RENEWABLE LEASES AND VALUATION FOR BULDINGS.

Press, Volume XXXVIII, Issue 5307, 7 September 1882, Page 3

RENEWABLE LEASES AND VALUATION FOR BULDINGS.

TOIHB BDITOEOF THE PBES3. Sib,—Will you kindly aliow mc space to invite my fellow oitissns to tiie 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 permanent atru:» tures.

Christehureh, for architecture! features, is far behind most colonial towns of any importance, even those with a population equal to hdf ours, and I venture to say it ia 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 yean. Hence the necessity oi seeking to make the street elevations of all future buildings as handsome as possible. Contrast our city centre with Dunedin, and where are we P It will be found that the majority of the fine buildings in that dty are on leasehold tenure, and the system so wisely carried on there of renewable terms, or valuation for buildings, is recognised, as benefleid and equitable by both landlord and tenant Take the opinion of a stranger amongst us, and what wul he aay of some of our most vduable business frontages P Take tbe targe blocks of town land, the property of the Church Trustees, and tee what miserable erections have been placed there. And these and many othsr blocks will remain so for the next twenty-five or thirty yean, 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 rente are satisfactory and sufficient money is expended by the lessees ia 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 possibl*, that they may reap the benefit of the free possession of such buildings at the expiration of lease. With such a class of landlords, how long will they use the old erections after termination of the lessee's faterestf Judging from many instances in some of our most vduable front-, ages, it vrifi be until repairs can no tafgstjoo*

rawdev'-fe-tadiraoult-for a lessee- to recoup outlay in a years'. lease without a compensation * ebtute,' "owing to heavy cost of building;, and"■■"«►.> ia thus driven to out and jpew* his plans down to the lowest;, possible Graft, the ground landlord caring..not to long as security exists for rents, the tenant quite tadifierent so long as ths building will stand to the last day of his term,'and through this course oar best streets wfil be disfigured for probably fifty yean to come. . It wiD. 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 took forward 1 with certainty to a fixed income, say for thirty or forty years ahead. But in the majority of cases such investments are not yield the best! iiossible income oaring to the refusal of landord to meet tenant on the question of compensation for buildings. A tenant who has to provide sinking fund tooover his total ex- | penditure cannot afford to give the tame rentals as one entitled at tha end of a similar lease to receive probably two-fifths of his first outlay. It may be said there is little difference to the landlord in tbe long run, as the loss oa 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 insreated income during the full term of lease (which is, I take it the primary object), and at the same time adding to tbe value of ths fas simple.

« In addition to the mm eased 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 erection of first-class premises, and when it happen, that a landlord has several adjoining building frontages to let it is a matter of great moment to him to secure the erection of good buildings on each site as affecting the value of the whole. But presume that such a landlord is careless as to buildings so long as rents are satisfactory, what v tha result* 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 wonld prefer granting a lease for fifty years rather than entertain the question of valuation at cad of a thirty years' tenancy, and all because they do not like the idea of paying for build-, bigs. But what do such stand to lose P Take ground rents twenty years back, and compare them with-present rates, and what do we find, and what may we not find in twenty years* hence f There cannot be the slightest doubt that business sites within a fair radius of Cathedral square will, at that distance of time, be extremdy 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 nor tenant can gain or lose much one from the other/by fluctuation in values ; but each will be assured that the income is fair for whatever is granted. It IsAmatter of greit moment to a tradesman in an established business to seeura himself under such a lease (in case he should not be hit own landlord), inasmuch as (lacking the right of renewal) an arbitrary power is placed in the hands of bis 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 .bis accustomed business premises, as it is not advisable even for an old-ertabushed business to remove its position. : ' / / Again, in the case of general merehanta and traders. All such will be found to prefer the position of tenants/ with right of renewal, rather than to purchase land and build premises (except in cases of unlimited capital), as the turnover on amount of capital so invested will more than equal current interest and the growing value of snob 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 lessee, under a renewable leate with valuation clause, hat a material advan*: tags, inasmuoh that his interest it 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 tbe landlord's position'is enhanced in .value, by granting such covenants, and in more ways than at first sight may appear. Take this instance, an owner of good city property: completes a lease for, say, thirty years, with no building restrictions. Shortly afterwards he dies, leaving instructions under his will to realise forthwith on such property. How ia the value of it affeflted by the conditions of the lease just granted P Under snob a lease the ground rent, would be considerably less j than under one allowing valuation, and, as the value of the fee simple is mainly governed by the nett income derivable, it follows that a true value is not obtained under such dreumstenoM.

'There are many other, advantages in- this system, whioh, if once understood, would lead to its general application. :,' To many minds tbe system is strange, end stay on first consideration appear to be in favor of the tenant but a little thought wiE convince them to the contrary; YOUri, &C, , v . ,-.,. *>■:■■■■:■ Y.i ABTHTTB AfFLSBY. " September 4tb, 1882. f;