Ibid, p. 20.

(4.) Instead of disposing of them to the landowner in augmentation of the rents to which he would otherwise be entitled, he may sell them to the builders C, D., E., F., in reduction of the rents which they would otherwise have to pay, thus entitling them to take up leases from the landowner at the 5l. ground rent at which he had agreed to let to B., instead of at the 12l ground rent at which B. had agreed to let to C, D., E., F. And if this process takes place with regard to a "remainder plot" to a lease of which B. has become entitled at a rent of 1l. or at a nominal rent, Mr. Sargant points out that B. can sell to the builder the right to take up his lease at this still lower or even nominal rent, instead of at the rent of 5l. or 12l It is further stated by Mr. Sargant, that it frequently happens that the rental value of the houses when built would be sufficient to adequately secure larger ground rents than have been agreed to be reserved on the leases under which they are to be held; and, in such cases, it is not unusual, either under a clause in the building agreement, or under subsequent arrangements, for the builder to "improve" his ground rent, that is, to accept leases from the landowner at higher ground rents than were agreed on, upon payment by the landowner of a certain number of years' purchase of the excess of the ground rents actually reserved over those agreed to be reserved.

It will thus be seen that site value and ground rent are not synonymous terms. Owing to the endless variety of circumstance and arrangement, it is not unusual to find a number of houses of similar rack rent held under leases at ground rents varying greatly in amount. The ground rents actually reserved on particular houses may exceed the ground rents really agreed to be accepted by the landowner, or they may fall short of the ground rents agreed to be accepted, and may be merely nominal. Sir A. De Bock Porter, Secretary to the Ecclesiastical Commissioners, has stated that the bulk of the older town property in London is held upon long leases at ground rents, which range from a nominal rent to a rent which represents two-thirds, or even three-fourths, of the rack rent of the premises. In many such cases premiums have been paid on the grant of the lease in consideration of a small reserved rent.

Ibid, p. 22.

De Bock Porter, Vol. IV. of Min. of Ev., App. No. IX. par. 6. Sargant, Vol. IV. of Min. of Ev., App. No. IX. par. 3 (b), also "Urban Rating," p. 23.

The actual methods of leasing building sites are numerous, varying according to the purposes for which they are required, and to the custom of particular localities. The following are, however, those which are the most usual: - (1.) A lessee takes a site for the erection of a house or trade premises for his own occupation. The lessee is generally allowed sufficient time for the erection and equipment of the building before the ground rent becomes payable.

In this case the ground rent, less the interest on the capital expense incurred by the owner in the development, is the real value of the land. (2.) A builder, or a land speculator, may take a lease of a block of land as a building speculation, agreeing to cover it within a certain number of years, and ultimately to pay a certain ground rent. For the erection of the buildings he also is allowed a sufficient period before the ground rent becomes payable. In this case also the ground rents, less the annual return on the expenditure on equipment, represent, in the total, the real site value. (3.) The speculator may agree with the owner to cover the land with buildings in a certain number of years at a certain total ground rent, the owner undertaking to grant separate leases to his nominees. When sufficient land has been built on to secure the total agreed ground rent, the speculator has the remainder as his profit, and takes a lease of it from the owner at a nominal rent.

In this case the ground rents do not necessarily indicate the value of the land; some may do so, but some will be above and some below.

Mathews, 22,050-71, and Vol. IV. of Min. of Ev., App. No. VI., par. 5. Cross, 21,595-8. Wainwright, 21,815-58, 21,978-84, 22,014-23, and Vol. IV. of Min. of Ev., App. No. V., par. 3. Warner, Vol. II. of Min. of Ev., App. No. V., par. 1.

(4.) The builder, having insufficient capital, may be financed by a speculating financier, who advances money during the progress of the building. In such a case the financier would take the original lease, make a sub-lease to the builder, and secure the money he advances by a largely increased ground rent. This ground rent would not, of course, represent the value of the site alone, but would include security and interest for money advanced.

(5.) The financier may acquire the fee of the site, and grant leases direct to small builders at ground rents largely in excess of the site value, as security for money advanced for building purposes, and also for money spent on developing the site.

(6.) An owner may take a capital sum or premium from the original lessee, granting him a lease at a ground rent much below the actual value of the site, sometimes at a peppercorn rent.

In all these transactions the following points are noticeable: (1.) The value of the site as laid out is partly due to the capital expenditure of the owner on development and equipment.

(2.) The rentcharge, or ground rent reserved, is no indication of the value of the site, either originally or after improvement by laying out. It may vary greatly on two similar houses taken on the same terms as part of a block.

(3.) Fixed rents are secured as much upon the building as upon the site.

(4.) The lessee contracts to pay all present and future tenants' rates and taxes. The lessor receives nothing out of his property during the term, except his reserved ground rent, and during that period has no share in the improved value of his land. At the end of the term he comes into this improved value, but will then have to relet subject to the burden of any increase in local rates.

Sargant, Vol. IV. of Min. of Ev., App. No. XI., par. 3 (a). Cross, 21,693. De Bock Porter, Vol. IV. of Min. of Ev., App. No. IX., par 6.

Mathews, Vol. IV. of Min. of Ev., App. No. VI., par. 11.

(5.) The only interest of the intermediate lessee is an improved ground rent during the term.

(6.) The last sub-lessee has the entire benefit of any increase in the value of the site during the term of his lease.