HOTEL RATING

Otago Daily Times, Issue 26624, 21 November 1947, Page 4

HOTEL RATING

EXCLUSION OF LICENCE

AN IMPORTANT JUDGMENT

“The basis on which the rateable value of licensed premises, under the annual value system, should be determined, is of great importance to publicans and rating authorities of the Dominion. It should, therefore, be determined by this court, or, preferably, by the Court of Appeal,” states Mr Justice Fleming in the course of his reserved judgment on an originating summons issued by Henry Thomas Hames, owner and licensee of the Captain Cook Hotel, Dunedin, against the Dunedin City Corporation and its valuer, Herbert Edgar Lyon, asking whether a publican’s licence should be taken into account when the rateable value of an hotel was being assessed and fixed under the annual value system of rating. At the Supreme Court hearing, Mr A, G. Neill appeared for the plaintiff and Mr J. C. Robertson for the defendants.

Rating Basis Limited

After tracing the history of Rating Acts in New Zealand, the judgment said it seemed clear that neither the definition of “land” nor the definition of “ improvements ” could possibly include the value of a publican’s licence or the goodwill of the business carried on under it. “Rateable property ” under the Rating Act, 1925, was expressly confined to “ lands, tenements or hereditaments with the buildings and improvements* thereon.” The licence and goodwill appertaining to it were neither hereditaments nor improvements, and there was no authority in the Act to rate them. But that was precisely what the defendants appeared to have done, his Honor said. His Honor said that it was the purpose for which the land was used that fixed its value as sites for buildings. The opening of a first-class hotel might enhance land values in its vicinity by bringing guests, more or less affluent, there from other parts. An ill-con-ducted or inferior hotel, on the other hand, could be a positive detriment to its locality. There was a time in England when the owne*- of any suitable oremises could obtain a licence for them,” th* judgment went on. “It is certainly not so in New Zealand, where the number of licences cannot be increased. The owner of a licence, therefore, is in a privileged position. He can protect himself from being fleeced by a too greedy landlord. Usually the licence and the premises are sold and purchased, or disposed of, together. To prevent confusion of thought, the licensed premises should be considered as belonging to the landlord, and the licence and goodwill to the tenant. The tenant, a valuable property in the iicence and goodwill, will protect himself by a carefully drawn lease.

Goodwill Adheres to Licence

“ When the tenant of licensed premises quits and obtains a removal of his licence, he takes the goodwill with him. The premises vacated ’ no onger licensed and no new licence can be grant'd for them. “In m” 'minion,” his Honor said, “the rateable value of licensed premises should bear a close relationship to that of comparable land and buildings—not being licensed premises—in its vicinity.” The valuer’s assessment of licensed premises, in respect of which a publican’s licence was in force, should not include the licence or goodwill which accompanied the licence, as adhering to the licensed premises in whole or in part, his Honor concluded. Where the landlord owned the licence, the valuer would take into consideration that any prospective tenant would have to purchase the licence, or the use of it, at full value, and that any apparently excessive rental for the licensed premises might be an indirect payment for the licence and goodwill. His Honor directed that the defendant corporation should pay costs amounting to £3l 10s.