Goulburn Mulwaree Council and Gunnedah Shire Council in New South Wales are pursuing investment in their communities through innovative new airport projects. Both councils have adopted projects that will enhance the productivity of their airports through transactions with third parties.
These third parties will assume responsibility of repairing and maintaining capital improvements and improve patronage of the airports.
Goulburn Mulwaree Council has resolved to dispose of Goulburn Airport.
Gunnedah Shire Council has exchanged contracts to sell a small portion of Gunnedah Airport to Australia Asia Flight Training Pty Limited (AAFT), for the construction of a flight training academy. Provided that the academy is constructed as agreed, the balance of the airport will be leased to AAFT for 30 years.
A key consideration for both councils is ensuring the continued operation of the airports after the respective sales are completed.
The continued operation of Goulburn Airport is required by a public positive covenant registered on the titles to the airport land. Put simply, the covenant provides that the airport must remain used primarily as an aerodrome available for public use, and all development must be compatible with the use of the land as an airport.
The benefit of a public positive covenant is that it enables Council to regulate the use of land and enforce the obligations against subsequent owners of the land as though that owner had entered into a binding covenant with the Council.
Although Council has resolved to sell Goulburn Airport, capital improvement works to the airport are highly desirable to revitalise the airport so that it continues to service the community and stimulate employment.
The sale contract to the purchaser requires that airport works be carried out by the purchaser. If the works are not practically completed as agreed, Council has the option to buy the airport back from the purchaser.
The sale contract also includes a right of first refusal in favour of Council. This means that if the purchaser decides to sell the airport, they must offer to sell it to Goulburn Mulwaree Council.
This allows Council to maintain a degree of control over a future disposal of the airport.
By contrast, the bulk of Gunnedah Airport will remain owned by Gunnedah Shire Council. In this way, Council may continue to control the use of the site through the powers it retains as the registered proprietor.
The proposed 30 year lease to AAFT contains provisions restricting the use of the land to an aviation training academy, operation of a licensed airport and ancillary activities.
Council retains the right to grant a service operator rights to use the airport for a regular passenger transport service.
Similarly to Goulburn Airport, if the flight training academy is not constructed as agreed, the 30 year lease may be terminated, and Council may exercise a call option to buy back that part of the airport land upon which the academy was to be constructed.
Maddocks is assisting both councils in these airport projects.
If you require any advice regarding the disposal of council assets, or controlling the use of council assets after disposal, please contact Christopher Conolly at Maddocks on (02) 8223 4142 or email christopher.conolly@maddocks.com.au
*Christopher Conolly is property partner in Maddocks Sydney office and an accredited specialist in property law. Maddocks are leaders in Local Government law, advising over 40 councils in NSW and 68 of 78 councils in Victoria.
