Noble Resources Ltd. v. Golden Code Development Ltd.

LDNT 298/2000

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

New Tenancy Application No. LDNT 298 of 2000

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J U D G M E N T

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The Applicant is the tenant of the premises known as Ground Floor Apartment B1, Block B, Deepdene, 55 Island Road, Deepwater Bay, Hong Kong, whereas the Respondent is the landlord of the premises. The duration of the expired tenancy of the premises was for a period of 2 years (1.9.1998 to 31.8.2000) at a monthly rental of $70,000 (exclusive of rates and management fees).

2. The only issue in this case to be tried is the amount of monthly rental payable for the new tenancy to be granted.

3. According to the valuation report compiled by Mr. Ringo Lam, the Respondent's surveyor, the prevailing market rent of the premises as at 1.9.2000 is $79,500 per month (exclusive of rates and management fees). But Mr. Lam did not testify in court in respect of this report and Mr. Ho Shek Tim was the only witness for the Respondent.

4. Mr. Ho referred to the Applicant's valuation report compiled by Mr. Cullen in which he made a "-2%" for Flats F4 and F1 for the adjustment factor of "flat size". He opined that instead of "-2%", it should be "13.6%", because the rental for larger unit should be higher. That certainly cannot be right; the reverse is often the situation, because the larger the area, the bigger sum of rental is required, and often the unit rental is reduced for the purpose of attracting potential tenants. If Mr. Ho's opinion is right, it is surprising that this 13.6% was not included in Mr. Lam's report.

5. In Mr. Lam's report, he gave 12% to 15% adjustment to the rentals of the comparables on account of the existence of the garden whereas Mr. Cullen took 1/12, or 8.33% (1/12 x 100%), of the unit rental rate of the flat, as the unit rental rate of the garden. Mr. Ho disagreed with Mr. Cullen's assessment in this aspect.

6. Regarding the adjustment factor of "refurbishment", Mr. Cullen gave a "-5%" adjustment for the comparable Flat D3. After visiting Flat D3, his impression is that Flat D3 is in a much better condition than the premises. On the other hand, Mr. Ho visited Flat D3 on 7.5.2001, and he opined that there is no difference between the decoration of these two premises. He therefore disagreed with Mr. Cullen on the "-5%" adjustment.

7. Mr. Lam made an adjustment of 1% to the related comparables because air-conditions were provided by the Applicant for the premises, and this 1% reflects the benefits obtained from the subject tenancy agreement for the said provision. But under cross-examination Mr. Ho stated that air-conditioners were provided to Flats D3, G2, and E3. Therefore the 1% made to these comparables by Mr. Lam on account of air-conditioner should not have been made.

8. Mr. Lam made a 5% adjustment to the comparables by reason of the provision of the break clause to the premises. In his report he stated that "The tenant of the subject property has the right to terminate the lease after twelve months of the term. I have made 5% allowance to all the comparables to reflect the provision of the break clause". But under cross-examination Mr. Ho confirmed that the comparables have break clauses. Thus there is no justification for making the 5% allowance on account of the provision of the break clause.

9. The adjustments relating to the provisions of the air-conditioners and the break clause show the unreliability of Mr. Lam's report. In any event Mr. Lam did not testify in court. Therefore the contents of his report were not tested. I attach no weight to this report.

10. Regarding Mr. Ho's evidence, I attach no weight to it, after considering his background. He is the senior manager of the Respondent, and has had 18 years' experience in property management. He has obtained a broker's licence in real estate, but he has not received special training in surveying. Therefore in respect of the aspects of evidence where Mr. Ho differed from Mr. Cullen, I prefer the evidence of the latter because of his long-standing professional qualifications and experiences in valuation.

11. I make the following orders : -

i. The Applicant is granted a new tenancy for 2 years, commencing from 1.9.2000 to 31.8.2002, at a monthly rental of $72,000 (exclusive of rates and management fees);

ii. The other terms of the new tenancy are to be the same as those under the expired tenancy agreement, save for the monthly rental, dates and the amounts of rental deposits;

iii. The rental deposits of the new tenancy are to be adjusted in accordance with the monthly rental of $72,000, and to be made within 1 month from today.

Costs

12. Mr. Cook applied for costs for the Applicant. But I am not satisfied that Mr. Ho conducted the case for the Respondent in a frivolous or vexatious manner. I therefore order that each party is to bear its own costs.