a special purpose lease runs “in parallel” to an existing lease, for the purpose of enabling public interest development and infrastructure projects over Crown-tenanted land.
It is also important to distinguish the concurrent special purpose leasing structure from a sublease structure. A special purpose lease is granted directly by the Minister as opposed to being granted by the general-purpose leaseholder (GPLH). In this regard, the renewable energy developer has a direct relationship with the State. This is an important distinction as a direct relationship with the State or landowner strengthens developer’s tenure, including by reducing the inherent risks that would often be found in subleasing arrangements.
Whilst the focus on this article is on the NSW legislation, we note that there are similar legislative mechanisms for the grant of renewable energy leases over state-owned land in other states and territories, such as:
- diversification leases in Western Australia pursuant to the Land Administration Act 1997 (WA);
- non-pastoral use applications and permits in the Northern Territory pursuant to the Pastoral Land Act 1992 (NT);
- standard term leases or licenses over State land in Queensland pursuant to the Land Act 1994 (Qld); and
- the grant of leases over Crown land in Victoria for renewable energy purposes pursuant to the Land Act 1958 (Vic).
What rights do special purpose leaseholders have?
It is no wonder that the idea of two leases existing over one parcel of land can sit uncomfortably with landholders, tenants, and developers alike. After all, the most basic tenet of leasing – that a lease grants exclusive possession – is disturbed under the special purpose leases’ “parallel leasing” structure. However, despite not conferring possession to the exclusion of all others, the special purpose lease is expressly recognised at law as a lease.4
Where a special purpose lease has been granted, the GPLH is restricted from:
- doing anything that has the effect of restricting or impeding the special purpose leaseholder from exercising the rights conferred under its special purpose lease; and
- developing any dwelling-house, garden, or significant improvement such as a building, dam, or tree plantation, on the land without the written consent of the special purpose leaseholder.5
Equally, the special purpose leaseholder is restricted from:
- exercising the rights conferred under their special purpose lease (except access rights):
- within 200 metres of any dwelling-house;
- within 50 metres of any garden; or
- on which any significant improvement is located,
without the written consent of the GPLH. If consent is granted to the special purpose leaseholder, this consent runs with the land, binding successors in title; and
- unreasonably withholding its consent to the GPLH’s development mentioned in paragraph 9(b) above.
Both the GLPH and special purpose leaseholder may sublease or licence to a third party in accordance with the terms of their lease (generally requiring Minister’s consent), but any sublessee or licensee is subject to the same conditions as those placed upon the headlessor or licensor.6
What are the key issues which renewable energy developers should be aware of and how can these be alleviated?
GPLH compensation
Generally, a Minister can only grant a special purpose lease over Crown land with the irrevocable consent in writing of the GLPH on the land.7 Accordingly, in addition to negotiating the option agreement and special purpose lease with the State, renewable energy developers will also need to negotiate the granting of consent from the GPLH. This secondary agreement typically requires the developer to compensate the GPLH for the additional burden imposed by the proposed project. This represents a commercial and practical hurdle to the special purpose leasing structure.
Compensation payable to the GPLH is similar to the commercial fees and rent payable to landowners in standard renewable energy transactions and commonly includes ongoing investigations fees, disturbance fees, construction rent and operational rent.
Renewable energy developers should negotiate commercial terms with both the State and the GPLH upfront to ensure the double rent structure is factored into the project’s financial modelling.
The operational rent structures usually imposed by the State under a special purpose lease are in line with the rent that would be requested by a sophisticated landowner and can include:
- a flat base rent per annum;
- rent based on the installed capacity of the project on the land on a per megawatt basis;
- a percentage of the turnover of the project; or
- a combination of the above three types of rent.
Aboriginal land rights and native title
Where Crown land is subject to an undetermined Aboriginal Land Council claim, further negotiation and potential compensation arrangements with the claimant Land Council will also be required. This risk is unique to Crown land as opposed to freehold land.
Additionally, when dealing with Crown land, there is a heightened risk of native title claims over the land, noting that the granting of a pastoral lease does not necessarily extinguish native title.8 This is distinct from freehold land native title is normally extinguished.
Developers should ensure that they complete specialist due diligence searches to determine whether native title has been extinguished and whether any Aboriginal land claims exist prior to entry into the option agreements with the State and GPLH.
Statutory land use restrictions
Developers should also be aware of the restrictions on dealing with the land. While it is uncommon for renewable energy assets to be located within 200 metres of a dwelling or 50 metres of a garden, developers should still seek to agree with the GPLH on appropriate asset locations and infrastructure corridors upfront. This would typically be contained in the same agreement that documents the compensation payable from the developer to the GPLH.
Key takeaways
Crown land and special purpose leasing arrangements can be particularly well-suited to renewable energy projects. Given the extent of Crown land across NSW, significant growth in the use of special purpose leases is anticipated.
Due to the unique nature of special purpose leases, developers must approach transaction structuring, timelines and documentation differently. Developers must account for statutory restrictions under the Act, as well as the potential implications of native title and Aboriginal land rights claims. However, these additional considerations do not prevent the delivery of commercially viable projects or hinder progress towards the State’s net zero target.
[1] Climate Change (Net Zero Future) Act 2023 NSW, (9)(1)(c); Climate Change Act 2022 (Cth), (10)(1)(b).
[2] Department of Planning and Environment, ‘Crown Lands Year in Review 2024-2025’, NSW Government 20 https://www.crownland.nsw.gov.au/sites/default/files/2026-03/crown-lands-year-in-review-2024-25.pdf
[3] Crown Land Management Act 2016 (NSW), Division 5.7, 5.30(2)(a).
[4] Crown Land Management Act 2016 (NSW), Division 5.7, 5.31(2)(a).
[5] Ibid, Division 5.7, 5.31.
[6] Ibid, Division 5.6, 5.32(7).
[7] Ibid, 5.30(4).
[8] Wik Peoples v Queensland [1996] HCA 40.