77

H.—42.

E. C. KEYNOLDS.

based on what a prudent man would give we have altered our method somewhat. We look at a site and ask ourselves what is reasonable—the best use to. which it can be put, We test the values we obtain by reference to adjacent rentals, after taking a percentage on what we work out as the capital value. If the rate of interest current is 5 per cent, we lake it on a basis of 4 per cerrt. to the landlord, and we consider that a fair rental. But you do not always get the three valuers to agree to (he valuation when worked out in that way. As a rule the three agree and sign. It is only in isolated cases that the third man does not agree. Occasionally we have complaints from the tenants that the rent lixed is too much. In my experience I have not had many objections, but I suppose all valuers have some. Human nature is human nature. With regard to the Corporation form of lease there is one improvement I would suggest, and that is as regards Hie appointment of the third man. I do not think that should be left to landlord or tenant as it is now. I find there is often a good deal of trouble and delay in appointing a third man. When a third man is proposed the other valuer has lo go away and see the people he represents before he can agree. I think all that could lie overcome by the Court in each town in New Zealand having on its list two or three sworn valuers who shall not take part in any arbitrations or valuations of land except as third man. They should not be paid anything by the Court, but when a valuation arises the two valuers appointed by the parties should take one of those irreri appointed by the Court as their third man. These men should be entirely under the Stipendiary Magistrate or Judge of the town, and if any Hagrant case of partisanship was brought to his notice he could remove the name of the offender from his list at a moment's notice. In that way you could always get an absolutely- impartial man as third man. 1 am not, in favour of a proposal that these assessments should be made by a Judge sitting alone and deciding upon evidence brought before him. If you could hear some of the evidence that is given in arbitration cases you would wonder how any one could make anything out of it. I could give dozens of instances to show that valuers for the tenants so value that when everything is worked out the landlord gets nothing. I have the figures before me now of one case in which the assessment by an expert valuer for the tenant in an arbitration case, when worked out, actually showed a deficiency against the landlord of £4 9s. 2. To Mr. Milne.] In assessing the rental for a new period we do not take into consideration any loss the tenant may have made during the previous period. I have never known of a ease where, when the tenant has kept his buildings in first-class repair and has managed his business reasonably, he has got little or nothing on his outlay, and the landlord has received the whole benefit of the work done. In my experience it is generally the tenant that gets the most out of it. 3. To Mr. Thomas.] We never test our valuations with the Government valuations subsequently. We do not assume that they should bear some relation to the Government valuations. Down here the Government let us value first, and they seem to take their valuations from ours. Even the mistakes are carried on. In arriving at the capital value for the purposes of these valuations, which we sometimes do, we take the freehold value at its lowest, and we place the highest value on the buildings, as the tenant runs the risk of being ousted from his lease. In assessing the value of bind for leasing we do not make any deduction of 15 to 20 per cent, as compensation to the lessee for loss of unearned increment or expectancy of unearned increment. The tenant has a lease of twenty-one years, and if (wo years afterwards, when the lease has still nineteen years to run, you try to buy his goodwill, the price he asks would make your hair stand on end in comparison with what he is paying for rent, although they may say the rental has been grossly overvalued. I can give one or two instances the details of which 1 would ask should not be published. | Figures quoted. | When we assess the rent for the new period we assess it strictly on Hie present letting-value without any regard to fluctuations at all. I. To Mr. Milne.] The present rale of interest in Dunedin is about 5_ per emit. At the present moment we would value to the lessor on a 4A-per-cent. basis. 5. To Mr. O'Shea.] I do not think the rise of c] per cent, for interest on mortgage has had any effect on property one way or the other. In valuing land for leasing we do not base our values on isolated instances of rentals received for similar properties. In a street where there was no difference in the sites I would take into consideration rentals that have been previously given for such sites. It is a fair thing, 1 should say, to take into consideration prices given for such sites, especially when the lessees are doing well out of them. We invariably find the capital value is the very best cheek you can have for ascertaining the rental that should be paid. A man next door who is a freeholder should not be penalized by letting another man come into the business alongside on a rental equal to a third or half the value of the property. 6. To Mr. Stephens.] I have stated in my evidence that after the valuations have been made tenants have acquired a considerable sum for goodwill. I have also stated that one reason for my fixing 4 per cent, as a rough guide as to what the rent should be is that the landlord has the unearned increment. 1 do not, think those two statements are inconsistent. What the tenant gets is goodwill in the lease; what the landlord gets is the unearned increment in the freehold. During the whole of the term of (he lease (he land is going up in value, and the landlord eventually gets the benefit of that. In many cases the tenant, makes his goodwill himself with his business, or somebody else for some particular reason may want (o get into that locality. It is true that the unearned increment may be gradually mounting up, and that the landlord does not get it until the end of his term. It might be argued that fourteen years is a fairer term of lease to obviate those difficulties, but it is generally recognized that it is more difficult to finance on a leasehold than on a freehold, and no doubt, it is more difficull to finance on a short term of lease than on a long one. I think- a 1-per-eent. deduction is fairer to the tenant without doing any injustice to the landlord. Although we are careful not to overvalue these leases, very often the tenant himself overvalues when he has got the lease. 7. To Mr. Thomas.] I can quote cases where the tenants have given more at auction for their holdings than the amounts at which T had valued them. As a rule here in Dunedin the tenant gets his own place back at auction. Then people negotiate with him afterwards.