CITY LEASES

Dominion, Volume 10, Issue 3017, 2 March 1917, Page 6

CITY LEASES

THE? COMMISSION'S INQUIRY FURTHER EVIDENCE WORTH OF WELLINGTON LEASES. The Leaseholds Commission, consisting of Mr. Justice Jiosking (chairman), Mr. C. V. Thomas, and Mr. w. Milne, sat in Wellington yesterday.

Evidence was given by Mr. Harold Beauchamp. He read a long statement, in the course of which he said that where the terms of a tenure caused the -tenant unnecessary loss without corresponding gain to the landlord, that lose was economic waste. It was a crude fallacy that fair rent might be ascertained by determining the freehold value of tho land, and iixing rentals on the renewal of a lease with oppressive terms on a percentage of that value. If this test was applied to Wellington City Corporation leases, it would be found that their terms were gratuitously burdensome and unsound. The terms of the Wellington leases were for fourteen years with right of renewal, and were devoid of the following requisites:—(l) Beasonableuess of term; (2) reasonableness of ront; (3) fairness and reasonableness of the otrer conditions to be observed by the tenant. Fourteen years was an absurdly short term, and the present corporation leases were worthless for security purposes. He did not consider the rents asked by the corporation reasonable. The only sound principle was to take the return that was to be made from the site having regard to all the usual conditions generally adopted by the prudent business man. The evil arising from the uncertainty or divergence of opinion as to the conditions to be observed by the lessee during the term, and as a preliminary to a renewal, conld not be overstated, and in this respect the corporation leases wore unutterably bad. Neither the lessees nor their legal advisors had been able to fathom the real meaning and effect of these leases. It certainly did not seem reasonable and sensible that lessees should be asked to carry onj under a lease from 6uch a body as a city corporation without a clear understanding of the rights and obligations under the lease, yet that was what every corporation lessee had done for years past. A further objectionable feature of" Wellington Corporation leases was that they contained no provision for compensation for improvements effected by the lessee. The lease was most undesirable as a base from which a business man could carry on his operations, and upon which to invest money in the erection of buildings.

Some Suggestions Offered. Air. Beauchamp urged to make the louses attractive and equitable:—(l) That leases for a term of 6S years shovel be granted, such leases in tho first case oeing oifercd for eale by tender, or public auction, at the upset rental fixed by thp lessor; (2) that at the expiration of each term tho rent for a further period of C 6 years should bo fixed by arbitration in tho customary manner, -and tho value of existing improvements determined in like mau.ner; (3) should the then tenant elect not to continue his lease, he should have the right , to surrender same, and ho paid lmlf-vnluo of his improvements as ;issessed in the manner aforesaid; (i) on tlie surrender of the lease, the lease should then be offered for sale by tender or public auction, for a now term of Oβ years, at the upset rental, weighted with tho total value of the improvements. By providing payment of value of improvements to tho extent of one-half there wpuld be every inducement for a tonant to maintain his premises in a good state of repair, whilst under existing conditions there was no such inducement. There should bo a provision in the lease that the lessee should be compelled to keep his premises in good order and condition, fair wear and tear execpted. Plans of buildings should be submitted to the lessors for approvnl or otherwise. Hβ saw no reason why there should bo any difficulty in securing the services of competent, experienced men to act as arbitrators and umpires in conformity with the practice that had obtained, provided that tho method of ascertaining the rent was more clearly denned to ensure something reasonable. If the torins of the lease ■wero altered ae he had suggested, there would not be such* a wido difference of opinion between the arbitrators, as the one acting for tho lessor would know that in tho event of his stipulating for too high a rental tho lesseo would decline to continuo his lease and would then be entitled to receive from tho lessor half value of his improvements, and it was in tho interests of the lessor that thero shouild be no break in the tenure of hie leases.

Wellington and Dunedin. The chairman: You speak of tho fact that these leases are not treated as valuable for security in the first place, and in the next place that there is no inducement to keep the- X'laco iu repair. What i can't fathom is that in Dunedin we have had it that this system of leasing has been in vogue for 50 years without objection, except that they should not bo put up to auction. Hie difficulties which have arisen here have never arisen there. Tho plan there has been generally to lake the rate of interest on the capital value, and not the current rate of interest, because it is recognised that- those rentals make the beat security possible.- Why that has not been applicable in Wellingoii 1 have not: been able to Hindu-stand. It irf the only place in which we have heard of these difficulties.

.Mr. Ueaiichamp: I don't think Dune<liu can bo compared with Wellingto'n. Duucdiu has been retrogressing and Wellington progressing. Also there is a very great dearth of land in Wellington. Tho chairman: Whatever the outside view may be, the inside view is that Dunedin is .not going back.

Mr. Beanohamp said also that-at present ho would- no more think of putting his money into a corporation lease than throwing it over tho end of Hie Queen's Whrrf, ivnd us u Igniter he would not consider a corporation lease to be a security. The fourteen years lease was too short.

The chairman: If things had-'beon going down, the tenants would have complained that twenty-one years were too long.

Mi , . Milne: Have the rates in Wellington increased in recent years? Mr. Beancliamp: Yes.

Mr. Milne: Was that not a burden which ehould have been taken into consideration?

Mr. Thomas: Has the rate really increased, or is. it the valuation that has creased?

Mr. 6'Shea: The rate has increased only a tenth of a penny. /

Mr. Thomas: Bo you think that a board of expert valuers as against arbitrators would get over the difficulty? Mr. Milne: I suppose that the real trouble is that the tenants find the contracts burdensome.

Mr. Beauehamp: That is undoubtedly so.

Mr. Beaucliamp said that a man of small means could not take up a corporation lease. Mr. Thomas: Is tlic small ness of tho area here a trouble? Mr. Beaucliamp: Tho difficulty;, of course, over business and residential circumstances is the limited amount of land Wellington has to offer. The chairman: That is the reason of the hifjh capital value. In Dunedin there is land which would come into competition with tho leases if there was am- excessive rental. Mr. Beaucliamp: There again the decision rests with supply and demand. The Lessees' Point of View. Dr. I'itchott, Public Trustee, in the course of evidence, said the Wellington ,£ity Corporation leases were not satie- ' factory security. Air. C. B. Morison, K.C.. attended, and submitted a copy of a statement he had nio.-icn'.ed to the City Council. It covered the. matter (if (lie arbitrations representing certain leases, and portions of it wore published at the time of its presentation to the City Counoil. Mr, C. E* Skerrott, K.C, who -ijppoared

existed two types of lease in Wellington —tho auction lease, and the form of lease which eliminated tlio auction clause and gave the right of taking a lease at tho valuation rental on pain of forfeiting improvements. There were nowonly eight or ten auction leases remaining. Tho present fourteen years' lease was too short. It was a defect that tenants had to forfeit their improvements, and it was unjust to the tenant for him to liavo to pay the whole cost of arbitration. As tilings stood at present a tenant. would "have to establish an obsolcsenee-depreciation fund, and he could only establish it by paying less rent. As to tho tribunal for fixing the rente, arbitration could not be satisfactory unless administered in the proper spirit. Tho trouble here was due not 60 much to the vice of the system as to the wrong spirit in which the corporation had administered it. As to the suggestion that a Judge should,be appointed as chairman of the tribunal, if a Judge were appointed the proceedings would become litigation, and the questions would have to be determined on tho weight of evidence, and not on the valuation. The commission, will resume at 10 a.m. to-day.