FAIR GROUND RENT

Dominion, Volume 37, Issue 192, 12 May 1944, Page 6

FAIR GROUND RENT

Lessee’s Application To . Court Rejected

STABILIZATION POLICY

Judgment in a case that is the first of its kind, a motion under the Economic Stabilization Emergency Regulations lor an order by the Supreme Sourt determining the fair ground rent, of land under a lease from the Wellington College governors, was delivered by Mr. Justice Smith yesterday, Tho application, which concerned a property in 1< itzherbert Terrace. Wellington, was rejected, ms Honour deciding that the applicant had failed to show that an anomaly existed. The applicant was Archibald Burnett Sievwright, solicitor, as lessee, and respondents were the governors of M elnngton College and Girls High School, lessors. Applicant Ind at an auction ot leases in 1927 for a lot containing 2a perches, and obtained it for a rental ot £54 a year with perpetual rignt of renewal for terms of 21 years at a rental to be fixed by arbitration without takin o into account-the value of improvements. He filled in a gully, built walls and drove piles for his residence ?.t a cost ot which would be taken into account when the rental was next fixed. Under the National Expenditure Adjustment Act, 1932, and at various times since, reductions in rental were the rear ended April I_, 1937, being £32/10/-, but for the year ended April 1~. 1940 and for subsequent years the governors have claimed the full rent, payable under the lease, £o4. In January, 1943, the governors agreed to a reduction of rentals at which Queen Margaret College purchased leases of two lots at the auction in 1927, hut rentals of two other lots Were not reduced. Applicant asked the Court to reduce his contract rent. 1 His Honour said that the first relevant matter was the purpose of The general intention was that the lessor should receive rent, of that amount to assist in meeting his outgoings as hud been stabilized at September 1.19 L, just as the lessee .in his capacity as creditor should receive payment of the amounts to which he was entitled at that date to meet his outgoings as .they had next relevant matter concerned the principle on which the amount, of the fair tent should be fixed, A dear distinction must be drawn between an application to fix the fair annual rent lor the purpose of a new contract and an application to fix for the duration of an existing contract a new rent in lieu of the existing rent to which the parties had already bound themselves by their contract. It had been held by a Court that the ground rental fort a renewed term between a lessor and a building lessee should be represented by a moderate rate of interest on the capital value ot the unimproved land. That seemed to have influenced the evidence in this case, but it had no relevance to the question at issue. It .was a rule of guidance which applied where the parties were making a new contract for a new term pursuapt to the method of valuation on which they had agreed. It had no relevance to the question of whether the highest rental bid at a public auction for the first term of a lease in perpetuity which carried with it the right to hold the property in perpetuity was fair or not during the first term. “In my opinion the principle for deciding .whether that rent is fair or not during its term is that the contractual rent freely bid at the auction is the fair rent unless matters which are relevant under the Stabilization Regulations can lie established which are so strong and cogent as to justify the breaking and varying of the contract,” said his Honour. Other relevant matters that.could have been submitted included a fall in valuation since September, 1939, but'obviously there had been no such fall in values and none had been suggested. It was impossible to say that a rental bid under the economic conditions of 1927 was unfair when judged by the economic conditions which had obtained since 1939. The only matter which had been submitted as relevant to show that the .rent should he reduced for the rest of the term, till April, 1948, was that applicant’s basic rent was anomalously high when compared with other rents. Assuming, without deciding, that the regulations contemplated that a rent should be reduced if it appeared to be anomalously high, his Honour said it was clear that only rents payable since the commencement of the stabilization policy were comparable. Rentals which would be relevant for comparison were others now payable which were bid at the auction in 1927. It was difficult to com pare them because of different purchasers’ desires, but assuming they could be fairly compared, then he would say applicant's rental was not anomalously high.. At the hearing Mr. C. H. Weston, K.C., with him Mr. W. Heine, appeared for applicant, arid Mr. T. O. A. Hislop for the college governors.