Māori Freehold Land sold to repay a commercial debt under a mortgagee sale

A long running Māori land court case provides a warning for all governors of Māori land seeking to use their land as security for commercial ventures.

In that case Māori freehold land was required to be sold to repay a commercial debt secured by way of a mortgage over the land.

The commercial debt arose from an unsuccessful business venture undertaken by a Māori Incorporation.

The forced sale was heart breaking for many of the Māori land owners who viewed the land as a taonga tuku iho or treasure to be handed down for future generations.

The outcome could have been avoided by the Māori Incorporation structuring their lending to safeguard the Māori freehold land.  For example it may have been possible for the Māori Incorporation to lease their land or a portion of it to a subsidiary who with the agreement of the bank could then borrow against the lease.  

In the event of non-payment then the lender would have recourse against the lease only and not the Māori freehold land which would remain with the owners.

It makes sense to carefully consider all of your security options before agreeing to use your Māori freehold land as security for commercial ventures.