CITY ENDOWMENTS.

Dominion, Volume 6, Issue 1679, 20 February 1913, Page 6

CITY ENDOWMENTS.

TENANTS SEEK RELIEF. THE QUESTION OF RENTS. ■ 7v*"' ' " LETTER TO THE COUNCIL. I'or 6onit> time pa.it thoro has .been .; ' great dissatisfaction; amongst leaseholders who rent .business sites from the City Corthe ground, rents which they, •aro', called I-Jpon to pay. Tho city endowments are leased under -' a tenure known as the Glasgow lease, which makes provision for,,'a'revaluation ©very .fourteen years. . After.; each revaluation tenants Have to pay a rent based upon a , A'ftlue assessed by arbitrators, or resign ;• ' their tenancy: together-with any improvements they may havo fiifected. lhis arrangement, the tenants t contend, is in- • equitable. They maintain that , the sys- ■' item-'of,'. valuation; of. tho: leasehold areas ■ whioh -the city, corporation has adopted is - ■ -. ■■wrong, and further, that compensation should be givfin for : improvements when tenant.resigns his lease. .. tfTho Casefor the Tenants.;, : A Wellington Leaseholders' Association U'as formed in October, 1011', >9 the result ,W> a meeting of; leaseholders. Who' Were -• Itlissatisfifed with the :high'.reittals. which ■ >'had bean awarded by; arbitrators ■m-re- '■ "' .'cent arbitration casesVi, The caeo for'tne '■tenants is set forth in the- following ,let- " ter from the secretary of -'the' ' Lease- ■ (holders' Association, i .which l has been forwarded 1 to tho Town. Clerk:— • : "I am directed by my committee to bring nnder 'the 'notice of. your; council ■ '' the' m'Attcr /of: the terms and' conditions - : ■ trupoa' wliioh the' corporation, grants . its : •>: ' 'leases, i The -leases: referred to : are .those from tho Wellington' City Corporation, in' '.which ■ generally i the rental is . assessed 'every'fourteen. years.'!: Threo valuers or , 'arbitrators are appointed to assess tho 'rental for each; period,'and it is the duty. 1 'of'ithese "arbitrators;.to'arrive'.'at what -ivill-lie''the fair annual ground rent;of ttho Und withb.it any buildings and"linprovfiinents for each further renewal period / . 1 of fourteenyenrs.' Until 'tho decision of ■' 1 the'.Court of AppwU. (ia'the D.I.C. case) ' " tho' method- adopted to arrive at tho reiV'tal,''in making ,'oiftw-''period, .was "for the: arbitrators to. ' jicaf'evidehceas to the freehold value of' ~ the' land included in .'the. lease, determine: .... Vhat. in 'their opinion:' was the freehold ■: >.' value, and then allow as the rental a per- ; fcentago-'of'. i s per -cent, .on the 1 value ar- ' rived at. 1 . Dlsoutod Valuations. ; - >.- \ i '"IJ; was'apparent tomany ofthe' lessks ■that.;th , 3.rentals 'awarded by. tho nrbitra-; , tors were much too high, and i at "first it • ■■'■■■ Wda 'difEcult .to seo where mistake' hiid ''- i" ■'• 'been 'madfi in tlie assessment, particularly '; inYview of thb'.faci that, the rentals ;were., ■: 'UsseOed- oil;.>vhat '.:WaS generally taken to; 'bo' tho current value of the' lind as, a' freehold T site. WJien' lessees "' :c6mo. '' . to'work • out';: 'the' net';producing''value ■of tlieir land and. buildings,' on'tlie one ; ihahd; .crediting®.rental3 v .i?6ctiVed,''and"on'. '. r ' tho .other' debitingall outgoings ' in. tho C jiaturo of rates, interest on cost of buildings, etc., and making duo allowance.fof 1 firo and : earthquake , insurance, deprecia-. •' • • tion, maintenance, and other ; . it nv-as' found- that they, could ''noi'afford u ' to payias.groiind rcntal eviih 4-,pcr-cent. •"■■■■'■• on,the ,land tax rvalue of tho land..: This V " :. dcnijsnstrnted';ei.tlier;;.that < •■the'./ ,tfix fvsTO|«aßrtb6.i{4V ; pr.--jthM;.ttj.;;wsfs, of V. : i ; fhe -arbitrators'.'assessment 'was . wrpng/ , "The'Leaieli'olde's*'-Association,' '■'■ which : ; iiiclwdes among its members nearly, all; the ■ . business houses in the town who are liold- !: ■'. , 'ersi.ofi City iCorporation ■ and Harbour ~Boar(l;[ leaseholds;, was/formed, and - the ■ ' .'whole-'matter».was teferred to Mr.' CI; P.

: \Sfcerrett, /K;C, for his opinion. .:■. Jfr. v. Skerrett expressed .thbixip'ihion 'that: the '-'■'. .raeth'odjadopted' by>arbitrators of taking thi£.alleged;.'freehold yaluej' r and determin- ■ ihf; as' ithe- rental a percentage of that ■.".' value, ■ was WTohj,- as- this freehold, value .'■/..nearly, .always. ;inciuded -a ; 'prospective .'/■'' value: '■ .'He-.advised-that the proper way ;.-.'■■ was. "to ascertain what return the land artd'buildings would produce,, and then, ! .r after deducting *all proper.".outgoings, it ■;. ; .w'ould*:ba fmmd'what was'the fair rental i\ :to Pay ''as-ground rent to the City ,Cor- !>'.'?•• poration,as lessor. .;.:.;• ';.,-'..,..'. [f.&TJ.'^'V,.'■''./: A,Te»t Casv .',;/..';■ ';'":'■;' to have a.case, stated .'. for the ■ opinion of.'the Supreme Court to '% ascertain., what was.the: proper, basis for i '..the-arbitrators to adopt,. And with the con- ' O 6ent of.the directors,of the D.I.C. and of ' the City Council; advantage ; was taken of.< .the; ,D.I.C. .valuation a test, case. .\Thß^ca!»,'wa's'■''remov'ed'' i to_.the■&>urt-of• '■ r ---"Appeatl,''. and the judgment of the Court ~, will ,bV found ,in .N.Z.L.K., Vol'. XXXI, :•'-'• page 577. ,lt will be-seen from,, that judg- ;',, ment ,;that .the.Court of Appeal decided . ,that the contention that.tho arbitrators. V 'lad to ascertain: the-, freehold yaluojof the land, and then fix the fair annual ground V ,ientat:at..some;.percen,tag6 ohthat,freeihold >aliie,.:.-w.as,>wrpng;V'and '.that/.tho^ ''■."/fine'.'basis was that the valuers':must' .'>:'. -proceed as .if. there were, no .buildings nor ",- ! :mprovement3 u onthe. land, and' then asceriV' I tain what ri prudent - lessee would give :" ;for the ground rent of tho land for the '."'•■ term on thf conditions as itb renewal and , '-'■ other terms mentioned in tho lease. '■! ;• : ''The'i ; :Leaseliblders ; ,. Association • then .'7; asked.,3rr. I ,SkciTett■ ; to '.a'dviss .what was / . the'effeot of, the. judgment.'; Copy of-Mr. . is'sent herewith. ..':.. u '"" " " Mr. 'Skerrett's Opinion. "Mr. Skerrott. expresses, the opinion that a; pi-ndent man wotild take many ,: 'things into consideration before he could ■ safely take up a lease: ho would have to :•':■ consider what rental return he was likely to get from his building, and on the other ~1 hand he would, require to make due allow- ;' ance. for ground rent, •'rates, taxes, .Are ■"•■■' and earthquake insurance, interest/depre- ': - elation, repairs; and maintenance, sinking '•' fund, cost of working lift, cost of a certain 'amount of heating and lighting, cost of collection of-rents,.: and: muko.duo .allow- ' .-'-'ance for«the 'probable period when tto building dr part of it would be unlet. He would have to take into' account tho fact <■■■.• that during the construction of his buildin", 'probably, about ..twelve ,-monthSi tun '- would get nonreturn'.l-.iHe would' havb to', .-, realise that he .pets no compensation for' ' t his buildings; that the lease was. renew- . able for fourteen yearly periods, and that each' time he applied for renewal he would ■' tie pht to.considerable eiperise. In'atlrti- '■■':■ Hon to this,:he,"would.have to,proyida: '•■ a sinkingfund in case- it were found_that. at any period when tho lease, was- being renewed that the bmldin? was unsuitable , '■' for the locality/and thlft in order to make -•".'. it suitable a 'large;sum would have to -"■ ■be spent, which 'expenditurt. .possibly. could not be recovered, from the tenants "'-.. in increased rental during the succeeding. .' period of fourteen years.

An Enormous Differ'nei. ' " ' "Several of the arbitrators w.ho-have-Bat on cases already heard havo expressed the opinion .that the ..leases aro unsatis- : factory. The difference between what " lessees and their ndvisers consider a pro- ' per lgronnd rent-and what tho'corporalion claims, is so enormous that natur- ■ .ally considerable unrest has arisen among ' : 'holders of lenses. ,In the D.I.C. case tho ' .lessees,', advisers-after, coing mast carefully into the D.I.C. figures, and after comparing them, with tho figures,of other lessees, camo to tho conclusion that a / le'iee taking up a lease in Brandon or J Panama' Street,"after making provision' for nil outgoings and proper allowances, could not afford,.to.;pay, more., than ..£2 12s. Cd. per foot. The corporation claimirt J2ll ss. per foot, and as the frontage ■ in (uie-tion was some 210 feet, and the term of tho lease fourteen years,, it is apparent that the difforcnco in tho calculations of rent. I>y-tho respective parties was enormous.' '.* '" ' . , , /' "It may be asked: Why ar® lessees tak- ' ing Up lenses or retaining'leases on which bis rentals ate payable. The. probability 1 is that many did not take into consideration, f(nd mnko! duo allowance for, all ' : tho contingencies. It must bo remera- • bcml, too, if the rent awarded by the arbitrators is too 'high for tho;. tenant to ■"pay, he has no remedyhe mtlst either • by tho rent or forfeit ,1ns -buildings, Ln'd this may'result in financial disaster. Tako tho case-of a leasee who puts up valuable buildings in an office area, »nd that area becomes a shop area, on a revaluation tho arbitrators will large1r iricreaso his. ground rent, but the alteraVon of his buildings to make them ■V suitable, for -shops may cost him soveral thousand pounds. It may be that unless S / v *

tin taking up a lease the cost of alteration is taken into consideration, a lessee, however careful,-will find, where the site valuo has increased, his leaso with the buildings thereon has bccomo a liability instead of an asset. It. is quite possible that tho rentals from his building as shops during the "next fourteen years, which will have to bo based-on rents ruling in that locality, will not cover the cost .of tho alterations, tho increased ground rent, other outgoings and proper allowances; "

Compensation for Improvements. "Tho-association submits that the existing leases are unsatisfactory, and after caretul consideration, and getting the best legal advice, has come to tho ivnclusion that the only renewable lease (hat can be satisfactory to both parties is one which provide! that'if the arbitrators assess a rental such as tho tenants think too high, then tho corporation-should bo compelled either to reduce the rent or allow the lessee to .'surrender Jjis lease, and should pay him for the value, of his building In debentures or otherwise. The- present lease, which compels the tenant to forfcit everything or to pay a rent which he cannot afford, is altogether unfair... "Tho ground rents awarded .recently, havo' bee n't o high that sonie of the lessees had seriously to consider Whether it would pay them to forfeit to the corporation all-, interest Tin their buildings. .Already several of tho' lessees have acquired freehold sites, and unless the leases are altered it' is highly probable that the corporation will,'have to ; accept surrender of leases, and have buildings on their hands.', '• ' ~ . ' "The ; association ■;submits' that compensation; should - be given - for improvements where the lessee finds that.tho rent is too high and where .the corporation will not aurco to reduce its then the lesseo will know exactly what his position'is. ""'Again; the association considers that tho term of fourteen years for the renewal periods is. too short and should be \i at least twenty-one years. The tenaius would have a better lease, and wo,uld have more confidence in it/ A. present the difference'-.between the, corporation s conception o£ values and the ' tenants ideas is so great, that every fourteen years the .tenant is put. to .considerable . expense. In self-protection he lLiust c'ise properly placed before the arbitrators. This means' employing counsel and calling expert witnesses, and these expenses,, tho'arbitrators' fees, and cost of drawing, out .lenses may easily cos several hundreds of pounds. The D.I.C. case lasted two and'a half days,, Committee Inquiry Suggested. " Tho' leaseholders' "Association" would suggest -that the ; corporation appoint, a committee to go into the matter of. the leases, and would to P-eased to. have itei own committee confer .with und place, its views before 1 the, corporation. . The members'of tho association..are. satisfied that if a: lease fair to. both'parties can ba devised it would be as -much in tho niter,ests of:the corporation, as in the interests of tho lessee.. ' ' ■■_ "The association has thought _it proper to write at length, as it considers that, as. there is;so much land in .Wellington City held under, lease, from the corporation, and'os .the Harbour Board, and other bodied have adopted a similar lease, it is of'the utmost, importance for the .future of the city ', that the .lessees and tli6 public should have confidence in-theirleases; 'otherwise, the; progress -of ,'he city will be retarded 'nnd freeho.d land will rise to a value which Dot really • justified-. Statement by the Mayor. . The (Mr. 1 D. M'Laren) was interviewed last evening : in .regard M the l action taken by the corporation lease- ! holders; biit idcclincd. t'o- discusfe the question at "length on ,tlii> ground-. th£u . it hid- not' .'yet' come; beforo hi'iii officially, ' and .that he had not y4t had .an oppprtunity consitlering in its (fetalis tho case stated by the leaseholders. '. i "So far as I know," ho said,. the letter from the leaseholders' Association has con© to tliQ Leaseholds Cojudiittso/ of-f 'the council. - Beforo ■ Mr. Palmer (Town Clerk) went away-on sick leave,.he told.me that he would place thi". matter befdre me. He'hhd submitted,it to'.thij chairman,of the'leaseholds. Committee.■ Unfal I get .» communication officially I do not feel disposed to discuss tho matter in 0V council holds that the basis on which the leases are fixed has beeirupheld by the' Court of Appeal .in the D.I.C. case; aud'that our, assessments, for'^rental. purposes have b&en on a proper basis, as de* fined and set out in that judgment. Ihavo not as yet, any. full knowledge of. what tho leaseholders contentions are, and until I have Tdon't feel disposed, to discuss the matter." ; /