SHL MANAGEMENT LTD v. HK ISLAND DEVELOPMENT LTD

IN THE LANDS TRIBUNAL OF HONG KONG

LANDS TRIBUNAL APPLICATION NO. L.T. 194/84

BETWEEN:

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DECISION

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Sir Denys Roberts:

1. This application under Part IV of the Landlord and Tenant (Consolidation) Ordinance relates to apartment No. B1150 in the New World Apartments ("New World") which are situated at 18-24 Salisbury Road, Kowloon. New World, which is in a central position, close to the Star Ferry and to Nathan Road, was completed six years' ago. There was evidence that the apartments in it attract high rents, which appear to have been maintained in a way which goes against the general trend of declining rents in the last year or two.

2. The applicant relied upon the report submitted by Miss Savage of Vigers, who expressed her opinion that the prevailing market rent for B.1150 was $18,500 per month, exclusive of rates and of $4,900 per month management charges, which include services, airconditioning, water, gas, electricity and telephone.

3. Miss Savage based her opinion upon a number of rents in New World, although the evidence, and the plans which we have seen, show that there is a substantial difference both in layout and in area between different apartments there.

4. The one with which we are concerned with is what might be called a "50" flat in section B. All the '50' flats are of the same layout and size, one on top of the other. Miss Savage was able to include in her report only information about B950, two floors below the suit premises. For this, she took a rent of $20,610, exclusive of rates and management charges, based on a letting which had taken place on 14th October, 1983. The valuation report of the respondent's valuer, Mr. Choi, included a rent of $22,900 for B950, the rent of a later tenancy of that apartment granted on 24th March, 1984. Miss Savage, however, said that even if she had known of the new rent, it would not have altered her calculation of the prevailing market rent for B1150.

5. We were not able to ask her whether she would have still maintained the same figure if she had known that Nos. 850 and 1250 had been let in the month of July at rents of $21,850 and $24,000 respectively, less 15%, in each case, the discounts being given because the owners grant, to old clients, discounts which would not have been available to the applicant.

6. We cannot but feel that, had Miss Savage been in possession of the much fuller information which was available to Mr. Choi, she would have enhanced her assessment of the prevailing market rent.

7. In addition to basing her assessment on the rent for B950, Miss Savage seems to have been influenced to a considerable degree by the lower unit rates which had been obtained for a number of '58' apartments. These are considerably smaller in size than the '50s' and their view is less attractive, being obscured in part because they are alongside the office block which has been constructed alongside section 'B' of New World. She also placed some reliance, though not in her report, on rents in Harbour City, informing us that rentals of something like $5 per square foot per month had recently been obtained for apartments there.

8. We do not feel that the Harbour City rents are of much assistance to us. On the whole the apartments there are very much larger; indeed, Miss Savage's example was based on an apartment which was 2,900 square feet, more than double the size of the suit premises. Also, the view of the apartments in Harbour City is said to be a less attractive one.

9. It seems to us quite unnecessary, in view of the substantial body of evidence as to the rentals in New World, to go outside it.

10. In his report, Mr. Choi, of Jones, Lang, Wootton. based his assessment of $22,600 per month, as the rent for B1150, upon the rents for B950 and B1450. Miss Tsang, a Senior Rental Officer employed by the respondent, gave evidence of the letting of B850 and B1250, at rents of $21,850 and $24,000 respectively. A discount of 15% was given, she said, in relation to B850, because it was being let to the City Polytechnic and the person negotiating for that tenant had also negotiated three other flats for the Hong Kong Polytechnic and one other for the City Polytechnic.

11. There was a similar discount of 15% for B1250, let to the Regent Hotel, because it had rented a large number of other flats from the respondent and is a company associated with the owners of New world. The applicant would not have qualified for any discount.

12. Mr. Choi's report relates to his view of the prevailing market rent on the date of his report, which was 4th July.

13. We are concerned with the prevailing market rent on the date from which the tenancy would commence, which was 1st February. Mr. Choi expressed the view that there had been, so far as the New World is concerned, no perceptible movement in rents either way in the period between 1st February and 4th July, the date of his report.

14. He added that his Knowledge of the two additional lettings of B850 and B1250 would not have made him alter his conclusion that $22,600 was the prevailing market rent excluding rates and management fees.

15. The additional evidence produced by Miss Tsang shows a somewhat higher rent for B1250 than the one recommended by Mr. Choi for B1150 and a somewhat lower one for B850. Mr. Choi's evidence was that you could expect a degree of increase in rent the higher the floors went. He thought that if $21,850 was correct for B850, his assessment of $22,600 was a reasonable one for B1150, taking into account that the rent for B1250, was higher. We prefer Mr. Choi's estimate of the prevailing market rent to that of Miss Savage and accept it.

16. It is to be noted that the respondents, during negotiations with the applicant, offered to grant a lease at a rent of $22,882, plus management charges, on 26th January, 1983. The figure of $22,600 therefore is slightly below the figure which the landlord proposed to the tenant somewhat over a year ago.

17. We decide that there should be a grant of a new tenancy to the applicant for a period of two years, from 1st February, 1984 at a rental of $22,600 per month, exclusive of rates and exclusive of management charges of $4,900 per month.

18. We are not disposed to order the amendment of the terms of the old tenancy agreement, (which will be embodied in the new one with the necessary modifications) in the manner suggested in Clause 12(b) of Form 13 completed by the applicant, nor to delete Clauses 4(m) and 5 as requested in Clause 12(c), nor to make the amendment suggested in Clause 12(d). Clause 4(c) of the agreement should be altered so as to provide for the amount of deposit to be twice the amount of the amended monthly rental.