LAM CHIK v. DIRECTOR OF HOUSING

LDHA 3/2003

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

Housing Ordinance Appeal Application No. LDHA 3 of 2003

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J U D G M E N T

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Introduction

1. The captioned application is an appeal from Mr. Lam Chik against the amount of premium assessed by the Director of Housing (the executive arm of the Housing Authority) for the removal of the non-alienation restriction in the Sale and Purchase Agreement pertaining to Flat 1, 23/F, Block B, May Shing Court, No.34 Mei Tin Road Sha Tin ("the Subject Property"). The appeal was made pursuant to paragraph 5(d) of the Schedule to the Housing Ordinance, Chapter 283.

2. Mr. Lam Chik purchased the Subject Property at a discount from the Housing Authority. The discount was substantial and granted as a housing policy of the Housing Authority to assist the under-privileged in the acquisition of their homes. Due to a discount in price being granted, the Housing Authority has stipulated a non-alienation restriction in the Sale and Purchase Agreement so that the Subject Property is only permitted to be sold to the eligible purchasers designated by the Housing Authority. If the Subject Property is sold to the ineligible purchasers, a premium assessed in pursuant to paragraph 1(b) of the Schedule to the Housing Ordinance, Chapter 283, is required to be paid.

3. Mr. Lam intends to sell the Subject Property to the ineligible purchasers and has applied to the Housing Department for removal of the non-alienation restriction by paying to the Housing Authority a premium. The two parties concerned failed to reach agreement on the amount of premium payable. Mr. Lam lodged an appeal on 19th June 2003 requesting an adjudication by the Lands Tribunal.

The Property

4. May Shing Court, one of the many residential estates developed by the Housing Authority under the Home Ownership Scheme, abuts on Mei Tin Road and stands by the side of the Shing Mun River. The estate comprises a multi-storey car park and three high rise residential blocks each containing 35 storeys and 24 flats per floor. The usual amenities that are normally provided in public housing estates, such as landscaped garden, children play areas and promenade are also provided in Mei Shing Court, according to both expert witnesses. Besides, a full range of commercial and retail facilities and services are available in Tai Wai district, which is on the opposite side of Tai Po Road (an expressway that separates May Shing Court from Tai Wai).

5. It should take anyone 15 minutes by walking from the estate to reach the nearby Tai Wai Railways Station. Public buses and public light buses are, however, available on Mei Tin Road.

6. Flat 1, 23/F, Block B, is about 35.4 sq. m. (or 538 sq. ft.) in saleable area with a western aspect.

Expert Witnesses' Views

(a) Views of the Appellant's Expert Witness

7. Mr. Christopher Tang Kee Duen, the Appellant's expert witness, quoted four sales in the period between 5th May 2003 and 16th July 2003, which are as appended below: -

Memorial No.	Date of Transaction	Address of Property	CGA (ft2)	Price (HK$)
01330656	18 June 2003	May Shing Court, Block B, Yat Shing House, 1/F Flat 10	538	480,000 @892
01327176	22 May 2003	May Shing Court, Block B,Yat Shing House, 24/F Flat 23	538	590,000 @1,097
01330542	5 May 2003	May Shing Court, Block B,Yat Shing House, 3/F Flat 08	538	550,000 @1,022
01332797	16 July 2003	May Shing Court, Block C,Fai Shing House, 14/F Flat 19	538	570,000 @1,059

8. He suggested that the second sale (transacted on 22nd May 2003) in the above table is the most appropriate for comparison despite its advantages of being located farther away from the garbage shaft and a better internal condition (i.e. without the problems of water seepage and peeling off of plaster) than the Subject Property. He considered it a suitable comparable because of the similarity (to the Subject Property) in the aspect of facing, being only a floor above and located in the same block B. He, nevertheless, admitted that both the second sale and the Subject Property are affected by school noise.

9. He advised the court that the lower transacted price (at $550,000) of the third sale is consistent with the price of the second sale as the former is similarly to the Subject Property close to the garbage shaft, but with a different aspect (the third sale faces east). As such, he is of the view that there is clear indication that the prevailing market value of the Subject Property falls within the range of $550,000 to $590,000.

10. During the cross-examination by Housing Department's representative, he was cornered for only relying on the second sale for assessment. This appeared to be a misunderstanding arisen from Mr. Tang's somewhat inarticulate explanation concerning his valuation method. He did analyse the four sales. His giving up to make detailed and individual adjustments to the transacted prices of the four sales for their differences in the various valuation factors does not mean that he has only relied on only one sale to arrive at the prevailing market value of $560,000. In paragraph 6 of his report, he did consider other sales before arriving at the conclusion that the second sale price is not anomalous. Afterwards, he aslo made adjustments to the price because of its (second sale) advantages in relation to the Subject Property.

(b) Views of the Respondent' Expert Witness

11. Mr. Wong Wai Leung gave evidence on behalf of the Respondent (the Director of Housing). He quoted 9 sales all taken place within the period from 17th March 2003 to 16th July 2003. Of these 9 sales, Mr. Tang has also quoted Sales Nos. 1 and 5. The other two sales on Mr. Tang's list (i.e. the one on 1/F and the other on 3/F) were not selected by Mr. Wong.

12. Mr. Wong made adjustments in the transacted prices of these 9 sales to account for their difference in floor level, view, aspect that the properties face, noise and date of transaction. He gave an adjustment of (i) 0.33% to account for one floor higher/lower, (ii) 0.25% for the next better/worse facing aspect in the order of South, South-east, East/South-west, North-east, North, North-west, and West, (iii) 0% for properties similarly with open and unobstructed view, 2% for view with buildings at some distance away and 4% for view blocked by buildings at close distance, and (iv) -1%, 0%, 1% and -2% respectively to reflect properties that are unaffected or less affected by the noise than the Subject Property, equally affected, the more seriously affected and most seriously affected. As to the adjustment to account for difference in transaction date, Mr. Wong basically followed the Rating and Valuation Department statistics but estimated the price in the period from June 2003 through to the Valuation Date of 7th August 2003 where the statistics were unavailable, down by 1%. As a result, the adjusted unit prices are as appended below: -

Comparables		Unit Rate	Date	Adjustment						Adjusted Unit Rate
				Floor Level	View	Facing Aspect	Noise	Time	Total
1	May Shing Court, Blk C, 14/F, Flat 19	16,102	16-Jul-03	2.97%	4.0%	0.75%	2.0%	-1.0%	8.7%	17,506
2	May Shing Court, Blk C, 26/F, Flat 16	16,469	23-Jun-03	-0.99%	2.0%	0.50%	1.0%	-1.0%	1.5%	16,718
3	May Shing Court, Blk C, 12/F, Flat 1	17,655	06-Jun-03	3.63%	0.0%	0.25%	-1.0%	-1.0%	1.9%	17,987
4	May Shing Court, Blk C, 11/F, Flat 7	16,949	27-May-03	3.96%	4.0%	0.00%	2.0%	-2.5%	7.5%	18,214
5	May Shing Court, Blk B, 24/F, Flat 23	16,667	22-May-03	-0.33%	0.0%	0.75%	0.0%	-2.5%	-2.1%	16,320
6	May Shing Court, Blk C, 10/F, Flat 19	15,254	29-Apr-03	4.29%	4.0%	0.75%	2.0%	-5.1%	5.9%	16,160
7	May Shing Court, Blk C, 24/F, Flat 11	21,186	25-Mar-03	-0.33%	2.0%	-0.50%	0.0%	-7.2%	-6.0%	19,909
8	May Shing Court, Blk C, 18/F, Flat 17	16,949	24-Mar-03	1.65%	4.0%	0.75%	2.0%	-7.2%	1.2%	17,153
9	May Shing Court, Blk B, 18/F, Flat 19	18,644	17-Mar-03	1.65%	2.0%	-0.25%	-1.0%	-7.2%	-4.8%	17,749

Average

17,524

Comments on Expert Witnesses' Views

13. Mr. Tang 's valuation method does not pose any valuation problem but his basis for selection of comparable is ambiguous. He seems to be confining to Block B properties but he has discarded Flat 19, 18/F, Block B that changed ownership only on 17th March 2003. At the same time, he quoted Flat 19, 14/F, Block C, which is not a Block B property. He discarded the former sale probably because it was a transaction in March 2003. However, it is a transaction still within 6 months from the Valuation Date where the Rating and Valuation Department statistics are available and may be utilised for price adjustment. It should be noted that the fewer the number of transactions taken for valuation, the higher is the risk for the assessment to depart from the market price that it ought to be. Mr. Tang obviously has not considered all sales taken place within the 6 months period although his view that sales selected for comparison should as far as possible similar (or in as many aspects as possible similar to the Subject Property) is a valid one.

14. Mr. Wong has provided a detailed valuation. The valuation factors taken into account in his assessment are valid, too. Though the percentages adopted for adjustment for the factors of view, noise and aspect of facing appeared subjective and may not be empirical, there was no challenge from the Appellant and Mr. Tang in court and in the valuation report. Since for most of the valuation factors the adjustment percentages adopted by Mr. Wong are not unreasonably wide between their two extremes (i.e. the best and the worst), the Tribunal does not find it justified making change to this basis. In fact, the Tribunal has not been given the evidence to prove the otherwise.

15. However, upon checking through the adjustments made by Mr. Wong, the Tribunal discovers the adjustment percentages have not been applied in a consistent way following his adopted basis. For example, Comparable Nos. 1, 2, 6, 7, 8, and 9 are all with low rise buildings in front and similar in view to the Subject Property, but were all given upward adjustment to reflect their disadvantage (in relation to the Subject Property). Similarly, Comparable Nos. 1, 2, 6, 8 and 9 which are all just slightly more seriously affected by school noise, were not given equal adjustment, and Comparable Nos. 4 and 7, which are less exposed to the noise were given 4% or nil adjustment. This chaos should be rectified.

Conclusion and Valuation

16. The Tribunal finds it reasonable to accept Mr. Wong's valuation save the few points made in paragraph 15 above. Following on from such, Mr. Wong's assessment is reproduced below: -

Comparables		Unit Rate	Date	Adjustment						Adjusted Unit Rate
				Floor Level	View	Facing Aspect	Noise	Time	Total
1	May Shing Court, Blk C, 14/F, Flat 19	16,102	16-Jul-03	2.97%	0%	0.75%	1%	-1.0%	3.72%	16,701
2	May Shing Court, Blk C, 26/F, Flat 16	16,469	23-Jun-03	-0.99%	0%	0.50%	1.0%	-1.0%	-0.49%	16,388
3	May Shing Court, Blk C, 12/F, Flat 1	17,655	06-Jun-03	3.63%	2%	0.25%	-1.0%	-1.0%	3.88%	18,340
4	May Shing Court, Blk C, 11/F, Flat 7	16,949	27-May-03	3.96%	2%	0.00%	-1.0%	-2.5%	2.46%	17,366
5	May Shing Court, Blk B, 24/F, Flat 23	16,667	22-May-03	-0.33%	0%	0.75%	0.0%	-2.5%	-2.08%	16,320
6	May Shing Court, Blk C, 10/F, Flat 19	15,254	29-Apr-03	4.29%	0%	0.75%	1%	-5.1%	0.94%	15,397
7	May Shing Court, Blk C, 24/F, Flat 11	21,186	25-Mar-03	-0.33%	0%	-0.50%	-1%	-7.2%	-9.03%	19,273
8	May Shing Court, Blk C, 18/F, Flat 17	16,949	24-Mar-03	1.65%	0%	0.75%	1%	-7.2%	-3.8%	16,305
9	May Shing Court, Blk B, 18/F, Flat 19	18,644	17-Mar-03	1.65%	0%	-0.25%	0%	-7.2%	0.58%	18,752

Average

17,205

17. Multiplying the saleable area of 35.4 sq. m. by $17,205 per sq. m., it gives a total value of $609,057 or say, $609,000.

18. Orders

(1) The Respondent shall calculate the premium in accordance with paragraph 1(b) of the Schedule to the Housing Ordinance, Chapter 283 and on the basis of $609,000;

(2) The Appellant should pay the Respondent costs of the subject application, which if not agreed, shall be taxed at the District Court scale.