The interest of the relator in and to the real property valued by the state tax commission for the purposes of the mortgage tax is detailed at length in the lease of the premises dated May 1st, 1911. Certain provisions of the instrument to which attention should be called are:
The term is twenty-one years from May 1, 1911, the rental for the first year is $20,000, thereafter the annual rental to be $40,000, payable in installments on the first day of each and every month during said term.
The tenant (relator) covenanted that it would within sixteen months from the commencement of the term erect and complete a substantial modern fireproof building for business purposes which should cover at least eighty per cent of the demised premises of at least twelve stories in height and cost and be of the value of at least $450,000, to keep such building in suitable and proper repair, keep the rentals of the building and the building insured for the benefit of the landlord and pay all duties, taxes, assessments, water rates and charges against said premises or their appurtenances during the term of the lease.
The lease contains provisions for renewal of the same, for one, two or three successive terms of twenty-one years each. In the event that such option or options are exercised by relator the covenants of the renewal leases, except for the erection of the building, are to be substantially as in the first lease. In case of the failure of the parties to agree upon the rent for each new term *157an appraisal of the value of the land leased is to be made and five per cent of such appraised value to be paid annually as rental during the new term, but in no event is such new rental to be less than that paid during the prior term.
A right of re-entry is reserved to the landlord in the event of the tenant (1) defaulting in the payment of any part of the yearly rental for a period of five days after demand for payment of the same, or (2) if at any time tenant shall be adjudged a bankrupt* or insolvent by any court, or if a trustee in bankruptcy or a receiver of the property of the tenant including the term granted or any part thereof shall be appointed and such term or rights be not freed from such trusteeship or receivership within thirty days after such appointment, or (3) default shall be made in any of the other covenants contained on the part of the tenant, which shall continue for thirty days.
Upon expiration of said term, or upon the sooner termination of the estate granted, the building and building material are to remain and become the sole property of the landlord and nothing is to be allowed or paid by her therefor.
The record discloses that relator immediately upon taking possession of the realty erected a modern fireproof building twenty stories in height covering a plot of ground of one hundred eight feet on Broadway, one hundred twenty-six feet on the northerly line, one hundred feet on its easterly line and eighty-six feet on its southerly line, comprising about eleven thousand square feet, presumably covering eighty per cent of the leased premises. The building consists of one large store occupied by relator and subsidiary companies and the remainder of the building is devoted to offices. The cost of the building was $1,800,000.
Upon the hearing before the state tax commission an expert in real estate matters was examined as a witness. *158He gave an estimate for the year 1917 of the total rental obtainable for the building as $180,000, and approximated the cost of inaintainance $80,000, ground rent $40,000, taxes $33,000, insurance $2,500, making a total of $155,-500, leaving a net return of $24,500. He also testified in substance that the expenditure of $1,800,000 by the relator was improvident for a building in that neighborhood, that the building was too elaborate and as constructed was a case of wild extravagance having in view the rentals possible to be derived therefrom; that in his opinion by reason of the clauses in the lease to which attention has been directed $50,000 per year should be written off for depreciation and in his opinion the lease was valueless.
The treasurer of relator was called as a witness by the commission and testified that the books of. relator disclosed that the building was treated as an asset at $1,800,000, and likewise was treated as an asset in the annual reports of relator to its stockholders; that the books further disclosed that as against the cost of the building the sum of $25,000 had annually been charged off.
Counsel for the commission in his brief asserts: “ The Tax Commission appraised the lease upon the relator’s own statement of cost less depreciation which was also book value,” and that the commission was not justified in accepting relator’s appraisal of property within this state as the same was inconclusive. While evidence of the methods employed by relator in keeping its accounts disclosing the investment made by it in the erection of the building and the amount annually charged off for depreciation, etc., is proper for consideration by the commission ther.e remained material facts which have direct bearing upon the question to be ultimately determined, viz., the actual value of the leasehold interest, or in other words the actual value of the lease. The rights and interests of the owner of the fee and the holder of the leasehold interest are defined by the lease in force *159between them. Recourse to the terms of that instrument is, therefore, essential to ascertain the extent of the estates of the landlord and tenant. Therein is contained the term of the leasehold interest and any right to renewals of the same, the consideration to be paid by the tenant, the time of payment and the result of a default in payment, likewise all covenants to be performed by the tenant, the rights -of the landlord and particularly in the event of default of the tenant or at the end of the term to resume possession of the property without allowance therefor, these and other provisions of the lease are material to be considered in reaching a determination as to the .actual value of the lease. In addition to the provisions of the lease evidence bearing upon the character and capacity of the building erected by the tenant, adaptability of the same for commercial purposes, the location of the site, the expense of erection of the building, demand for space therein, rentals derived therefrom, the expense incident to maintainance thereof and the charges to be assumed by the tenant under the lease have a direct bearing upon the value of the lease and are proper to be considered by the commission as well as by witnesses qualified to testify upon the subject of value upon a given state of facts.
As to whether or not the relator was improvident in the expenditure of $1,800,000 in the erection of a building on the premises is immaterial. Witnesses may reach diverse conclusions upon that question which would tend to confuse rather than clarify a solution of the question to be determined. Presumably the relator gave due consideration to the project and in anticipation of the long term provided for in the lease concluded that the investment to be made by it was beneficial.
The views expressed and the conclusion reached finds support in numerous decisions of the courts. (People ex rel. D. & H. Co. v. Feitner, 61 App. Div. 129; affd., 171 N. Y. 641) Larkin v. Misland, 100 N. Y. 212; Clarkson *160v. Skidmore, 46 N. Y. 297; Matter of City of New York, 120 App. Div. 700; Matter of William & Anthony Streets, 19 Wend. 678.)
The state tax commission concededly rejected the evidence of the expert witness of the relator whom it examined in the proceeding, and adopted as the value of the leasehold interest the cost of the building less the amount charged off on account of depreciation as the same appeared on the books of account of the relator. While evidence of such account was proper for consideration by the commission we are led to a conclusion that the commission should in connection therewith take into consideration the terms and conditions of the lease under which the relator held the premises particularly the clauses to which attention has been directed. Such course would naturally be adopted by any individual or corporation in the event that the interest of the relator in the real property was offered for sale or assignment and should prevail before the commission.
The order of the Appellate Division should be reversed and the proceeding remitted to the state' tax commission for a rehearing, with costs in this court and in the Appellate Division.