PETER LUK YU KWAN v. HO HING CHEUNG

Landlord and tenant - Part IV - domestic premises formerly subject to Part II at a rent of $6250 per month transferred on the application of the tenant to Part IV - after transfer tenant applied for a new tenancy at a rent lower than the prior Part II rent - new Part IV rent fixed at a rate lower than prior Part II rent - Held:    1. New tenancy granted for 2 years from 10.12.85.

2. New rent $5600 per month - Sections 51B, 117, 119K Landlord and Tenant (Consolidation) Ordinance, Cap. 7.

IN THE LANDS TRIBUNAL OF HONG KONG

Application No. L.T. 1384 of 1985

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JUDGMENT

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1. This is an application for a new tenancy by the tenant. The only disputed issue is the new rent. The suit premises were transferred by the Commissioner of Rating and Valuation on 9th October 1985 from Part II to Part IV on the application of the tenant pursuant to Section 51B of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7. Earlier while the suit premises were still subject to Part II, the landlord had offered a new 2 year tenancy from 10.12.85 at $6,250 per month. The tenant has since 11.12.85 remained in possession at the monthly rent of $6,250 per month.

2. The tenant cited 1 comparable which was Flat B, 19th Floor in the same block of Rhenish Mansions. This flat was identical in size and like the suit premises included the provision of a carpark. A new tenancy was granted for this comparable on 10th July 1985 at $5,900 per month for a period of 2 years. The tenant submitted that the comparable being much higher in the block, had a better view and less road noise. In his view his own premises were much inferior and supported a prevailing market rent of $5,200.

3. The landlord called Miss S.L. Wong, Chartered Surveyor, to give evidence in support of the landlord's submission that the prevailing market rent was $6,700. Miss Wong relied on two comparables in an adjoining block at Rhenish Mansions on the 3rd and 4th Floors of that Block. These comparables had the advantage of being on the same or similar level as the suit premises. Flat A on the 3rd Floor was subject to a 2 year tenancy from 1.10.85 at $6,000 per month. Flat A, 4th Floor, was subject to a 2 year tenancy from 16.9.85 also at $6,000 per month. Miss Wong adopted these comparables as her base but pointed out that neither included, the provision of a carpark. Carparks in the locality commanded, she claimed, $800 to $1,000 per month. Carparks were not in liberal supply in the locality and she observed that while rents for different types of flats in the locality necessarily varied, there was very much less variation in car park rentals.

4. The tenant pointed out that the Block containing the comparables was materially different to the suit premises block on a number of grounds. While he conceded the comparables did not include carparks, he submitted that there were a number of other differences adverse to the suit premises. These included the fact that the comparables were larger and that the other block was far better maintained that the suit premises block. Within the suit premises block, he submitted, that apart from being on a lower floor compared with the higher floor comparable, his own carpark, because of its position, was inferior to the others in the block, in regard to parking and height. He also observed that the carpark prices on which Miss Wong had based her $800 to $1,000 per month, were in newer and better designed buildings.

5. After the hearing I entered and inspected the suit premises and the 19th Floor comparable in the same block. Entry to the other two comparables in the adjoining block was not available but I observed the exterior of that block.

6. I find that as between the suit promises and the comparable in the same block the suit premises are inferior. In size they are identical but the suit premises are more affected by surrounding buildings, many of which extend to a height lower than the 19th Floor of the suit premises block. As to view, only 1 bedroom has a very limited view of the sea. None of the other rooms do while those on the eastern side lose privacy due the closeness of the adjoining block. The 19th Floor comparable suffers from neither disadvantage and in addition has a relatively unlimited sea view from all windows. Road noise tends to travel upwards but the suit premises are probably a little more adversely affected. I am satisfied that the market value of the suit premises is about $500 per month less than the market value of the 19th Floor comparable.

7. The next question is whether the $5,900 monthly rent of the comparable, reflects the market value. Unfortunately, no other comparables of identical flats in the same block were available. However, the adjoining block is similar and it is helpful to consider the 2 comparables in that block. They are let for $6,000 without carparks. They are also in lower floors comparable to the suit premises. On the one hand, they do not have carparks but on the other hand, they are from 40 square feet to 70 square foot larger. From my inspection I also record that the exterior maintenance and appearance of the adjoining block is much better than the suit premises block. The factors in favour of the adjoining block comparables, leaving aside the carpark issue, outweigh the better view of the 19th Floor comparable. If the comparables were all without carparks, the two comparables in the adjoining block would attract a higher value than the 19th Floor comparable.

8. Turning to the carpark issue, I accept Miss Wong's opinion that between different premises in the same Locality, there will be less variation in carpark rentals than for rentals of the domestic premises themselves. I accept too that in this locality there is a demand for carparks and that in .  new buildings carparks are being let at 8800 to $1,000 per month. I am satisfied that a carpark separately let in the suit premises, without any design or access disadvantages, would command a rental in the region of $800 per month up towards $1,000 per month.

9. When I take all the available rentals into account I consider that the existing rent of the 19th Floor comparable is at the lower range of market prices and that the market runt for those premises would range up to $6,300 per month. On that basis, rents without carparks of the various premises cited could well be $5,200 for the suit premises, $5,500 for the 19th Floor comparable and $6,000 for the adjoining block comparables.

10. I reject the tenant's submission that carparks are an inherent part of existing rentals. For obviously the use of a carpark is an additional facility which is quantified into additional rent. The question is how much additional rent. However, the historic letting of fiats in this block with carparks, appears to have resulted in lower carpark rentals being achieved than if the carparks had been let separately.

11. It is always arbitrary notionally to apportion global lettings, but the global lettings of flats and standard carparks probably reflect a monthly carpark rental element of $500 to $800. This would increase the notional flat only rental of $5,500 for the 19th Floor comparable, to $6,000 to $6,300. The 19th Floor comparable has a standard size carpark with reasonable access. Turning to the suit premises carpark, which I inspected, it suffers from two disadvantages. First, it has poor access as it is situated at right angles to the nearby carparks. Secondly, if of lesser significance, being under a lower part of a ramp, it has restricted height. These factors, I am satisfied, would lead to a Lower rental being negotiated in the market, if it were let separately, than for the majority of' the other carparks in the building. I confirm the view that it is artificial and can even be misleading, to overanalyse rentals by apportioning global lettings of flats and carpark into separate prices for each, when that course had not been followed by the parties in the market. However, where as here, the other comparables do not include carparks, some attempt is necessary. Any attempt should be limited for checking purposes only and then broadly to review the results as a guide.

12. Adopting this approach, I find that the global letting of the suit premises would probably result in the market rent increasing from about $5,200 to $5,600 per month. Taking all these factors into account I determine the new rent at $5,600 per month. I record that the purchase price of the suit premises recently paid by the landlord and the fact that he owns other premises are both wholly irrelevant and have been ignored.