RATEABLE VALUE

Auckland Star, Volume LXXII, Issue 193, 16 August 1941, Page 11

RATEABLE VALUE

LEASED PROPERTIES

IMPORTANT COURT RULING

(P.A.) WELLINGTON. Friday. . The Court of Appeal to-day, in'a judgment of great importance affecting local bodies rating on annual value, upheld Mr. Justice Kennedy in his finding that the method of valuing leasehold interests adopted by the Dunedin City Corporation for the purpose of its rating on annual value is incorrect.

The Dunedin city valuer, in determining for rating purposes the rent at which a property would let from year to year, has adopted the procedure of taking the actual rental payable by the lessee and, before deducting statutory deductions, adding thereto rates which the lessee is liable to pay to the corporation. James William Young, lessee of the Excelsior Hotel, objected to this method, and Mr. Justice Kennedy upheld his objection in the Supreme Court on December 12. 1940, finding there was no warrant in rating legislation for taking rent payable by a lessee and adding thereto rates payable by him as occupier of the land and then returning such increased sum as the annual value of the premises.

Although upholding Mr. Justice Kennedy's view that this method is incorrect, the Court of Appeal was not entirely in agreement with his view as to the method which should be adopted. As to this, the Court of Appeal held that the valuer should not assess the rateable value on the basis of the rent annually being paid to the owner by the existing tenant but it was the duty of the valuer to take as his basis the gross annual rental—that is to say, the annual amount an hypothetical tenant would be prepared to pay for the right to occupy a property on the basis of his being the tenant from year to year.

The assessment must be made on the assumption that in respect of his occupation the tenant will not have to pay anyone anything other than this rent and will not have to pay rates, taxes, insurance premiums or other outgoings. Having ascertained the hypothetical rent on this basis, the valuer must then make the statutorv deductions required by statute.