CO129-604-2 Crown Leases 23-2-1948 - 6-11-1948 — Page 28

2.

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Now that these concessions have been withdraw, the disparity between the terms offered to those who apply after that date would be even more marked if the latter were also asked to pay a premium which included even a part of the developed value at the date of renewal in 1948 or later. And this disparity would be further underlined since, in the case of lessees who took advantage of the terms offered in June 1946, a number of instances have come to light in which assignments have taken place with the result that new owners, who were not leaseholders at the time when war damage occurred, have reaped the benefit of the special terms,

4.

Whilst I am very conscious that these strong arguments are in any case available for the support of the opposition that will be engendered, yet the formulation of the proposed terms has proceeded on the basis of producing as great a yield financially and as great an impetus towards reconstruction as it is felt Government can effect. Lest it be considered that the terms previously offered (terms which have effectively hastened a great deal of valuable reconstruction by the imposition and enforcement of strict building covenants) have been too generous, it should be recorded that two appeals against these terms have been made and in the case of one, a hotel site, the lessees have expressed their intention of allowing the lease to fall in on its expiration.

5.

Government's post-war policy with regard to building covenants has the effect of compelling lessees to make fuller use of their land than has been enforced in the past, and it is my intention, as I made clear in paragraph 4(b) of my despatch No.38, that this policy should continue. This will secure an added return to the Crow in the form of rates and property tax payable over the entire period of 75 years for which a lease is renewed as well as for the remaining period of the expiring term.

While this only brings these leases into line with the policy pursued in dealing with new leases and those 75 years non-renewable leases which have already been renewed, the present time is nɔt considered opportune for adding further to the burdens of lease- holders insofar as that would merely tempt them to pass on the burden to others in the form of increased rents or other charges,

6.

I am also influenced by the consideration that to charge a premium on the developed value would in effect, be a penalty on those lessees who have made proper use of their land, and that this would be a contradiction of our present policy that full development is to be encouraged and, if need be, enforced,

7.

At the same time, I propose to modify the announcement, the draft of which accompanied my previous despatch, by including a further sentence at the end of paragraph 4 in the following terms:-

8.

"The calculation of the premium on the value of the

land exclusive of the buildings thereon is a concession arising from the special circumstances following on the War which will not constitue a precedent for dealing with the renewal of other types of leases".

I trust that you will find these reasons sufficiently cogent to enable you to approve of the proposals set out in my previous despatch quoted in paragraph 1 above, and as now modified. I may add that it has recently come to light that, in calculating the capitalised value of the premium which would be paid in advance if a lease were renewed now but were not due to expire for some years, the practice has been to allow compound interest at 8 The reasons for this has been that 8 is the return which, it is assumed, car. be secured from land in the Colony. This rate is evidently much too high since Government only gets the benefit of the advance payment of the premium on

/which it cannot