Kamal G. Chulani v. Li Yee Hung

LDNT373/2001

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

New Tenancy Application No. 373 of 2001

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JUDGMENT

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Background

1. The Applicant is the tenant and the Respondent the landlord of the subject premises known as Flat E3 on 16th Floor, Mirador Mansion, 54 Nathan Road, Tsimshatsui, Kowloon, Hong Kong ("the Premises"). According to the information given by both parties, the Applicant has occupied the Premises for over 20 years. From 1996 to March 2002, the Premises was subject to a monthly tenancy at a monthly rent of $6,119, inclusive of Government Rates and exclusive of management fee. In this respect, the Respondent produced as Exhibit R2 a copy of Form TR9A, a Certificate of Increase in Rent given by the Commissioner of Rating & Valuation on 10 October 1996, certifying that the existing rent of $4,772 for the premises may be increased by $1,347. Since 1 April 2002, the parties agreed an interim rent of $4,000 per month, inclusive of Government Rates but exclusive of management fee, pending the outcome of the new tenancy application by the Applicant. The Applicant filed an application to the Lands Tribunal on 20 December 2001 applying for a new tenancy. The Respondent filed a notice of opposition on 4 January 2002 opposing the application.

2. On 24 June 2002, the date fixed for the trial of the case, the Respondent, represented by her lawyers, Messrs Haldanes, indicated in the opening that she no longer opposed the Applicant's application for a new tenancy. Instead, it was submitted that the parties had agreed on a 2-year tenancy commencing from 1 April 2002. Therefore, the dispute centred on the amount of prevailing market rent ("PMR") for the Premises from 1 April 2002, the agreed commencement date of the new tenancy. The Applicant submitted that the PMR should be $3,600 per month, inclusive of Government rates but exclusive of management fee. On the other hand, the Respondent submitted that the PMR should be $4,500 per month, exclusive of Government rates and management fee. In addition, the Respondent submitted that, apart from the PMR, there remained unresolved the method of paying the rent, the details of the written tenancy agreement to be signed by the parties and the issue of rent rebates arising from the payment of rent, that was, according to the Applicant, at higher than market rent level since 1996.

The Premises

3. The Premises is a domestic unit on the top floor of a large, 17-storey composite block known as Mirador Mansion, situated on the eastern side of Nathan Road bounded by three other roads, Mody Road, Carnarvon Road and Bristol Avenue. According to the evidence given by Ms. Ng Hung Mui, Elsa ("Ms. Ng"), an expert surveyor called by the Respondent, the area of the original "Flat E3 on 16/F" of the building had a saleable area of 36 sq. m., plus an enclosed and covered side roof of 4.1 sq. m. Besides, there was alteration of the party wall and the internal layout of the Premises and the adjacent unit (i.e., Flat E4 on 16/F), as a result of which the whole of the original kitchen of the said Flat E4 had become part of the Premises. According to Ms. Ng, the original kitchen area of the said Flat E4 was about 4.0 sq. m. Summing up, she estimated the saleable area of the Premises to be about 40 sq. m., plus an enclosed and covered side roof of 4.1 sq. m. Also, she suggested that the value of the area of the enclosed and covered side roof to be about 50% of that of the original unit as extended by alteration. On that basis, she estimated the adjusted, equivalent saleable area of the Premises to be about 42.05 sq. m. In the absence of other information, the Tribunal accepts this area estimate.

Assessment of PMR

4. The Applicant gave evidence in person. He produced a written document (Exhibit A1), which set out his assessment of the rent for the Premises, his arguments for the terms of the tenancy agreement and the rebates. The Applicant referred to a schedule of rental information dated 26 February 2002 provided by the Rating & Valuation Department (Appendix 5 of Ms. Ng's valuation report, produced as Exhibit R1). He submitted that so far as the assessment of PMR is concerned, Comparable 4 in that schedule (i.e. Flat 13 on 16/F, a unit adjacent to the Premises) should be taken as the best and the only comparable for this valuation. Based on the equivalent area of the Premises of 42.05 sq. m., he applied the adjusted unit rate of Comparable 4 in the sum of $85.2 per sq. m. (as shown in Appendix 10 of Exhibit R1) to arrive at a rent of $3,583, which he rounded to $3,600. He further added that the rent for the Premises should also be "at least 25% or more less" than the rent of $80 per sq. m. for Flat A13 until the KCR Corp.'s work is finished so as to compensate for the lighting bills and other disadvantages he suffered.

5. The Applicant called for the evidence of Ms. Ng, Chartered Surveyor. She analyzed six comparables in the same building (i.e., Flat A9 on 15/F, Flat B2 on 11/F, Flat A14 on 6/F, Flat A13 on 16/F and Flat C2 on 14/F) and a comparable in a nearby building, Flat D4 on 3/F of No. 87 Nathan Road. The rental information of these comparables was based on the schedule of rental information dated 26 February 2002 produced by the Rating & Valuation Department. Mr. Ng agreed to disregard Comparable 1 because of its being commercial in use. Thereafter, Ms. Ng first adjusted the comparables to a common basis of exclusive of rates and management fee. Then, the comparables were adjusted to reflect the differences between the comparables and the Premises in terms of various factors: lease commencement date, building age, floor level, size, layout, privacy & security, ventilation & natural lighting, noise and new letting versus renewal. Ms. Ng estimated the adjusted unit rates of the remaining five comparables to be in the range of between $85.2 per sq. m. and $122.1 per sq. m. She adopted the average unit rate of $106.3 per sq. m. for these comparables and applied that to the equilavent saleable area of the Premises of 42.05 sq. m. to arrive at a sum of $4,471, rounded to $4,500, as to be the PMR of the Premises.

6. The Applicant submitted that since Comparable 4 was the best comparable, the adoption of that Comparable should be preferred, at the expense of the other five comparables. On the other hand, the Respondent submitted that it would be unsafe to value the Premised solely on the basis on one comparable. Since more appropriate comparables were available, they should be used instead of one comparable as suggested by the Applicant. The Tribunal agrees with the Respondent that in general, the use of more comparables is preferred. In the present case, the Premises is not that unique as to justify the use of only one comparable, as suggested by the Applicant. In addition, the Tribunal considers that it is also relevant to consider the size range of the comparables vis-à-vis the Premises. Therefore, the appropriate comparables for the Premises should be restricted to Comparables 4, 5 and 6 since for Comparable 2 and Comparable 3, their sizes are very much larger than that of the Premises, thus making these two comparables to be inappropriate comparables.

7. As to the adjustments of the comparables, since Ms. Ng is the only expert witness called by the parties, her evidence is preferred than that of the Applicant.

Determination of the PMR of the Premises

8. Following the reasons aforesaid, the average of the adjusted unit rates of Comparables 4, 5 and 6 is calculated, at $97.37 per sq. m. This is applied to the equivalent saleable area of the Premises of 42.05 sq. m. to arrive at a sum of $4,094, which can be rounded to $4,100. The Tribunal therefore determines that the PMR of the Premises, on the basis of exclusive of rates and management fee, is $4,100 per month.

Method of payment of rent

9. The Respondent submitted that in order to ensure that payment of rent by the Applicant be made in time, there should be included under the terms of the new tenancy a clause that the payment of rent by the Applicant be effected by a Standing Order from a licensed bank. The Applicant disagree with the Respondents' proposal. The Tribunal considers this to be a very unusual term for a domestic tenancy in Hong Kong. Therefore, the Tribunal does not agree to the inclusion of this requirement under the new tenancy.

Other terms of the new tenancy

10. The parties also asked the Tribunal to determine the other terms of the new tenancy. The Respondent prepared and sent to the Applicant a copy of the draft tenancy agreement, intended for signatures by the parties. This was produced as Exhibit R3. However, the Applicant rejected the majority of the terms of the draft tenancy agreement (see Exhibit A2). In the circumstances, since the Respondent has let the Premises to the Applicant in the past 20 to 30 odd years without a written tenancy agreement, the Tribunal decides that it will be a waste of time and costs for the Tribunal to decide one by one the clauses to be included in the tenancy agreement for the new tenancy to be granted by this Tribunal. Therefore, no additional term of the new tenancy, other than the rent, the duration and the commencement date will be included in the new tenancy to be ordered by the Tribunal.

Rebates of over-payment of rent to the Applicant between 1996 to 31st March 2002

11. The Applicant requested the Tribunal to grant an order that the Respondent be required to rebate the over-payment of rent made by the Applicant during the period from 1996 to the date before the commencement of the new tenancy.

12. The Applicant's request falls outside the jurisdiction of the Tribunal. So far as this new tenancy application is concerned, it is made pursuant to the provisions of the Landlord & Tenant (Consolidation) Ordinance (Cap. 7). There is however no provision in the Ordinance that the Respondent could be asked by this Tribunal to rebate to the Applicant any over-payment of rent, calculated as the difference between the rent actually paid and the then prevailing market rent of the Premises, during the period between 1996 and the commencement of the subject new tenancy. The only rebate that could be ordered is in respect of the period between the date of commencement of the new tenancy and the date of order of the new tenancy. In the present case, the parties agreed that an interim rent of $4,000, on the basis of inclusive of Government rates but inclusive of management fee, has been paid by the Applicant to the Respondent for the period from 1st April 2002. There is therefore no rebate required from the Respondent since the PMR determined by the Tribunal is $4,100 per month, on the basis of exclusive of Government rates and management fee. On the contrary, the Applicant is required to pay to the Respondent the shortfall between the interim rent and the Tribunal's assessed PMR as arrears of rent within one month from the date of this Judgment.

Costs

13. The Respondent submitted that the conduct of this case on the part of the Applicant warranted the Tribunal to make a costs order against the Applicant. This is unreasonable. The Tribunal does not find that any party was conducting the case in a frivolous or vexation manner, to merit the award of costs order against any party, in the light of section 119R of the Landlord & Tenant (Consolidation) Ordinance, the section that provides for the circumstances under which costs order should be made. Therefore, there shall be no order as to costs.

Orders

1. By consent, new tenancy for two years commencing from 1st April 2002;

2. New rent at $4,100 per month (exclusive of rates and management fee);

3. Leave to the Applicant to pay the Respondent arrears of rent, if any, within one month;

4. Other terms of the new tenancy to be the same as for the previous tenancy;

5. No order as to costs.