43

14.—42

\V. FERGUSON.j

But I found great difficulty. In my mind the tenants fell into three classes. There' was the landlord who had used his buildings purely for letting purposes; there was the landlord who used the buildings partly for the purposes of his own business and partly for letting purposes; and then there was the landlord tenant wdio used the buildings entirely for his own business. With respect to the landlord who let the whole of his premises, the question became one of evidence entirely to determine what his incomings were and what his outgoings were. The difference between the two is the amount which he had, and it was clear that he could not pay more than that amount as rent or his object in taking the premises would be gone. Then the question came as to what were the incomings and what were the outgoings. That is a question (here was a certain amount of difference upon. The incomings could be arrived at fairly well: the rents were so-much if every room were let. Then there was the percentage due to empty buildings and due to bad debts, and a certain expenditure that was necessary. I was able to arrive at a clear decision as to what amount ought to be allowed for those purposes. The question of rates was decisive; the question of land-tax was decisive. Then came a question about which there might be a certain doubt —namely, fire insurance. 1 deemed that a prudent man would probably allow for fire. Probably a prudent man would allow for' the risk of loss of rents in case of fire. If his building were burnt down and had to be restored the fire insurance would not cover that, and he would have to insure his income. That seemed to be a reasonable thing. Then there were other matters that were not so clear, such as earthquake risks. I do not know that I ought to give you my decision The Chairman: No. Witness: You merely want a general statement. Earthquake risk. 1 think, is a matter of greater doubt as to whether it should be allowed or not. There is a risk in those eases where a tenant has to restore. 1 do not know that a prudent tenant, would ordinarily insure against earthquakes, but I think it is one of the elements that has to bo considered. If he did not insure the probable reason is that the charge for insurance against earthquakes would be so high as to be prohibitive. At the same time I think that is an element which ought to be considered : that is one of the elements. Then there would be the public-risk element, if the building has a lift particularly. There is the public risk. There are cases where he has the maintenance of passages and staircases, and there is the jjossibility that an action might be brought against him, and it is a reasonable thing to think that a prudent tenant would consider (he question of insurance against public risk. That was one of the elements which I had to consider. Then there is the depreciation and obsolescence of the buildings during his term —that has to be considered. Then there are repairs and maintenance : evidence was given to the arbitrators as to the amount which these average. Those things all had to be taken into consideration. ! think that probably covers all the various things one had to consider. A good many of them were doubtful; a good main' were absolute, and others were in doubt; and you had to strike a happy mean. Then the balance left was the maximum which a man could pay the Corporation. That is in the case of a straight-out letting business. Where a man owned—as many of them did—the ground floor for his own business, and let the superfluous buildings or rooms, 1 had to look at it in a different light. We were told that we were to look at it as if the buildings were absent, as if the grouud were vacant, and a man building there were to get the best return for the fourteen-year period. Therefore 1 had to look at the matter in this way : Would the tenant have done better by building within the limits of the restrictions of the lease a building simply for his own purposes, and not build for and run any risks of letting to subtenants? I spent a lot of time over one typical case, and I came to the conclusion that it was a toss-up whether he would have done better simply by building for his own requirements and no more, or build. as he did, a larger building. I came to the conclusion that I could assume that case to be the case of all. Therefore we were brought back to considering how much a man in his business could afford to give for his rent. We had certain evidence in regard to some of the cases, and I had to form a judgment as to what was a reasonable rent to allow—what a prudent tenant would allow. 4. Mr. Thomas.] You found as to the two alternatives you had to consider that it was very nearly a toss-up between them? —Yes, in that particular case. 5. Mr. Milne.] How r did you ascertain how much he could afford to pay for his own rent? —■ That is a difficult thing. There was some evidence given as to what would be given in similar cases. 6. The Chairman.] That is, as to similar places which were let?— Yes; but that dealt, with the second class. Then, as to the third class —the class where the buildings were entirely used by a man in his own business —where there was no letting : both were cases of drapery establishments.. Evidence was given as to what wholesale drapers could afford to give per square foot or per square yard in other parts of the town, and I had to arrive at a reasonable deduction as to what was reasonable. 7. Mr. Thomas.] Practically on the same principle as you assessed the tenants in the second case?— Yes, except that it was more difficult; and in both cases it was complicated by the fact that they were adjacent to a large building used by the same tenants. Therefore they were part and parcel of the same establishment, which made it a more difficult thing to deal with. 8. The Chairman.] By that process each of the tenant's rent was assessed with reference to the class of buildings that was actually on the land, the class of buildings actually on the land being taken as the test?— That was one of my difficulties, and it is one of the difficulties in connection with tins system. It is a question of what a prudent tenant will give. A tenant is not going to take up a lease of this class unless he has got some reason for taking it up, or something he wants to do with it. A man does not go into this kind of speculation simply for the purpose of building unless he has got a clear idea of what he is going to do with it, and we must assume that he used it in what he considered the best way.