LAURENCE STEVENS AND ANOTHER v. CHOW WAI LAN

LDNT435/2000

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

Application No.: LDNT No. 435 of 2000

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JUDGMENT

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Background

1. The first and second applicants ("the applicant") are the tenant and the respondent the landlord of the subject premises known as Block A, 2nd Floor, 16 Tai Hang Road, Hong Kong (also described as 16A & 16B Tai Hang Road, 2nd Floors, 16 Tai Hang Road, Hong Kong). The existing tenancy was for a term commencing from 20 July 1998 and expiring on 5 January 2001 at a rent of $21,000 per month, inclusive of rates and management charges.

2. Both parties agreed that a new tenancy should be granted by the Tribunal for a term of two years commencing from 6 January 2001 and otherwise subject to the same terms as before, save for the appropriate adjustment for the deposit sum, at the rent to be determined by the Tribunal (pursuant to Section 119(C) of the Landlord & Tenant (Consolidation) Ordinance). The issue before this Tribunal was the level of the prevailing market rent on 5 January 2001.

3. The two applicants were represented by the first applicant, who also gave evidence in person. The respondent was represented by her sister, Ms. Chow Wai Kam Annie. Neither party called any expert witness to give evidence regarding the prevailing market rent ("PMR") of the subject premises. The applicant asked for the PMR to remain the same as existing under the expired tenancy whilst the respondent suggested that the rent should be increased by $3,000 to $24,000 per month.

4. The subject premises is a residential flat on the third floor of a 4-storey building situated at Tai Hang Road, Hong Kong even though it has been described as a second floor unit in the rating assessment and demand note by the Rating & Valuation Department. There are shop premises on the ground floor level which is currently occupied by a real estate agency, domestic flats on the first and second floor below and roof units above. The subject building was completed in 1955 and unlike building of its age and height, is served by a lift.

5. The applicant produced a schedule of reported rents ("Exhibit A-1") dated 19 January 2001 provided by the Rating & Valuation Department. He further provided many photographs showing the external façade of the comparable buildings ("Exhibit A-5" to "Exhibit A-8").

6. The applicant gave evidence that the comparables were better in condition than the subject premises. For Comparable 5, it was a multi-storey block with a clear view of the Hong Kong Sports Stadium. Some comparable rents included parking facilities whilst the subject premises had no parking. He also produced some photographs ("Exhibit A-9") showing the internal condition of the subject premises caused by the water leakage from the roof , a problem he had raised with the respondent but not yet resolved.

7. The applicant said he had discussed with a business friend working for a international property consultant who had advised him the monthly asking rents of flats at No. 28 Tai Hang Road was between $18,000 and $21,000, whilst that of No. 3 Tai Hang Road was between $20,000 and $22,000. In addition, the applicant inquired with the real estate agency on the ground floor of the subject building and was advised that a reasonable rent for the subject premises should be under $20,000 per month. In summary, the applicant felt that his offer of status quo was an extremely fair offer.

8. Ms. Chow, the respondent's representative, gave evidence that she herself was also the owner of the first floor flat in the same building. She produced a copy of Form CR109 dated 30th June 1999 filed with the Commissioner of Rating & Valuation which show that the first floor flat was let for a term of 2 years commencing from 1st July 1999 at a rent of $21,500 per month, on exclusive basis. Ms. Chow said that the total rent, including rates and management charges, paid by her tenant amounted to $23,150. She further explained that at the time the existing lease of the subject premises commenced in 1998, the owner was anxious to rent out the premises as soon as possible as the property market was in the doldrums. As a result, the rent agreed in 1998 was in a depressed level.

9. Ms. Chow added that despite the old age of the building, the subject premises had a high ceiling, conveniently located and had been renovated about two to three years ago, with new tiles in the kitchen and toilet, new window frames and new bath tubs. One of the rooms even enjoyed sea view over Causeway Bay area.

10. The applicant replied that the sea view had, since the completion of the huge central library building, be blocked.

11. Both parties had not analysed the rental evidence provided by the Rating & Valuation Department in more details. Neither did they suggest any adjustment factor to the comparable rents for the purpose of determination of the PMR for the subject premises. The oral ball park estimates provided either by the applicant's friend or his real estate agent are of not much assistance. Neither was the rent passing of the flat on the first floor as it was out-dated, some 18 months ago. As a result, the Tribunal tried to analyse the rents identified by the parties in order to ascertain the PMR of the subject premises.

Analysis of the rental evidence

12. Details of the comparable rents provided by the applicant and the respondent are set out below:

13. The first six comparables all have transaction dates falling within the second half of 2000. As the relevant valuation date is 5th January 2001, the transaction dates of these six comparables are about one to six months earlier. As these comparables are closer to the relevant date than that of Comparable 7, they are preferred to the latter in terms of the timing of transactions.

14. From the evidence produced, the Tribunal is satisfied that the subject premises is at the lower end of the range of values, so far as the comparables are concerned. In particular, the Tribunal decides that the two comparables, which appeared to be superior in condition to the subject premises when viewing externally (see Exhibits A-5 and A-8) should be discarded. We are left with Comparable 2, 3, 4 and 6. They show a range of unit rates of between $147.45 and $225.9 per sq.m. with an average of $187.17 per sq.m.

15. According to the general knowledge of this Tribunal, the rental trend is relatively level during the second half of 2000. Hence, no adjustment as to time is made. The Tribunal has made adjustments to the value of the parking space for Comparable 2 and Comparable 3. As for other factors of adjustments, the Tribunal has heard no evidence to substantiate the adoption of any adjustment factor. Under these circumstances and in the absence of better evidence, the PMR of the subject premises is valued on the basis of the saleable area of the premises and the above analysed average unit rate, as follows:

16. Saleable Area of 116.8 sq.m. x $187.17 = $21,861 rounded to $21850 per month.

Orders

1. New Tenancy for 2 years from 6th day of January 2001;

2. New rent at $21,850 per month (inclusive of rates and management charges); leave to the applicant to pay the respondent the arrears of rent (if any) within 1 month;

3. Deposit to be increased pro rata in accordance with the new rent; leave to applicant to pay the respondent the increase adjustment within 1 month;

4. Other terms of new tenancy same as in the previous tenancy agreement;

5. No order as to costs.