CONVERTING LEASEHOLDS.

Dominion, Volume 6, Issue 1582, 28 October 1912, Page 4

CONVERTING LEASEHOLDS.

VALUE OF UNEARNED INCREMENT. Many opponents of tho proposal to give Crown tenants on. renewable leaseholds the option of purchase declare that if the freehold is to be. sold the price should be the present market value. The Minister for Lands has always maintained that this contention is unfair, and his proposal is that instead of paying tho so-called present value of tho fee simple, the settler shall nay tho original value plus the actuarial valuo of the unearned increment, a very different thing. Tho position so far as the Stato is concerned is that, providing the lease is not renewed on its expiry, there would revert to the State land of which the valuo comprises the original valuo plus the unearned increment, if any. A parallel to tho case of the settler who wishes to acquire the freehold of his section is the caso of a man discounting a bill. Tho unearned increment is a bill duo at tho expiry of tho lease, and its present value must be calculated by a reverse application of interest, similar to tho method by which tho discount on a bill is computed. Some illustrations have been calculated by Mr. Morris Fox (Government Actuary). lii each instance he assumes tho case of a man holding a 33 years' renewable lease- of 100 acres, tho unimproved value of which has increased from .£5 to ,£ls per aero, the original valuo thus being .£SOO, and the increment .£IOOO. The Opposition contention is that at any period of the lease tho tenant should pay .£ISOO for the freehold. Mr. Massey's proposal is that the price should bo proportionate to tho period of the lease remaining. Interest is taken at 5 per cent., and the price of the freehold works out as follows, the actuarial valuo of tho unearned increment being given in parentheses:—A lease having run ten vear«-(jC325 18s., which is the value of £1000 duo in 23 years), prico ,£625 lis. 6d.; a lease having run 15 years (.£lls 10s.). .£915 10s.; a lease having run 20 years (£530 65.), .£IO3O Gs.; n lease having run 25 years (i!G7G 175.), £117G 17s.