CITY LEASES

Dominion, Volume 10, Issue 2979, 17 January 1917, Page 6

CITY LEASES

ROYAL COMMISSION OPENED

TENANTS AND THE CORPORATION

INVOLVED PROBLEMS

Tho Royal Commission set up to inquire into systems of municipal leases oponed its sittings at Parliament Buildings, Wellington, yesterday morning. . Tho Commissioners are Mr. Justice Hosking (chairman), Mr. C. F. Thomas, and Mr. , Wm. Milne.

.' The Coinmission'has to inquiro into *and report on 'the following:— .

(1) Is the system of' valuation proscribed by Seotion 137 of' tho Municipal Corporations - Act satisfactory in its application to (a) leases that havo heretofore or- maj , be hereafter granted by any borough, council? (b) leases'that have been granted or may be hereafter granted by tho Wellington City' Council P ■ '• '. (2) If the said By stem of valuation is not natisfactory, what alteration should be mad© therein ? ' (3) Should .the, said alterations, if any, he made applicable (a) generally with respect to leases that have been heretofore or may be hereafter granted by. borough councils? or (b) with respect only to leases that may be hereafter granted by borough councils? or, (o) • wth. respect' only to leases that have heretofore or may be granted by the AVellington City Council?. ■•■■'.,■■ '. (4) : .Are tho provisions of the Municipal Corporations Act, 1908, relating to the leasing powers of borough councils satisfactory and in the best interests of the leases of tho Corporations concerned? ■• • (5) If, ' any. what ■ alterations should be made in the said pro-/ visions? ; ' .

Mr. J.' 'O'Shea. City Solicitor, represented Wellington City Corporation, Messrs. A. Blair and L. 0. H. Tripp represented the Leaseholders' Association and Mr. T. S. Weston was present in the interests of the Wellington jJHarbour Board. The chairman said it was possible .tho Commission would havo to sit in other centres to get evidence of lea-sing I systems there The' Commission was not confined to Wellingon city lease- : holds, but extended to'leases of all boroughs. Ho bad advertised the Com.raission in the chief centres, and had cominunicalions sent to harbour boards, other local bodies, the O'tago University, the Presbyterian Church. ■and the Churoh of England, all of '•whom had leases, and ■ should bo able to tender valuable information. He had 'also sought for forms of leases, and those he bad collected differed much in detail and principle. It seemed that the Wellington Harbour Board was affected, and it>was probable the secretary would be called to give evidence., To start, witlr-he thought the courso would be for someone to stato to the Commission what the mat.tors at issue between: the Wellington City Council and the tenants were ;-It was agreed that Mr. O'Shea should begin. - •

The Corporation view, _Mr. O'Shea said that tho main question, that, affected the commission as far as Wellington. was concerned was the constitution of tribunals to fix the rents in cases of revaluation. Generally, the. scheme ofje'asing set out in the Municipal Corporations Act was satisfactory. But ibn corporation did not think that a: tribunal' consisting, as it did, of three arbitrators, should continue. At these arbitrations a ereat .".mount of evidence was called, different theories were put forward each time, and thero was no continuity and .no similarity in the awards made. Tim chairman: Does not the City appoint the same valuer each time. Mr. O'Shea: Yes, but when it conies' to.tbfl;third valuer, who is the man ■who really decides;' ho is rarely the same-man. The third man sways the

commission. • . ( - The chairman: That has been found to be tho practice? ■ ■ ' Mr. O'Shea: Yes. There has benn a great variation in the awards. In every case where tho third arbitrator has been a barrister of standing the award ks satisfactory. Mr. Blair: To the council.

Mr. O'Shea: In overv case where the third arbitrator has been a business man of standing the nward has not satisfactory.- OiVc think it would be far better if the scheme were so altered that the . parties to the lease could agree, failing an agreement either uarty tb have a right-to apply to a Judge of the Supreme Court to fix tho rent. The chairman: It is only a modern 'development in my experience that determination, of rent; shall be by arbitration.- Is it not far simpler, for instance,..to .have three good builders to determine thn value of a building than p dozen builders giving evidence to a Jiidie of the Supremo Court.

'Mr.' O'Shea: We also pnxnse that at the same timp that a Judge fixes tho value of the land ho shall fix- the value of the building. If ,ibe tenants are dissatisfied with the rental they onn surrender on terms by getting Gf! nor cent, of the amount fixed.

The chairman: One of the objections to this, elaborate system which seems to have grown up is that a valuation is- as expensive as a lawsuit. It is a shocking system both from the point of. vieir of the tenant and the council.

'_ Mr. O'Shca: It is much more to the ,interests'of the communitv. that these rents should he uniform than that the . council should get anything, approaching a. rack rent. It is necessary, of Course, that rents should approach thereal value.

Sixty Per Cent. Compensation. • Mr. O'Shea contended that GO per cent, compensation for building was as much,as a tenant would get on mortgage. If he wanted more he should In , willing to take up tho lease.

Mr. Thomas: The City Council sav that valuers should bo done away with and advocates appointed. Does not the 'Act stjnulato valuers? The Act was read, and it was found that "independent persons" wero provided for. _ The Chairman: In Dunedin there has never been such trouble there as in Wellington. Why there is such trouble hero I don't know. Mr. O'Shea: The council is willing, if this matter is referred, tp tho Supreme Court! to have such limitation put on tho calling of evidence as may be thought necessary. Tho "piling up" of witnesses is not necessary. .Mr. O'Shea (continuing): Another diffio'jltv in Wellington is that the second "term of all the" leases has been limited to fourteen years. ■Mr Thomas: What, does the council want? :. Mr. 'O'Shea: Power to .extend it to tv.onty-fivo years. Blair: As far as the Leaseholders' Association is concerned, wo don't propose to contend that thero should lie any interference with existing ♦ nniis. They should be left to mutual .•urangoment between tho lessees and the cpuncil. "" ■ ».■ /-i: -•■-.- Mr. Thomas: Tho twenty-fivo years' period, would go oil ad infinitum, then? Mr. O'Shea: Ye 3.

Mr. Milne: Why waa fourteen years stipulated for it! tbo first place? ft'weuty-ono yoars is the usual thing.

Mr. O'Shea: I hare no information on that.

The Chairman: No doubt it was fixed at fourteen years to capture the increment.

Mr. O'Shea said they wanted! power to grant straight-out leases up to sixtysis years. Also thoy wanted power where there was a building covenant 'for the corporation to insert a comclause in tlio ', terms of tho lease. .

AEr. O'Shea added that ho proposed to call Mr. James (City Valuer), Mr. C. B. Morison, K.C., and sonic members of the council.

The Leaseholders' Side. The chairman said that before taking evidence submitted by tho corporation, tho commission would like to hear a general outline of tho tonants' viows.

ivlr. Blair: Tho Leaseholders' Association pomes before this Commission feeling it has a duty to place beforo it suggestions which will have the effect of making the leases more valuable, both from the point of view of the corporation and tho tenants. The leases fall into two classes. First, thero is the question of what is to be dono with the subsisting leases, and second, what is the position regarding future leases. Mr. O'Shea indicates that with regard to the subsisting leases he does not want to interfere with them except to alter the terms of the leases as to the method of assessing compensation. Ho wants to force on the tenants something which is not in their leases. The lessees say that if they are going to have a fixed third arbitrator, namely, a magistrate or a judge, that their present contract is being interfered . with—that tho Legislature is interfering. In the D.'I.C. case the • question as to what was the partioular matter to be inquired into was put before the Court of Appeal, and they Baid it/ was: "What would a prudent mail pay in rent " Wβ, say that the ordinary business man is personified as a prudent man. ' . ' . The chairman: What do you call a business man ? A man in a warehouse, a shop, or an office? Mr. Blair: A, man engaged in some form of bpeiness—a man who is used! to weighing business risks. AVe say that a lawyer: never makes a successful business man; his is a deductive training. The chairman: AVould you call a land ager.t a business man? Mi-. Blair:.No./

Mr. Blair: Mr. O'Shea. wants a man with a legal training." Wβ say we -want' a business ; man. It does_ not follow that either, a lawyer or a judge will have that essential business training. ' The chairman: I see. You object to lawyers and land agents. . Mr. Blair: Yes, and we say that tho findings of all the "iiusiness men- are consistent. ,

The'chairman: You say that as a matter of fact the awar<fe-of the business men are better than the awards of the,lawyers? Mr. Blair: Yos. We earnestly stress the point that there should ■ be no statutory • interference with oui contracts. It would be a grave injustico to us. ■ i ..

Longer Leases and Compensation Wanted. The chairman: Do you seek any relief of any kind? Are you content to leave mattere as they are?

Mr. Blair: All we ask is tha^ power be given the corporation to grant an immeasurably better lease. We intend to leave the matter to the corpora- • tioh. t The chairman: That is to say, the corporation may raise the (rent on you if they improve the lease. Mr. Blair: If power is given to mako the renewable period 25 years instead of 14, years, and gives us some compensation for improvements made, it is only right and) proper that the council should have a right' to say, "Before we give you that concession you must give us some concession." Mr. Blair said also that tlie association was of opinion that the corporation should have power to lease up to 100 years arid givo compensation. Mr. Blair: future tenants there is not a great deal of difference 'what we suggest and what has been suggested (much to our surprise) by the City. We wrote to them that they should adopt our suggestions, arid after about two years they have decided to adopt them with some modifications, li should he left to them to da the best they can with the properties,' The chairman: The idea is that the corporation shall have as many wares as possible to sell, so that a customer shall have as great a choice as pos- - Mr. Blair: It is not really that the corporation is the I owner of the property. It is trustee for the public, hilt its powers as trustee are so limited

The chairman: It is not saleable, for instance. •. . Mr. Blair: We don't say it should be saleable, but ire say it is not sale-, able upon terras that are open to dinary business , men. And then the corporation are surprised that they don't get rents the private propertyowncrs get. "We say it is a bad business pronosition tn have it-so. ' Mr. Thomas: "What do you say as to the tribunal?

What Tribunal? Mr. lilair: Wβ say it should be a tribunal of three persons, one each to be selected by the landlord and tho - tenant and the third to he selected by both the others. If the parties cannot agree, wo are quite prepared to trust the Supremo Court to select the best man. They are not prepared to trust even the Supreme Court—Ahey want it fixed right away. . . . The hard fight in many of these cases has been caused by shortsightedness on the part of the Corporation. Take the T. and G. case. Tho Corporation asked £11 10s. They got £o 10s., and were* satisfied with it. Mr. O'Shca.: Satisfied with the award, not with tho amount/. The chairman: If you , don't want any alteration in the tribunal, what do yon want? ' Mr. Blair: We want a tribunal of laymen, and the Corporation given power to grant a better lease; we then anticipate no difficulty in coming to an arrangement with the Corporation. The chairman: The AVollington Corporation leases now first of all give a tenant the option of a renewal. Then when tho valuation is made it gives him an option by taking it or leaving

it. ■ . Mr. Blair: Yes, but he may have to present them with £10,000 worth. oE buildings, if lio does not take it. But tho mischief was not in the tribunal, but in tho lease. There- is a want of appreciation by the council of the depreciatory nature of its own lease. Tho chairman asked if Mr. Blair suggested that the tribunal should be by arbitrators or of valuers. Mr. Blair: Arbitrators. The chairman did not sec why the matter should not be left to valuers whose business it was to make valuations. If the arbitration system ,was extended throughout New Zealand it might do much harm. Mr. Blair said tho amounts involvrd were so large that arbitration was desirable. "Arbitration" was the term used in the Act.

Tho chairman: Then what do you object to in the lease? Mr. Blair: First, that it is fourteen years. Then, if a rental is too high, a man should have a right to forego the lease and get compensation for tho building. The chairman: Would you agree to that operating both ways ? If ; the council thought the rent too low, would you agree that the council could refuse.

to lease, and say: "Here's your compensation" ?

Mr. Blair: No. If the council wanted to get hold of our buildings, tliey would only liavo to say the rent was too low.

Evidence by Mayor and City Valuer,

James Ames, City Valuer, was called to give evidence. Hβ said that his opinion was that the valuations of City leases in the past had beeu very low. Higher rents were obtained by tender. Until the Leaseholders' Association was formed there was no trouble. If a Judge of the Supremo Court dealt with these cases it would tend to settlement.

To Mr. Blair: This reclaimed land belongs to us as citizens, and why should we not get as much rent for it as private individuals get for theirs?

Mr. Blair: AVe "want to see you get a good rent. Give us a decent lease and you will get it.

Mr. Ames: Wβ are going to give you a decent lease.

Mr. Ames said lie had recommended the Leaseholders' Committee of the City Council to give sixty-three years leases in three twenty-one years' periods, with a 25 per cent, increase in rent for the second period, and a 50 per cent, increase for the third period. Mr. Milne: AVonld you charge a publican more rent than another man? Mr. Ames: No. The chairman: You would assess the rent irrespective of the use to which the building is to bo put? Mr. Amos: Yes. John Pierce Luke (Mayor of Wellington) said the council was not at all satisfied with somo of the awards made in recent years, and thought there should be a change in the tribunal. The council was of opinion that where over £2000 value was involved a Judge of the Supreme Court should be tho determining factor. Mr. O'Shea: And under that a Magistrate ? Mr. Luke: Yes. Mr. Luke said the council was of opinion that a fourteen years lease was too short. At this stage the sitting was adjourned till 10 a.m. to-day.