Mr. Vigers, Valuer and Surveyor, of London, and Mr. H. A. Hunt, Surveyor and Agent of Estates in London,

Warner, also confirmed this view. Mr. Vigers said that those who are undertaking a building lease for a long series of years make the consideration of rates a prominent one in their calculation, and that land in a parish where rates are low will fetch a greater price per foot than where they are high.

13.47°-1. 13,542-72,


Warner, 13.572.

Warner, 13,456.

Vigers, I9,512-5.

Mr. H. A. Hunt stated that, in his experience in London, the lessee of a house or site does take present, and also future, rates into consideration, by agreeing to pay a rent which will "hold them nearly harmless."

He also said: "I consider that the man who takes a house is perfectly capable of taking care of himself, and he makes a very good allowance for any increase of the rates." Further, "On large estates the site or building is let at a rent that leaves the tenant a fair allowance for contingencies which may fall upon him, and which he may not have sufficiently considered when he took the lease with the liability to pay all rates and taxes; although I consider that persons entering into contracts fully calculate their liability under the contract, and it is in no sense a 'blind contract.' The tenant gets all the advantages of the improvements in the value of the lease, whilst the owner gets no advantage, and cannot increase his rent."

Mr. Mathews, Land Agent and Surveyor, of Birmingham, dealt with the point in question, as follows: - "Every lessee expressly contracts to pay all rates, taxes, and assessments (except landlord's property tax) whether present or prospective, and the ground rent which the owner could otherwise obtain is reduced by the estimated amount of these burdens. The arrangement between the owner, the lessee or builder, and the occupier, may be thus illustrated: - The occupier can afford to pay rent and rates amounting together to 100l. a year for a house or other building. The builder expects, and is content with, a certain net interest on his expenditure. After making due allowance for repairs, insurance, and sinking fund, he estimates that 80l. a year will be his fair remuneration. If then there were no rates, the owner could, and would, obtain a ground rent of 20l., the sum which makes up the rent of 100l which the tenant can afford to pay. But the tenant finds that he has to pay 10l. a year in rates, and so can only afford to give a rent of 90l. The builder will not be satisfied with any sum less than 80/. for his interest, and the owner must therefore be satisfied with a ground rent of 10l. instead of 20l a year. Some future increase of rates is also taken into consideration in determining the ground rent which the owner can obtain. It seems clear, therefore, that all, and more than all, the local rates at the time of the contract are borne by the owner."

H. A. Hunt, 21,020-5, 21,062-8, and Vol. IV. of Min. of Ev., App. No. I., pars. 5, 6.

Mathews, 22.073-5. 22,149-60, and Vol. IV. of Min. of Ev., App. No. VI., pars. viii., ix.; x.

"The local rates have increased greatly in recent years, and, it may be admitted, that if this increase had been anticipated by the then contracting parties, the ground rent may have been still further reduced, and that the burden of this excess has now to be borne by the building lessee or the occupier.

"On the other hand, site values have also increased in a still greater proportion, and have given a greater rental value to the buildings thereon. The owner has no share in this increase - the entire profit has gone to the lessee, in accordance with the contract which gave him all the prospective increase of land value, and bound him to pay all the present and prospective assessments thereon.

"The lessees and not the owners have profited most by the bargain, and, if during the continuance of a lease the situation or site value has greatly increased, it is equitable that the lessee, who gets the annual value in the shape of additional rent due to this improvement, should also pay the rates thereon.

"It must, however, be noted that while the situation for commercial purposes, i.e., the site, may have risen greatly in value, the intrinsic value of the building cannot increase, but must deteriorate as time progresses, and, on this account, the lessee may not be able to take full advantage of the rise in site value. For example, land that has been covered with houses may have acquired a value for some commercial purpose for which the houses are not adapted, or the site may justify a larger business than the old building thereon can accommodate. In such cases it is usual for the lessee to apply for, and the owner to grant, a new 99 years lease.

"The new ground rent is then estimated on the basis of the increased value of the land, proper allowance being made for the lessee's interest in the unexpired term. It is also not unusual for a sub-lessee to buy out the original lessee and negotiate directly with the owner for a new lease. The burden of the increased local rates will then, as before, be imposed upon the owner."

Sir Robert Giffen says that "The class of occupiers count the full cost of the rates before they settle what rent they will pay to the owner."

Mr. Leonard Courtney thinks that "Existing rates may be, and are, taken into account when tenancies are created, but no one can speculate, with practical effect, on the possibility of a subsequent increase or diminution of them."

Mr. Sargant's view is that "A very large amount of rates - at least equal to what anyone would consider the fair proportion, whatever that may be - is automatically and by anticipation thrown on and deducted from the ground rent, so that existing ground rents have already borne rates to a very large extent."

Sir A. De Bock Porter informed the Royal Commission that "It is asserted by the advocates of the tax that the rates fall at present upon the occupier, and in support of their contention they argue that the occupier, before entering on his tenancy, does not know, and does not trouble to inquire, whether the rates are, say, 6s. or 6s. 6d. in the . But this 6d. in the , about which the occupier is either so ignorant or indifferent, is, in the aggregate, calculated on rateable value, probably equivalent to a tax of 2s. in the on the whole of the site values of London. And as this is the maximum tax which it is sought to impose on owners, it may well be asked whether the endless friction and heavy expense which would be involved are not out of all proportion to the result to be obtained."

Giffen, Parliamentary Paper C. 9528 of 1899, p. 97.

Courtney, ibid, p. 90.

Sargant, Vol. Vl.of Min.of Ev., App. No. XI., par. 4. De Bock Porter, Vol. IV. of Min. of Ev., App. No. IX., par. 7.

De Bock Porter, Vol. IV. of Min. of Ev., App. No. IX., par. 11.

"The real incidence of the rates in the case of an ordinary letting, under the system of short term leases which prevails in London, may be briefly stated as follows: - When the contract is first entered into between the landowner and the builder-lessee, the then existing rates by reducing the rack-rent obtainable, diminish pro tanto the amount of the ground rent. During the currency of the lease, any additional rates (other things being equal) reduce the value of the rack-rent receivable by the lessee, and at the same time diminish the value of the landowner's reversion. On the expiration of the lease, the whole of the rates again fall on the landowner, who then comes into possession."

The expert evidence is almost unanimous on the point that tenants take rates into consideration to a great extent. But whether it follows that they are able to shift the entire burden, is a question upon which opinions differ. On this point a number of economists appear to agree that tenants can, and do, shift that part of the rates which they can avoid by going elsewhere, but that the rates which they must pay wherever they go cannot be shifted on to the owner of a particular site.1

Sir R. Giffen, however, says: "The idea of the separate rating of ground values arises from a misunderstanding of the real incidence of rates. As that burden falls ab initio upon the ground landlord, diminishing the sum of capital or income he is able to obtain for his property, there is really no separate ground value to be assessed."

De Bock Porter, 22,684, and Vol. IV. of Min. of Ev., App. No. IX., pars. 7,

8.9. Warner, 13,486-92. Wainwright, 21,861-3, and Vol. IV. of Min. of Ev., App. No.V., par. 12. Mathews, 22,079,

22,149-65, and Vol. IV. of Min. of Ev., App. No. VI., pars. viii, ix. F. W. Hunt, 22,527 and Vol. IV. of Min. of Ev., App. No. VIII., pars. 5,6, 7,8, 10. Giffen, Parliamentary Paper C. 9528 of 1899, page 97, par. 11.

Cd. 638, p. 156.

1 The Separate Report on Urban Rating and Site Values, of the Royal Commission on Local Taxation, says : " Now rates being proportioned to the value of the whole property, may be roughly divided into the part proportionate to the value of the site, and the part proportionate to the value of the building. The first part, or what may be called the amount of the rates on site value, varies from place to place, just as site value does, and a tenant can avoid this burden, or most of it, by going to an out-lying district where the value of sites is almost negligible. But he will have to pay some rates on his house wherever he may go; and at least this portion of the burden sticks to him, though he will probably shift on to the owner that part of the rates, even on building value, which is due to the exceptionally high poundage rates of any particular district."