A. N. Forsyth v. Banbury Investments Ltd.

LDNT306/2000 (Review)

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

Application No.: LDNT No. 306 of 2000 (Review)

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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 described as Flat E3 (also known as Flat E on 2nd Floor) of No. 12 Broadwood Road, Happy Wanchai, Hong Kong ("the Premises"). The Applicant on 31st August 2000 applied to the Lands Tribunal for the granting of a new tenancy. The Respondent did not oppose the application. At the hearing, the parties consented that the new tenancy would be a one year tenancy commencing from 1st October 2000. The outstanding issue was in the amount of prevailing market rent.

2. The Tribunal heard the application and granted the following orders on 15 December 2000:

1. By consent, new tenancy for 1 year commencing from 1st October 2000;

2. New rent at $20,400 per month (exclusive of rates); leave to the Applicant to pay the Respondent the arrears of rent, if any, or leave to the Respondent to pay back over-payment of rent to the Applicant, if any, within 1 month;

3. With liberty to apply by either party regarding the other terms of the new tenancy;

4. No order as to costs.

3. The Respondent applied for a review of the above Orders and the granting of the following orders:

1. To dismiss the application of the case.

2. To re-consider the market rent.

4. The Tribunal decided on 10 January 2001, within one month from the date of the above Orders, to review the said Orders. The review hearing was fixed on 9 February 2001.

Review application by the Respondent to dismiss the case

5. The Respondent submitted that the Applicant "is not entitled to apply for a tenancy since our CR101 was sent to the principal tenant, Pioneer Asphalts Limited at a wrong timing, i.e. 6 months earlier when the tenancy was still under II of the Landlord and Tenant (Consolidation)". Therefore, the Respondent submitted that the Applicant should be liable to pay to the Respondent the same rent of $27,386 per month (which sum of rent was paid by the principal tenant to the Respondent) but the Applicant was prepared to deduct a sum of $1,000 being the parking fee charged by the Building Manager to the Respondent since the tenancy for the subject premises did not include a car parking space. The Respondent also sought leave to file notice of opposition.

6. The Respondent acknowledged that during the original hearing, the Respondent had consented to the granting of a new tenancy to the Applicant. Ms. Choi, the representative for the Respondent admitted that she became aware of the provisions of the Landlord & Tenant (Consolidation) Ordinance only after the Tribunal dismissed a similar new tenancy application (Reference LDNT 305 of 2000) soon after the date of judgment of the present case. The Respondent therefore lodged an application for review of the present case.

7. The Applicant objected to the Respondent's application for leave to file notice of opposition at this stage. The Applicant disputed that the Respondent, having consented the granting of a new tenancy to the Applicant, could now be permitted to oppose the grant. In fact, after the judgment was delivered by the Tribunal, the Respondent had proposed to sign a new tenancy with the Applicant based on the Orders made on 15 December 2000. However, the Respondent unilaterally cancelled a proposed meeting only about 24 hours before the schedule, following the results of the Tribunal's decisions for LDNT305/2000.

8. The Tribunal has ordered for the transcripts of the original hearing for the present review application. The Tribunal has perused the transcripts and is satisfied that the parties had, at the commencement of the original hearing, consented to the granting of a new tenancy by the Respondent to the Applicant. The consent also extended to the agreement of the commencement date and the duration of the new tenancy. Under the circumstances, the Tribunal decides that the Respondent is bounded by the consent given at the date of the original hearing. The Respondent's application for leave to file notice of opposition is therefore dismissed. Also, the Respondent's application to dismiss the Applicant's new tenancy application is dismissed.

Review application by the Respondent to re-consider the market rent

9. The Respondent submitted that in the alternative of a dismissal of the granting of a new tenancy to the Applicant, the Tribunal should re-consider the market rent for the subject premises. There were two grounds:

"(i) The previous judgment is based on the rental transaction of Unit E4 only. At present, we submit a tenancy agreement of another unit (Unit C2) in the subject development for your re-assessing the prevailing open market rent of unit E3. For information, the existing rental of Unit E2 is HK$27,000 exclusive of rates to our knowledge.

(ii) Besides, according to the other owners, the condition of Unit E4 is poor as there has been water leakage problem from the roof."

Section 11A. (Review of decision) of Lands Tribunal Ordinance, Cap. 17, Laws of Hong Kong provides:

" (4) The Tribunal may, in any review, hear and receive any evidence it thinks fit for the purpose of determining the issue between the parties."

10. Since the Respondent submitted that the new rental information of Flat C2 was not known to the Respondent at the time of the original hearing, the Tribunal agreed that this additional rental evidence could be adduced by the Respondent in this review hearing. Likewise, the Applicant was given the opportunity to give any new rental evidence or any new information pertaining to the rental evidence produced in the original hearing.

11. Ms. Choi for the Respondent produced Exhibit R-5 which contains the first page and the backing sheet of the Tenancy Agreement for Flat C2 signed between the landlord, Lau Siu Hoi and the tenant, Wee Dennis Chi Wai. It was for a term of 2 years from 21 February 2000 at a rent of $26,000 per month, inclusive of rates and management fee. Ms. Choi also gave evidence that she telephoned the landlord of Flat E4 who advised her that the tenancy for Flat E4 commenced in early 2000. She further asked the landlord why the rent for Flat E4 was so low. The landlord did not elaborate, but said that he had the premises re-painted and then cut the telephone line. She had reason to believe that Flat E4 suffered from water seepage from the roof above.

12. Ms. Choi further gave evidence that the landlord of Flat E2, a Mr. Chow, had told her that the rent for Flat E2 was $27,000 per month, on exclusive basis. Mr. Chow told her that the tenancy commenced in early 2000 but declined to provide her with a copy of tenancy agreement. In the final submission, Ms. Choi for the Respondent asked that the PMR for the subject premises be determined at $26,386 per month, on exclusive of rates basis.

13. The Applicant produced a number of documents, marked as Exhibits A-7 to A-10. They were summed up below:

(1) Exhibit A-7- a signed letter from Mr. Poole, the tenant of Flat E2 who confirmed that the tenancy for Flat E2 was signed nearly two years ago.

(2) Exhibit A-8 - a signed letter from Mr. Bruce Baron, the tenant of Flat E4 who stated that “I have never encountered any water seepage from the roof of my apartment. Furthermore this apartment is no hotter than any of the apartments on lower floors on account of the thickness of the floor slab, this is an old building which faces West, and the apartment also has new style aluminium windows fitted."

(3) Exhibit A-9- a set of photographs showing the interior of Flat E4.

(4) Exhibit A-10- a copy of a tenancy agreement of Flat B4 (Flat B on 3rd Floor and roof and one car parking space) made on 7 February 2002 between the landlord and the tenant. The tenancy was for a term of two years commencing from 1st February 2001 and expiring on 31st January 2003 at a rent of $24,000 per month, inclusive of rates and management fee.

(5) Exhibit A-11- analysis of rent passing for Flat B4.

(6) Exhibit A-12- a set of photographs of Flat B4.

14. Mr. Forsyth, the Applicant, gave evidence that he had viewed the inside of Flat B4. It was in very good condition. The tenancy for Flat B4 was a renewed tenancy of the sitting tenant, Mr. Bruce Baron. Regarding the estimate made by the Tribunal, Mr. Forsyth objected to the adjustment for the roof radiation. He asked the Tribunal to take into account the opinion given by Mr. Baron in the his letter produced as Exhibit A-8. He said that Mr. Baron's flat, Flat E4, was not hotter than the subject premises. Also, he submitted that for the subject development, the disadvantages associated with the requirement to go one storey upward were cancelled by the benefits of enjoying a better view, which was the normal situation for walk-up buildings in Hong Kong.

15. The Applicant in the final analysis submitted a calculation sheet (Exhibit A-11) setting out his estimate of the PMR of the subject premises based on the comparable rent of Flat B4.

Determination of the PMR by the Tribunal

16. In light of the evidence, the Tribunal decides to take into consideration the new rental evidence produced by the parties during the hearing. The rental evidence for Flat E2 is considered to be not a good comparable since it was confirmed by the tenant in writing that the tenancy agreement was signed about two years ago. The remaining rents in the development are in respect of Flats C2, B4 and E4. They were adjusted in the manner shown below:

Adjustments

17. Regarding the adjustments of the comparables Flat B4 and Flat E4 to reflect the value of the portion of the roof above the flats, the Tribunal decides to stick to the previous adopted assumption. That is, the value of the roof is taken as to be equal to 10% of the value of the flat below. Similarly, the previous time adjustment for Flat E4 remains unchanged. A similar adjustment is also applied to Flat C2 which has a similar commencement date as Flat E4.

18. As to the adjustments for the effects of the solar heating on the roof of the subject development and for the differences in floor levels, the Tribunal agrees with the Applicant's evidence and the submission that no adjustment is required in view of the construction of the subject development and the balancing effect of having a better view as one goes one storey upwards.

19. The Tribunal also made the necessary adjustments to the comparables to reflect the liability of the tenants of the comparables to pay rates and management fee, where appropriate.

20. Thus, having regard to the evidence of the after-adjusted rents of the three best comparables adduced by the parties, the Tribunal determines that the prevailing market rent of the subject premises, on the basis of exclusive of rates and exclusive of management fee, shall be $20,600 per month.

Orders

1. The Respondent's application to dismiss the Applicant's application be dismissed;

2. Upon review, the new rent for the new tenancy granted by the Respondent to the Applicant be revised to $20,600 per month, on the basis of exclusive of rates and exclusive of management fee;

3. Other than the revision of the new rent, all the other Orders remain the same as in the Judgment dated 15 December 2000

4. No order as to costs for this review application.