Mr. Buck to Mr. Hay.

No. 364.]

Sir: I have the honor to inclose herewith a copy of a note addressed by me to the Japanese minister of foreign affairs concerning the registration of transfers by assignment of titles to property held under perpetual leases in the foreign settlements of the country.

[Page 316]

It seems to me that the requirement of payment, as a revenue to the Government, of 2½ per cent of the value of any property held under a perpetual lease, confirmed by the treaty, is inadmissible—that such a burden placed upon the property should not be borne by the assignee, who should stand in the same position in respect to such property, in all respects, as the original holder.

That a title to property under a perpetual lease should be registered as a superficies, thereby restricting the uses of the property, and, perhaps, the duration of its use, seems to me clearly inadmissible, as it certainly would change the conditions contained in the original lease.

Though I may possibly be in error in my position in respect to the registration tax of 2½ per cent of the value of the property since there is no law compelling an assignee to register, I am confident that I am correct in my opinion as to the registration of property as a perpetual superficies being in violation of treaty stipulations in respect of such property.

Awaiting notification of the decision of the Japanese Government in reply to my note, I have the honor to ask instructions upon the questions involved, that I may make no mistake should I insist upon the Japanese Government recognizing the correctness of the position I have already taken.

I have, etc.,

A. E. Buck.
No. 164.]

Sir: Referring to the brief conversations we have had recently in respect of the registration tax of 2½ per cent upon the value of property held by foreigners in the respective foreign settlements in Japan under perpetual leases by the Government, which, as I am informed, is required by the registering officers to be paid in registering any transfer or assignment of such leases; and also in respect of such registration of such perpetual leases being required to be made as perpetual superficies, I have thought it best to express to your excellency in writing, in short, some views touching these matters now entertained by me.

By the stipulations made in Article XVII of the treaty between the United States and Japan in respect of the several foreign settlements whereby such settlements are incorporated with the respective Japanese communes, it appears that existing leases in perpetuity in foreign settlements must be confirmed, and that any new conditions whatever imposed by the Government are in contravention of the rights of the holders of real property under such leases. If I correctly understand the full import of the foregoing stipulations, the 2½ per cent of the value of the property so held, if imposed in registering a transfer of title, is a tax upon the property not contemplated, and, as it would seem, is inadmissible. The imposition of such a tax by so much reduces, in effect, the value of the property and changes the original conditions of the lease itself, which stipulates a certain sum to be paid annually to the Government—an annual tax upon the land, and the only tax, as it appears to me (except certain municipal taxes provided for in the leases themselves and in the agreements entered into between the Government and the representatives of the treaty powers), that, under the provisions of the treaty, can rightfully be levied upon it by the Government. It seems that the leaseholder fully complies with the terms of the contract of lease made between the Japanese Government and himself when he annually pays his stipulated rent; and in registering a transfer or assignment of a perpetual lease, such additional sum to be paid to the Government by the assignee on the value of the property so transferred, though called a registration tax, is an additional tax upon the property for revenue, which, however, would not be the case if a fixed registration fee only was required, without regard to value, upon all transfers of property alike in compensation for the work done in registering, in which no additional income to the Government from the property was to be derived.

I may add that while the forms of the deeds of title giving leases of perpetuity in the foreign settlements vary in their wording in some nonessential particulars, the titles in all cases are granted by the Government not only to the original holders, [Page 317]but, in terms, to their heirs and assigns as well, and, as I conceive, no tax should be imposed by the Government upon the heirs or assigns of the original lease in addition to that imposed upon the original lessee. It may be claimed that the registration of a transfer of an assignment of title to an assignee is not made obligatory by law and is to be registered or not at the option of the assignee; but to protect his title against a third party (who through fraud by the original holder of the property might acquire a second assignment of title which would be good if first registered), he must have his assignment registered for his protection and is thereupon compelled to pay 2½ per cent of the value of the property not contemplated in making the original grant of the title, which was made, as already stated, not only to the original holder but to his heirs or assigns, thus, in my view, imposing in effect an additional condition upon the title confirmed under the treaty.

The registration of such perpetual leases at the Saibansho by which, if I am correctly informed, such leases are to be registered as perpetual superficies, will also, in my opinion, change the conditions of the original contracts of lease, inasmuch as a superficies, if I correctly understand the meaning of that term, restricts the holders of such a lease to uses of the land in certain respects, and. in some contingencies, though declared perpetual, will restrict its duration also, and consequently impairs the value of the property. By the terms set out in the original perpetual leases the leaseholders have the perpetual use of the lands for all purposes whatever and for all time, provided they keep up their annual payments as stipulated in the original contracts of lease.

Knowing that your excellency’s Government does not intend or desire to put any additional burden upon citizens of the United States holding property in the foreign settlements under their perpetual leases not warranted by the treaty between the two countries, I have the honor to submit to your excellency the foregoing statement for such consideration as the merits of the questions involved will warrant.

I avail, etc.,

A. E. Buck.