HUNG, LOURENCO ROSE AND ANOTHER v. DIRECTOR OF HOUSING

LDHA8 of 2002

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

Housing Appeal No. 8 of 2002

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JUDGMENT

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Background

1. The Appellants were the registered owners of the suit premises known as Flat 8 on 14th Floor of Block B, Siu Hei Court, No. 201 Wu Chui Road, Tuen Mun, New Territories. On 15 November 1985, they bought the Premises at a price of $98,000. The Premises is a domestic flat in Siu Hei Court, which is a Home Ownership Scheme project located on the northern side of Wu Chui Road at Tuen Mui Pier Area, Tuen Mun, N.T.

2. The Deed of Assignment of the Premises was subject to the terms, covenants and conditions as stated in the Schedule to the Housing Ordinance (Cap. 283). Basically, the said Schedule restricts any alienation of the Premises without payment of a premium to the Housing Authority. In 2001, the Appellants applied to the Director of Housing for the assessment of the said premium to be paid by the Appellants. There were much negotiation between the Appellants and the Director of Housing's designated surveyor who acted as the Director's premium assessor.

3. The Appellants were dissatisfied with the said surveyor's assessment. They filed an application to the Lands Tribunal on 5 August 2002 appealing against the assessment of the prevailing market value of the Premises by the Respondent, pursuant to the provisions of the Housing Ordinance. The grounds of appeal were: (1) the assessment was too high and the market value should be between $380,000 to $400,000; (2) the cost of decoration should be included in the assessed market value; (3) with the continuing recession and high unemployment rate, the demand for Home Ownership Scheme unit was reduced.

4. The Respondent, the Director of Housing, filed a Notice of Opposition dated 14 August 2002 opposing the appeal. In the notice, the Respondent attached a copy of a letter dated 10 July 2002 from his surveyor, Mr. Pang Chuck-hang ('Mr. Pang"), who advised that the assessment of the prevailing market value of the Premises at $470,000 was fair and reasonable.

5. Prior to the hearing on 22 October 2002, the parties exchanged their valuation. Although the trial was conducted in Chinese, the Tribunal shall deliver the Judgment in English, as the only issue in the case is the valuation of the Premises and all the submitted valuation reports, with the exception of an appendix in the Respondent's report (which is a Chinese translation of the main valuation report), are in English.

6. Although the Appellants' application form contained three grounds of appeal, they confined their evidence and submission in the hearing on the first ground only, i.e. that the assessment of the prevailing market value of the Premises at $470,000 was too high and should be reduced to $430,000. During the hearing, the parties spent sometimes in negotiating for a settlement but they failed to reach any agreement.

Statutory provisions

7. Paragraph (1) of the Schedule to the Housing Ordinance sets out that the premium payable by the Appellants to the Housing Authority shall be calculated by the following formula-

Premium = Prevailing Market Value (Initial Market Value - Purchase Price)

`Initial Market Value

in which "Prevailing Market Value" means, subject to paragraph 6 of the Schedule, "the market value of the land assessed by the Director of Housing as at the time when the purchaser pays the premium."

8. Paragraph 5(d) of the same Schedule provides that "the purchaser may appeal to the Lands Tribunal in accordance with the Lands Tribunal Rules (Cap. 17 sub. Leg.) against the Director's assessment of the prevailing market value of the land within 28 days of the date of notification under subparagraph (b)."

9. Paragraph 6 of the same Schedule also provides that "The determination of the Lands Tribunal on an appeal shall be of the prevailing market value as at the date of the determination by the Lands Tribunal unless the purchaser has paid the premium in which case the determination shall be of the prevailing market value as at the date of payment."

Basis of assessment

10. The parties did not have any dispute on the basis of assessment. Both agreed that since the premium had not yet been paid, the Prevailing Market Value of the Premises to be determined by the Tribunal should be the open market value of the Premises as at the date of determination by this Tribunal, i.e. the date of this Judgment.

11. Both also agreed that the method of valuation to be employed should be the Direct Sales Comparison Method, using the actual comparable transactions of similar flats in the same estate as the Premises.

Issue between the parties

12. The only issue before this Tribunal is in the choice of the best comparables and their adjustments.

Evidence of the Appellants

13. Ms. Liu, Chui Yi Jacqualine ("Ms. Liu") represented the Appellants. She was the daughter of the 2nd Appellant and the granddaughter of the 1st Appellant. She was a dentist by profession. She said that a friend had assisted her in preparing her valuation document, which was produced as Exhibit "A-1". She said that she had agreed and adopted the contents of Exhibit "A-1". It included 2 valuation schedules of 11 comparable flats and the supporting documents. The only difference between the 2 schedules was that in the first schedule, the adjustments for the differences in the dates of sales of the comparables, and the relevant valuation date were made using the price indices from Centaline Property Agency Limited whilst in the second schedule, the adjustments were made using the price indices from Rating & Valuation Department. Under the 2 schedules, the open market value of the Premises was estimated to be the same, at $430,000.

14. One of the arguments raised by the Appellants was that although the Respondent, through his previous premium advisor/surveyor, had advised them in July 2001 that the market price of the Premises was $470,000, the Respondent did not consider it appropriate to make any downward adjustment to reflect the falling market trend as evidenced by the price indices of both the Rating & Valuation Department and Centaline Property Agency Limited.

Evidence of the Respondent

15. Mr. Pang, the current premium advisor/surveyor of the Respondent, gave evidence that after receiving objection from the Appellants, he decided to reduce his valuation from $510,000 to $470,000 since the latter figure, even though at the lower end of the range of value, was still within the range of acceptable values. Also, Mr. Pang admitted that he was trying to see if he could support the previous valuation given by his predecessor. Subsequently, when the Appellants objected for a number of times, Mr. Pang said that he carried out valuation again and again but found that there was no need to change his last valuation figure of $470,000.

16. Mr. Pang produced his valuation report (Exhibit "R-1") in which he identified a total of 8 comparables. Mr. Pang stated that, in his opinion, the Premises, located near the centre of the subject block, Block B, shared the same characteristics with other flats located near the centre of the same block or other blocks in that both the Premises and these similar flats were partially blocked by the opposite flats. Therefore, Mr. Pang said these flats, which did not require any adjustment on the size/layout factor, provided the best comparables for the Premises. This was not the case for some of the comparables identified by Ms. Liu. Mr. Pang estimated that his comparables, after adjustments, show a unit price range of between $12,531 and $17,167 per sq. m. He calculated that the average of the adjusted unit rates of his 8 comparables was $14,319 per sq. m. Having regard to this result, he adopted a rate of $14,300 per sq. m. and applied that to the saleable area of the Premises of 32.60 sq. m. giving a figure of $466,180, which he rounded up to $470,000 as the Prevailing Market Value of the Premises.

Determination by the Tribunal

17. At the time of considering the Appellants' objection, there was no necessity for Mr. Pang to try to see if he could support his predecessor's valuation. This should not be a factor of consideration at all. After receiving the Appellants' objection, Mr. Pang should has conducted an independent review valuation himself and came to his conclusion regardless of what his predecessor or what he himself had valued before. Otherwise, he had not given full and impartial consideration to the Appellants' objection, prior to the lodging of appeal by the Appellants.

18. Having said the above remarks, I must stress that the objection stage was prior to and did not form part of the present judicial proceeding. Therefore, the valuation of the Prevailing Market Value of the Premises in the present case should be decided on the basis of the best comparables available and their appropriate adjustments.

19. The Tribunal finds that there is little difference between the parties' valuations. In fact, their valuation figures are different by the margin of a mere 7.76%, which is within or very close to the accepted margin of difference between any two qualified and experienced valuation surveyors for any property.

20. The Tribunal also finds that for the 11 comparables of Ms. Liu, their dates of agreement are between 15 March 2002 and 23 August 2002 whilst for Mr. Pang's comparables, the dates of agreement are between 11 January 2002 and 23 August 2002. Also, there are a total of 5 common comparables, the dates of agreement of which are between 9 May 2002 and 23 August 2002.

21. There is no disagreement between the parties that the market was falling for the few months prior to the hearing. This is evidenced by the similar time adjustments made to the comparables by both witnesses. The comparables were all adjusted downward to reflect the earlier dates of the comparable transactions and the date of the current valuation for the Premises. Therefore, the Tribunal decides that of all the comparables identified by the parties, we should best concentrate on the common comparables, which, with the exception of Comparable 7 of Miss Liu, are also all the comparables falling between the months of May to August 2002, being closest in time to the relevant date of valuation, the date of this Judgment. The Tribunal summarizes the details of these comparables, as follows: -

Appellant's witness, Ms. Liu's comparables & adjustments		Respondent's witness, Mr. Pang's comparables & adjustments
Comparable Ref.	Adjusted unit price (per sq. ft.)	Comparable Ref.	Adjusted unit price (per sq. ft.)
1	$974	1	$14,590
2	$855	12	$12,531
5	$893	3	$13,693
6	$984	4	$14,279
8	$956	5	$14,196
Average	$932.4	Average	$13857.8
Saleable Area of The Premises	479 sq. ft.	Saleable Area of The Premises	32.60 sq. m.
Estimated Prevailing Market Value	$446,620	Estimated Prevailing Market Value	$451,764
Average of the above two estimate: $449,192, or rounded to $449,000

22. As shown in the above table, the estimated Prevailing Market Value of the Premises, based on the chosen comparables and using entirely the adjustments adopted by Ms. Liu and Mr. Pang in their valuation, is found to be in the range of $446,620 and $451,764, with an average of $449,192, which is rounded off to $449,000. The Tribunal finds that since the average adjusted unit rates of the parties' chosen comparables are so close to each other, it is best to accept the average of their figures (i.e. $449,000) as the Prevailing Market Value for the Premises.

Costs

Both parties asked for lump sum costs in the event that they are entitled to such costs. The Appellants submitted that they would ask for costs of $1,500 whilst the Respondent asked for costs of $2,900, being the cost of employing the surveyor for the Appeal including the preparation of his valuation report. The Tribunal finds that since the Prevailing Market Value of the Premises as determined above is less that the value estimated by the Respondent prior to the commencement of this proceeding by the Appellants, the Appellants are, in principle, entitled to the costs. Since the costs asked by the Appellants, at $1,500, is a reasonable amount, the Tribunal in the circumstances makes an order nisi that the Respondent shall pay such costs.

Orders

(1) The Tribunal determines that the Prevailing Market Value of the Premises as at the date of this Judgment, 12 November 2002, is $449,000.

(2) The Tribunal makes an order nisi that the Respondent shall pay the costs of $1,500 to the Appellants. If there is no further application on costs within 14 days from the date hereof, the costs order nisi shall become absolute.