The New Zealand Times. WEDNESDAY, FEBRUARY 26, 1913. THE CITY LEASES

New Zealand Times, Volume XXXVII, Issue 8364, 26 February 1913, Page 6

The New Zealand Times. WEDNESDAY, FEBRUARY 26, 1913. THE CITY LEASES

The principle of the Glasgow lease was originally adopted in connection with the disposal of our city endowments under the profound impression that it was a fair and equitable system. Mature experience, however, has convincingly demonstrated ,tho fact that it is neither fair nor equitable to the tenant, while, at the same time, it heavily penalises and materially retards the architectural progress of the city. Some reasonable degree of security of tenure is necessary if the tenant is to hold a sound and marketable asset in exchange for his expenditure of capital, and, equally so, if he; is to bo encouraged to invest a considerable sum of money in the construction of substantial buildings that would be an advantage and ornament to the city. Now that the first period of twentyone years bus expired, and the lease is subject to re-valuation every fourteen years, there is neither security of tenure or rental, without which there is no inducement to replace present dilapidated structures with imposing and. suitable edifices. It is quite true that the tenant holds the right of renewal, but ■•if the rental at any four-teen-years period is fixed at a. capricious value, it may easily bo made unprofitable and impossible to the tenant to maintain his lease. Under other and less modern systems of leasehold, tne tenant would he protected in such circumstances, because he would receive some measure of compensation for his buildings. Under the Glasgow lease, however,, if the rental is fixed at too high a value, and the lessee is compelled to rehhquish, he practically receives no compensation. The whole of the buildings revert to the corporation, unless anyone els© is prepared at auction to pay the rejected rental, and is willing also to pay for the improvements. This contingency, in a situation such as w© have indicated, is remote. It will thus be seen that if the lessee, with his rent satisfactorily fixed for a period of only fourteen years, ventures upon an expenditure of, say, £50,000 for buildings, ho takes an enormous risk. Not only is his security one ou which it would be impossible to borrow, though it represents £50,000 in solid cash to him, but after his fourteen years has expired he is at the mercy of the caprice or bad judgment of the assessors, who, no matter how good their intentions, might bring absolute ruin upon him. No sound basis of valuation has yet been devised to meet these cases. There has been a disposition to fix the rental on the existing freehold value, but this, as the thoughtful reader must recognise, is commercially unsound. There are considerations such as depreciation and maintenance which must be taken into account, and for which there should be some compensating advantage, but such a system of valuation makes no allowance for these. The valuation may be fixed in a boom period, and may be accepted as reasonable, but the boom period may be immediately followed by a run of fourteen years of depression. Wo have known such things to happen. Certainly, even if the valuation uncertainty could be overcome, the difficulty is a disquieting and recurring one, and is calculated to discourage rather than stimulate the erection of that substantial and imposing class of buildings that a progressive and wealthy city is entitled to expect from its citizens. Wo have within our knowledge, at the moment of writing, an example where it was proposed to invest £70,000 in a handsome structure in Wellington, but when the conditions of the lease were examined and it was realised that the rental might be made impossible at the end of any period of fourteen years the scheme was abandoned. This, which is not an isolated instance of what is going on, is unfortunate for the city of Wellington. For these and other reasons, based on sound considerations of equity and good government, we think thoughtful and sympathetic consideration should be given to the representations of the Wellington Leaseholders’ Association. The Hon, W. F. Massey is converting the agricultural leaseholds of the country into freeholds at I per cent, advance on the original value, thus furnishing ample precedent for action in the present instance in the direction of granting well-merited relief. We do not dream of suggesting that the city endowment leaseholders should’ be given the freeholds at the original value, plus I per cent,, though it is a queer law that will not apply equally all round, but wo say unhesitatingly that it would be a good thing for the city, as well as equitable treatment to the tenant, to devise some means of converting the present tenure into some other form of leasehold that would give the holders security for a reasonable number of years at a fair rental covering that period. Failing that, they should certainly he assured a reasonable measure of compensation for their buildings.