RENEWABLE LEASES AND VALUATION FOR BUILDINGS.

Globe, Volume XXIV, Issue 2628, 8 September 1882, Page 3

RENEWABLE LEASES AND VALUATION FOR BUILDINGS.

The folio wing letter appeared ia Thursday's issue of the " Press ":

Sib, —Will you kindly aliow me spaoe to invite my follow oitizens to the consideration! of this question. The present time is favorable, as many of the original leases of the most valuable city properties are now running out, and the old buildings must give way to new and more peimanent struo* turos.

Christchnroh, for architectural features, ia far behind moot colonial towns of any importance, even those with a population equal to half ours, and I venture to say it is mainly attributable to the non-introduction of the system named above. It must be borne in mind that any buildings we may now erect, and they must necessarily be composite, will do duty for the next fifty years. Hence the necessity of seeking to make the street elevations of all future buildings as handsome as possible. Contrast our city centre with Dunodin, and where ate we P It will be found that the majority of the fine buildings in that eity are on leasehold tenure, and the system so wisely carried on there of renewable terms, or valuation for buildings, is reoognieed as beneficial and equitable by both landlord and tenant. Take the opinion of a stranger amongst us, and what will he say of some of our most valuable business frontages f Take the large blocks of town land, the property of the Church Trustees, and see what miserable erections have been plaoed there. And these and many other blooks will remain so for the next twenty-five or thirty years, until the leases shall lapse. However, passing what is irrevocable, let us look to the future. We all know that ground landlords, as a rule, care little what class of building is erected so long as the ground rents are satisfactory and sufficient money is expended by the lessees in erections to save the landlord against any risk or loss. And we also know that ground landlords prefer making a building lease as short as possible, that they may reap the benefit of the free possession of such buildings at the expiration of lease. With such a clats of landlords, how long will they übo tbe old ereetions after termination of the lessee's interest T Judging from many instances in some of our most valuable frontages, it will be until repairs oan no longer be made. It is difficult for a lessee to recoup outlay in a thirty years' lease without a compensation clause, owing to heavy oost of building, and he is thus driven to cut and pare bis plans down to the lowest possible limit, the ground landlord caring not so long as security exists for rents, the tenant quite indifferent so long as the building will stand to the last day of his term, and through this course our best streets will be disfigured for probably fifty years to come. It will be admitted that the majority of owners of city property are averse to building on their own land. They prefer to let on building lease as giving least anxiety and enabling them to look forward with certainty to a fixed income, say for thirty or forty years ahead. But in the majority of oases suoh investments are not made to yield the best possible ineome owing to the refusal of landlord to meet tenant on the question of compensation for buildings. A tenant who has to provide sinking fund to oover his total expenditure cannot afford to give the same rentals as one entitled at the end of a Bimilar lease to receivo probably two-fifths of his first outlay. It may be said there is little difference to the landlord in the long run, as the loss on ground rent per annum on a non-valuation lease is equalled by the amount he must pay at end of term for valuation of buildings. But the difference appears in this, that the owner will be receiving the benefit of an increased inoome during the full term of lease (which is, I take it, the primary object), and at the same time adding to the value of the fee simple.

In addition to the increased rental that a landlord can obtain, where he grants a right of renewal or valuation at end of lease, his tenant materially increases the value of property by the ereotion of first-olass premises, and when it happens that a landlord has several adjoining building frontages to let it is a matter of great moment to him to seoure the ereotion of good buildings on eaoh site as affecting the value of the whole. Bat, presume that such a landlord is oareless as to buildings so long as rents are satisfactory, what is the result t A probable diminution in value of his own freehold, and a like result to that of his neighbours. I am aware that many ground landlords would prefer granting a lease for fifty years rather than entertain the question of valuation at end of a thirty years' tenanoy, and all because they do not like the idea of paying for build' ings. But what do such stand to lose ? Take ground rents twenty years baok, and compare them with present rates, and what do we find, and what may we not find in twenty years hence P There cannot be the slightest doubt that business sites within a fair radius of Cathedral square will, at that distance of time, be extremely valuable and out of proportion to any valuation we may now make. Hence the reason in granting short, renewable leases, and thus fixing rentals on an equitable basis. Under such terms neither landlord cor tenant oan gain or lose muoh one from the other, by fluctuation in values ; but each will be assured that the income is fair for whatever is granted. It is a matter of great moment to a tradesman in an established bueiness to seoure himself under suoh a lease (in oase he should not be his own landlord), inasmuch as (lacking the right of renewal) an arbitrary power is placed in the bands of his landlord on termination of lease whereby an excessive high rental may be demanded, and which the tenant will be almost bound to pay rather than leave his accustomed business prsmises, as it is not advisable even for an old-established business to remove its position.

Again, in the case of general merohants and traders. All suoh will be found to prefer the position of tenants, with right of renewal, rather than to purohase land and build premises (except in oases of unlimited capital), as the turnover on amount of capi al so invented will more than equal ourrent interest and the growing value of such land and premises.

The question is simply one of bringing in land as an ordinary marketable commodity, to be quitted and re-offered at its market value.

Again, the lessse, under a renewable. lease with valuation clause, has a material advantage, inasmuch that his interest is always a good marketable security up to the end of his lease, to an amount equal to the value of compensation derivable from his ground landlord. There can be no doubt that the landlord's position is enhanoed in value by granting suoh covenants, and in more ways than at first sight may appear. Take this instance, an owner of good city proporty completes a lease for, say, thirty years, with no building restrictions. Shortly afterwards he dies, leaving instruetions under his will to realise forthwith on suoh property. How is the value of it attested by the conditions of the lease just granted P Under such a lease the ground ront would be considerably less than under one allowing valuation, and, as fcho value of the fee simple is mainly governed by the nett income derivable, it follows that a true value is not obtained under such ciroumstanoes.

There are many other advantages in this system, whioh, if onee understood, wou'd lead to its general applieation._ To many minds the system is strange, and may on first consideration appear to be in favor of the tenant, but a little thought will convince them to the oontrary. Yours, &c., AbtHT/b Applbby. September 4th, 1882.