Splitting the Lease Now Allowed

New rules have been brought into effect to provide for the regulatory regime necessary to allow bifurcation of tourism leases. 

In 2020, the Tenth Amendment was brought to the Tourism Act on 27 December 2020. Among other things, section 5-1 of the Tenth Amendment enabled legislative change to split tourism leases for islands falling within one lease and located within one lagoon.  The law provided for the basic rules and left the details to be dealt with in regulations.

After a prolonged waiting period, the Ministry of Tourism have now brought out those regulations providing detailed regulatory mechanisms for bifurcation of tourism leases. The rules are found in the 5^th Amendment brought to the Grant of Rights Regulations. The gazette publication of these rules was made on 28 March 2022. 

Some Key Rules

The key provisions in the bifurcation regulations are summarized below:

1. The lessee is given options: split the lease; transfer the additional island to a separate lessee; grant a sublease; or even enter into a management agreement. 
2. The process can begin by making a submission in the prescribed form to the MOT. The first phase would be to split the lease; and the second phase would be to assign, transfer or sublease the other island(s) to a new entity. 
3. Tourism Ministry would require certain documents along with the application: board resolution of the lessee to create separate leases; and a chart demarcating overall boundary of the designated location and boundary of the each of the affected island(s);
4. In addition to that, a no objection letter would be required from mortgagee bank if there is any subsisting mortgage affecting (or including) the island(s).  
5. Before MOT would approve the split, the lessee would need to settle all dues owing to the government; and pay a bifurcation fee of US$500,000.

Some key processes

As for the processes, the following may be noted:

1. There ought to be a map prepared by a registered surveyor under (and in accordance with) the Boundary Regulations (Regulations 2012/R-7) demarcating overall boundary and individual island boundaries. 
2. The boundary of individual islands should not exceed the overall boundary and must contain at least 100 meters within each island – and there ought to be consideration given to the ease of access to each of the islands. 
3. A no development zone of at least 100m should be created at the point of bifurcation of the individual boundaries of the islands.
4. There must be a distance of at least 200 meters between the two islands measured from the edge of the vegetation of each island. 

Relations with main lease 

The bifurcation should not affect or alter rights and obligations provided in the main lease agreement. 

The period of individual (new) leases (for bifurcated islands) would be deemed to begin from date of commencement of the main lease. 

By MN

Photo: Courtesy Mihaaru