GROUND RENTALS

Evening Post, Volume CXXII, Issue 68, 17 September 1936, Page 11

GROUND RENTALS

VALUATION METHODS

CORPORATION CRITICISED

' Submitting that leases had been . valued in the past by the Wellington ■ City Corporation as if there were constant progress and prosperity, Mr. C. A. L. Treadwell, in the Supreme Court ' yesterday afternoon, said the Corpovai J tion had no right to .assume that there ' was going to be progress and constant prosperity for another decade or so. The remarks were made when Mr. Treadwell was opening the case for the Post and Telegraph Employees' Association, which is a party with the City Corporation in an action before Mr. Justice Smith to fix the ground rental of a section at the corner of Lambton Quay and Waring Taylor Street, the twenty-one years' lease of which" ex- ■ pired last year. The association had the right of renewal. The case for ihe Corporation- lasted a day and a half, the association's case opening yesterday afternoon .and continuing today. Mr. J. O'Shea, with him Mr. J. R. Marshall, appeared for the Corporation, and Mr. Treadwell, with him Mr. H. J. V. James, for the association. In support of his contention Mr. Treadwell said ,that ground rent had . never been reduced, despite the fact that relevant charges had increased — on that point nothing more eloquent than the rates could be cited. Giving evidence for the defence,. C. J. S. Harcourt, land agent and valuer, said the risk of a lease was that new buildings were constantly being erected, and tenants left older buildings for improved accommodation. One bank had lost several valuable tenants as a result of,the building of the new Commercial Bank of "Australia. The cost of arbitration over rentals had cost some lessees £200 to £300 each;, in the case of the Midland Hotel it had cost nearly £1000. The value of a site might be entirely changed in twenty-one years, Mr. Harcourt added. His Honour (after further cross-ex-amination): I think I'm entitled to ask you as an expert, what you would say a 'prudent lessee would give for this lease for the next twenty-one ■ years, taking into account the specu- : lative aspect and the possibility of a ; rise in rents? 1 Mr. Harcourt replied that on past experience he would suggest that 3 1 per cent, of the Government valuation • (£9400 in this case) should be the ■ maximum. - . . DIFFERENT VALUATIONS. Questioned by Mr. O'Shea on discrepancies between Government valuations and other valuations,. Mr. Harcourt said the- valuation of land by an outside valuer depended on how long the valuation was made after the Government valuation. Mr. O'Shea referred to the sale of a leasehold in Featherston Street in 1930 to City Buildings, Ltd., for £4500, a site now occupied by the Government Life Insurance, and the witness replied that that transaction was typical of the boom period. The building was let at £2400 a year now, but when the Government Life moved into .the new building it might be a different matter —property in-Fe^atherston Street would take some letting. Mr. O'Shea suggested, in an aside, that leaseholders were behind the present case, but Mr. Treadwell replied that the association was; in court in the sense of justice. . Mr. O'Shea: I know, Mr. Treadwell, you're overflowing with it. Mr. Harcourt continued that Lambton Quay was no place for an investor, but for the pure speculator; It was correct that if the association continued to pay the present ground rental of ; £220 a year it would lose £100 ani nually, and it might pay the association :to walk, out. Personally, he would . walk out. : To his Honour, Mr. Harcourt said . that the two vital matters to be con- ■ sidered by a prospective lessee were a possible rise in letting values in i the future and the speculative element in possibly selling the ? lease at a profit. He did not think that there would be a rise in rents in the next 21 years—that factor could be discarded. His Honour said he wag being asked to determine something speculative^something that might happen in the future. "SCANDALOUS RATES." "I think the outlook is very bad indeed for anybody to build on leasehold unless they are forced to," said S. G. Nathan, valuer and estate agent, the next witness. "In my experience, especially in the last few years, financial institutions, such as banks and lending companies, don't like city leaseholds. In the past the Corporation has been getting it both ways,- not, only with heavy rents but with the scandalous rates we have to pay. The rates in Willis Street today amount to 20s 4d per inch frontage per annum." ; His Honour: Your point is that companies or corporations who might take leaseholds from people at a profit are not likely to offer?—l am sure they ■ won't in the future. His Honour: In your opinion today it is poor speculation to take a lease- . hold in Lambton Quay?—lt is worse ■ than that. '■'■•■ < : Asked by Mr. Treadwell if he knew i of any sales in Lambton Quay in the • past fifty years at under £300 a foot, ; Mr. Nathan said that twenty-five or [ thirty years ago the Wairarapa Farm- : ers' building, which had a frontage ! of 60ft or 70ft, was sold for £18,000, i which included the buildings. That . would be £300.a foot with the buildI ings, but not more than £100 a foot s without them.

If he were in the position of the Post and Telegraph Employees' Association he would suffer a present loss and get out immediately, said witness. He considered a fair rental would be £210. (Proceeding.)