Letters To Editor: Leasehold woes raise issues

Leasehold woes raise issues
A recent letter to the editor from Phil Hathaway regarding Hawke's Bay Regional Council's leasehold sections raises an interesting point.
Currently to determine the price that the lessee is required to pay to freehold, the council's valuers assess only the lessor's interest and not the lessee's interest. They value the interest using a secret formula involving the current rent being paid, the current interest rates prevailing and the balance of the term of the lease. In other words it is a yield-based formula to set the cost for lessees to freehold.
As Hathaway correctly notes, there is a requirement under the Hawke's Bay Land Empowering Act 2002 for sale purposes for only a valuation to be established of the lessor's (owner's) interest and not the lessee's (tenant's) interest yet if you were to look at the lessee's interest and calculate the lessor's interest as being the difference between that and the total land value, I suggest you get an entirely different proposition.
There is no doubt that in the past 21 years there has been a substantial rise in the value of the land.
If you ask the question: What has the Hawke's Bay Regional Council done to create this increase ? I suggest the answer is probably very little. Yet when you ask the question: What has the lessee done to create this increase? then the answer is very different.
The lessee has paid all of the rates on the property over the years to the local authorities who have provided a road and footpath outside; parks and reserves nearby; a library just down the road; a rubbish and recycling collection outside the property; a water, stormwater and sewerage connection to the boundary and of course numerous other services that enhance the property.
The lessee has also paid for power reticulation and a connection to the property, and by virtue of living in the city, working in the city, and purchasing goods and services in the city, has contributed to the economic activity and value of the City which of course is reflected in the increased value of their leasehold section.
If the lessee had not paid the rates and contributed virtually the total economic activity around the section, then the property would be merely a very small parcel of farm land supporting one sheep and worth very little.
Again I ask the question:What has the Hawke's Bay Regional Council done to create the increase in value to their leasehold sections ? You will struggle to find anything like the same activity and cost that the tenant has paid. I suggest that the only increase in value applicable to the HBRC is an inflation figure and any other increase totally belongs to the tenant.
I have recently been involved in the negotiation and purchase of the lessor's interest in a leasehold property in Napier (the HBRC was not the lessor and therefore the Hawke's Bay Land Empowering Act's conditions did not apply). We successfully argued, without a valuer in sight acting for us, that the lessor's interest was less than 40 per cent and our lessee's (tenant's) interest was over 60 per cent and we purchased the freehold on that basis.
To be totally fair with their remaining tenants, Hawke's Bay Regional Council should instruct its valuers to stop using the secret formula basis for valuing their interest and should take their lessor's interest as at the previous renewal term 21 years ago and apply only the rate of inflation to that figure - any other increase belongs to the tenant.
Now that would be fair. (Abridged)
Ross McKelvie, Napier
Key is in la la land
In question time in Parliament on Tuesday John Key said the average wage is $51,123 a year. This is rubbish. A person working 40 hours a week at the minimum wage of $13 an hour earns $27,040 less tax.
John Key also said that of the $2.5 billion tax cuts that of these was delivered to the bottom two codes. He also said that income inequality has actually fallen in recent years. This again is rubbish as those on the rich list have gained by 20 per cent.
Pensioners would be pleased to know the average wage is now $51,123 as they are entitled to 65 per cent of the average wage.
By the way, the 400,000 people struggling to pay their rent would be most interested to learn on television from JK that a trillion is a billion billion.
Personally I think he's in la la land and he should be careful walking the up-market streets in Parnell and keep an eye out for the men in white coats.
Pete Carver, Havelock North
It's just not fair
Well John Key may well have his own personal reasons for not fronting up with the minor parties for this election. He is the Prime Minister and he calls the shots.
But, all I can say is, it's just not fair.
How would he like it if he was the leader of a minor party?
I particularly, along with many others, would like to hear what the minor parties have to offer. After all this year it's still MMP and next time I think I'll go with STV. It's a much fairer system, and you're more likely to get the people you want.
Sheila Linton, Onekawa