“GLASGOW” RENTS

Otago Daily Times, Issue 25457, 11 February 1944, Page 3

“GLASGOW” RENTS

IMPORTANT TEST CASE EFFECT OF STABILISATION REGULATIONS An important test case involving the effect of the Economic Stabilisation Regulations, 1942, on leases made on what is known as the “ Glasgow ” principle, was heard in the Supreme Court yesterday before Mr Justice Kennedy. The case was one in which the Dunedin City Council, as plaintiff, sought an interpretation of Regulation 14 of the regulations, which deals with the determining of basic rents. The defendants were A. Taylor and Sons, furniture manufacturers, and the property concerned was a site in Princes street, south which the defendants held on lease from the council. Mr J. C. Robertson represented the plaintiff, and Mr O. G. Stevens the defendants.

Mr Robertson said that the case was one which would be followed with interest all over New Zealand. The “ Glasgow ” form of lease, in which only the property was leased, and all improvements’ were the property of the lessee, was particularly suitable for local bodies fas lessors), as such leases tended to stimulate the progress and development of a city by the erection of buildings on city properties. In Dunedin there were four leasing bodies which adopted the “ Glasgow. ” principle—the Dunedin City Council, the Otago Harbour Board, the Presbyterian Church Board, and the University of Otago. The system was also common in other parts of the Dominion. particularly in Wellington. Determination of Rental The question to be decided, Mr Robertson submitted, was to what extent the regulations governed “ Glasgow ” leases renewable after September 1, 1942. It was clearly stated that no rent, which was not the basic rent as defined in Regulation 14, could be increased after that date without its being fixed as a “ fair rent.” According to the terms of a “ Glasgow " lease, the parties agreed that on the expiry of the prior term of the lease, the lessee should have the opportunity of bidding at auction for the right to continue his possession of the land, with the buildings In this case, the defendant’s 21 years’ lease of the property expired on May 23, 1943, the annual rent being £22 4s a year. On this date the defendant bid at auction and obtained a renewal of the lease of the land for the ensuing 21 years at an annual rental of £37. This latter sum was greater than the rent paid on September 1, 1942, but it was the contention of the plaintiff that, by the terms of the original lease, the renewal was pursuant to an agreement entered upon before September 1, 1942. The proviso to the regulation, therefore, applied, and the basic rent was the new rate of £37 a year, and not the old rental of £22 4s.

Mr Robertson added that eases could arise in which considerable sums would be in dispute, and quoted the recent case of the Otago Harbour Board v. Macintosh Caley Phoenix, Ltd., which was heard by the Full Court, and in which the rent under the old lease was £489 12s, and under the new lease, fixed by bid at auction, £6BO. If the contention of the lessor were rejected, Mr Robertson concluded, local bodies throughout New Zealand which leased properties in this manner would probably have to make, in all, thousands of applications to thq court for the fixing of fair rents. Rent “ Frozen ” by Regulations For the defendants, Mr Stevens contended that in the renewal of such a lease the lessor was obliged to put the lease up for auction, but there was no obligation on the part of the lessee to take up the lease at the upset or higher rent. The position in law might be that a stranger could purchase the lease, or even that the lease might not be taken up at all, and that it would revert on its termination to the lessor. For this reason it was contended that any arrangement to pay a higher rent was made at the time of the auction, which was held after September 1, 1942, and was there--fore governed by the terms of the regulations. The lessor was not entitled to claim any increase in rent without prior application to the court. Mr Stevens submitted that the rent for the property was, in fact, " frozen ” by the regulations, but if either the lessor or the lessee felt aggrieved in the matter the aggrieved party had the right to apply to the court for an adjustment. After hearing further argument his Honor reserved his decision.