Advani, Lavita Lavina Hiranand v. Kolling Company (Hong Kong) Ltd.

LDNT82/2001

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

Application No.: LDNT No. 82 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 No. 8A, Universal Mansion, 52 Hillwood Road, Tsimshatsui, Kowloon ("the Premises"). The premises is subject to a tenancy for a term of 2 years commencing from 14 November 1998 to 13 November 2000 at a monthly rent of $9,155, inclusive of rates and management fee.

2. The Applicant applied on 3 March 2001 to the Lands Tribunal for the granting of a new tenancy. Hang Seng Real Estate Management Ltd., as the Agent for the Respondent filed a notice of opposition on 13 March 2001 stating that "the Respondent does not oppose the Applicant's application to the Lands Tribunal for the grant of a new tenancy in respect of the above premises subject to the payment by the Applicant of the prevailing market rent to be determined by the Tribunal." Subsequently, the parties agreed the granting of a new tenancy for a term of 2 years from 14 March 2001 on the same terms as the previous tenancy with the exception of the commencement date, the rent and the deposit. The only outstanding issue is the amount of the prevailing market rent (PMR) for the new tenancy.

3. The subject building, Universal Mansion, is a 11-storey high irregular shaped apartment building comprising two phases, which have separate ground floor entrances. The building is set back from Hillwood Road and accessible by a flight of steps from both Austin Road and Hillwood Road. There is also a vehicular access from Observatory Road/Court. Phase one of the building was certified for completion completed in 1962 and phase two, in 1964. From the first floor upwards, the flats of both phases align into one common corridor. Flats A to H belong to phase one, whilst flats I to Q belong to phase two. The subject premises is a 2-bedroom flat on the 8th Floor of the building.

Applicant's case

4. The Applicant gave evidence herself. She produced a report (Exhibit A1) which set out the valuation of the subject premises. She described that the living room of the subject premises had no window, no natural light and ventilation since it only had a high level "borrowed-light" through a bedroom. She together with her mother had occupied the premises for over 14 years during which time the landlord had not carried out any re-decoration or renovation. She stated that "whilst the premises are generally in a fair habitable condition, in the absence of renovation the window frames are old, and warped and some windows do not close properly." She further added that "this problem has been drawn to the landlords attention in writing on various occasions but nothing has been done to remedy these defects." In her report, she had also attached some photographs of various parts of the premises

5. She confirmed during the hearing that through her own and her mother's personal contacts and enquiries with her neighbours and estate agent, she had been able to assemble a total number of 7 comparables, the details of which were shown in the table marked as Annex A in Exhibit A1. They were summarised below:

# For conversion from inclusive to exclusive for Comparables 2, 3, 4, 6 and 7, an allowance of $16 per sq. m. has been deducted for rates and management fee

6. The Applicant in her report drew the Tribunal's attention to the following:

1. Except for 9/F., Flat O, the living rooms of all comparables had windows providing natural lighting and ventilation.

2. Windows in all the comparable flats had been replaced with modern aluminum windows whereas in the subject premises, the original corroded iron frames remained.

3. Flat I on 8/F had been renovated throughout.

4. Partial renovation, i.e., new floor finishing in kitchen or bathroom were found in some of the comparable flats.

7. Despite the differences between the subject premises and the comparable premises, the Applicant considered it be fair and reasonable to adopt $152 per sq. m., the average of the unit rates of her 7 comparable transactions, for the purpose of determining the PMR for the subject premises. She multiplied this unit rate to 50.18 sq.m., the saleable area of the subject premises and arrived at a figure of $7,627. She rounded off this to $7,600. Adding to this rent the sums for rates and management fee, or $388.5 and $435 respectively, she arrived at a figure of $8,423.50 as to be the PMR on inclusive basis.

8. Upon cross examination, the Applicant revealed that she had obtained the rental information of her comparables from difference sources, as follows:

Comparable 1- from the owner whom the Applicant had known for about 15 years;

Comparable 2- from the owner whom the Applicant had known personally;

Comparable 3- from the estate agent and the owner is a Ms. Lee;

Comparable 4- from the estate agent and she had not inspected this flat;

Comparable 5- from the tenant;

Comparable 6- from the tenant;

Comparable 7- from the agent, and the flat had been converted from the original 1-bedroom design into a 2-bedroom flat.

9. In support of her evidence, the Applicant also produced two floor plans of the subject building (Exhibit A2), a copy of the tenancy agreement of Comparable 6, Flat I on 2/F (Exhibit A3), and a copy of the tenancy agreement of Comparable 4, Flat C1 on 4/F (Exhibit A4).

10. Finally, the Applicant commented on the valuation prepared the Respondent's expert, Mr. Pang Shiu Kee, Chartered Surveyor. She produced two charts (Exhibit A5 and A6) which respectively plotted the unit rates of Mr. Pang's 5 comparables against time, and the unit rates of both Mr. Pang's and the Applicant's comparables against time. In Exhibit A5, the Applicant calculated that with the exception of Mr. Pang's Comparable 1, which was out of line, the average of the remaining 4 comparables of Mr. Pang was only $158. Also, Mr. Pang's Comparable 1 had an after adjusted rate of $200.56 per sq. m. That was over 26% above the average rate of Mr. Pang's remaining 4 comparables. Similarly, she plotted on Exhibit A6 the unit rates of all her 7 comparables and those of all Mr. Pang's 5 comparables. In conclusion, the Applicant suggested that Mr. Pang's Comparable 1 was out of line with all the other comparables, the analysed result of which was illustrated on the charts by a line which she termed as the "stable line of market".

The Respondent's case

11. Mr. David Tang, the Respondent's representative cross-examined the Applicant. Afterwards, he produced the valuation report prepared by Mr. Pang Shiu Kee, Chartered Surveyor and a sketch plan showing the saleable area of the Premises. These were marked as Exhibits R1 and R2 respectively. In Exhibit R1, Mr. Pang analysed 5 comparables in the subject building and arrived at adjusted unit rates of $200.56, $155.1, $159.8, $152.72 and $166.5 per sq. m. He averaged the above 5 after adjusted unit rates to arrive at a unit rate of $167 per sq. m. This was adopted by him as the appropriate unit rate for the subject premises in his valuation. He multiplied this $167 per sq. m. with the saleable area of 50.4 sq. m. and arrived at $8,416.8 and then, he added to this the monthly rates of $388.5 and $435 respectively before arriving at a figure of $9,240.3, which was rounded up to $9,250.

12. Mr. Tang decided in the hearing that he would not call Mr. Pang to give evidence. I have warned him that if the Respondent in this application sought to rely on the report prepared by Mr. Pang, he should not deny the opportunity to cross-examine Mr. Pang by the Applicant. However, Mr. Tang still maintained his decision.

13. In the final submission, Mr. Tang submitted that based on the Applicant's valuation as shown in Exhibit A1, the unit rate to be adopted by the Applicant for the assessment of PMR was $152 per sq. m. Applying this to the correct saleable area of 50.97 sq. m. (548.44 sq. ft.), as shown in the registered assignment plan for the subject premises which was produced as Exhibit R2, the rent exclusive of rates and management fee was calculated to be $7,747. To order to arrive at the PMR on an all inclusive basis, on terms similar to the expired tenancy, an amount of $388.5 for rates and a monthly sum of $435 for management fee had to be added. This gave a figure of $8,570. Mr. Tang submitted that this assessed PMR of $8,570 was not much different from the previous contractual rent of $9,155.

14. Mr. Tang also referred the Tribunal to Mr. Pang's valuation report (Exhibit R1) in which Mr. Pang opined that the PMR of the subject premises on all inclusive basis was $9,250 per month. Mr. Tang submitted that the Applicant in assessing the PMR failed to take into account the floor differences between the subject premises and the comparables as well as the differences between 2 bedroom typed (such as the subject premises) and 1 bedroom types comparable flats. Finally, Mr. Tang said that he would leave it to the Tribunal to have a determination of the PMR of the subject premsies.

Applicant's response and final submission

15. The Applicant stated that he had earlier used an area of 50.18 sq. m. (540 sq. ft.) as the saleable area of the subject premises since it was provided to her by the Respondent's agent. However, after seeing the floor plan (Exhibit R1) produced by Mr. Tang, she agreed to adopt the area of 50.97 sq. m. as to be the saleable area of the subject premises as their difference was negligible. Also, the Applicant denied that she had not considered the differences between the high floor and the low floor flats as three of her comparables (Comparables 1, 2 and 3) are high floor flats. Also, her Comparable 1 was a 2-bedroom typed, same as the subject premises. She submitted that she had used the unadjusted average of the unit rates of the comparables in this valuation despite of the inferior condition and state of repair of the subject premises.

Determination of the PMR by the Tribunal

16. Since the Respondent refused to call for the expert evidence of Mr. Pang, the surveyor who had prepared the valuation report for him, the Tribunal decides to give very little to the valuation shown in that report. It would not be fair to the Applicant that the latter did not have the opportunity of cross-examining the evidence of Mr. Pang.

17. I find that the Applicant has researched the subject premises and the comparable transactions in details. I also find her to be a trust worthy witness. She shows herself to be very knowledgeable with the subject building in which she has lived for over 14 yers. Although she is not a valuation surveyor by profession, she has set out clearly in her report her comparables and valuation. She has not make specific subjective adjustments to reflect the differences between the subject premises and the comparables. However, she stated that she had personally inspected all the comparables, with the exception of Comparables 4 and 7. I find two of these comparables to be particularly relevant:- Comparable 1, a 2-bedroom typed flat on a high floor, same as the subject premises and Comparable 2, a 1-bedroom typed renovated flat on the same floor of the subject premises. These two comparables fetch unit rates of $145 per sq. m. and $159 per sq. m., on exclusive basis. The average unit rate is $152 per sq. m. Incidentally, the average unit rate of all the Applicant's 7 comparables is also $152 per sq. m. Therefore, all in all, I agree that the Applicant's suggested unit rate of $152 per sq. m. for the subject premises is supported by the seven comparable lettings in the subject building.

18. Thus, I determine the PMR of the subject premises, for the new tenancy commencing from 14 March 2001, on the basis of inclusive of rates, and management fee to be $8,570 per month. The deposit to be adjusted pro-rata in accordance with the newly assessed PMR. Otherwise, the other terms of the new tenancy remain the same as in the former tenancy agreement.

Orders

1. By consent, new Tenancy for two years commencing from 14 March 2001;

2. New rent at $8,570 per month (inclusive of rates and management fees); leave to the Respondent to pay to the Respondent over-payment of rent, if any, within 28 days from today;

3. Deposit to be adjusted pro-rata in accordance with the new rent; leave to the Respondent to pay back to the Applicant the adjustment within 28 days from today;

4. Other terms of new tenancy to be the same as in the former tenancy agreement;

5. No order as to costs.