Wednesday, May 10, 1972
18
The Government determines this capital value by ascertaining from
recent market transactions what other purchasers have paid for similar sites as
well as by forming a judgment on this data, and uses a five per cent
interest rate for converting the capital value so ascertained into annual
payments.
Five per cent is a fair and proper long term rate of interest;
there is a case for saying it should be 4%; but Mr. Cheung said he was not
disposed to argue it should be a lesser rate, On the other hand, there was
nothing "concessionary" about that rate, as certain Government spokesmen
have tried to make out.
Full Market Rent
By this process, Mr. Cheung said the Government is reassessing
Crown rents at the full market rent and not at a fair and reasonable rent
without fine or premium,
"With the utmost respect to those in Government who have devised
that policy, I would submit, that just as those who advocate adoption of
Zone Crown Rents (nominal rents) have gone to one extreme, the Crown has
gone to the other extreme. Neither school of thought is correct."
A fair and reasonable rent without fine or premium is one which
avoids extremes. It is somewhere in between a nominal rent and a full
market rent. It was a phrase perfectly well understood at the turn of the
century when it was introduced into renewable leases. It was perfectly well
understood because for 50 years before that the Crown rent on land auctioned had
been reserved at rather less than half the full market rent, leaving the other
half to be taken by way of a premium. This was done expressly on the instructions
of the Secretary of State, who ordered that "moderate" grown rents be reserved.
And "moderate" means to avoid extremes, somewhere near the middle, the same
thing, as a "fair and reasonable rent",
/That