DAVIDSON, JUSTIN CRESEY v. NG HON SUN MEYAR

LDNT 41/2003

IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

NEW TENANCY APPLICATION NO. 41 OF 2003

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J U D G M E N T

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1. This is an application for the grant of new tenancy under Part IV of the Landlord and Tenant (Consolidation) Ordinance, Chapter 7. The concerned property is located at the 6th Floor of Block B (together with Car Parking Space No.8 on Ground Floor) of Ventris Court, No.15 Ventris Road, Hong Kong ('the Subject Premises"). The Applicant is the tenant and the Respondent, the landlord. The Applicant appeared in court in person and the Respondent represented by Mr. David Vijmoed, solicitor of Messrs K.C. HO & FONG. The application was lodged on 31st March 2003 with the hearing held on 16th June 2003.

2. The two parties have reached consensus on the term of tenancy, commencement date, Break Clause, rates and management fee, amount of deposit, and date of execution of the new tenancy agreement. The only outstanding issue is the amount of rent payable. Both parties also agreed that the rental information obtained from the Rating and Valuation Department (" the RVD") should form the basis of assessing the rent. This rental information is contained in the two RVD lists dated 25th April 2003 and 30th May 2003. The Tribunal is aware that the information on the two lists was over-lapsed in parts.

The Applicant's Views

3. The Applicant advised the Tribunal that Comparables 1 & 4 on the list dated 30th May 2003 are units in the same building as the Subject Premises and let about the same time as the tenancy commencement date of the Subject Premises. He considered Comparables 1 & 4 suitable for comparison despite the fact that Comparables 1 & 4 are facing the mountain whereas the Subject Premises facing the road. He considered that units facing the road are regarded as better orientated. Both Comparables 1 & 4 are not let with car parking spaces whereas the Subject Premises are with one car parking space. He said that adjustments could be made to reflect the difference in orientation and for letting with a car parking space (according to his understanding, car parking spaces were normally let at $1,000 to $1,500 per month).

4. He considered that other comparables on the list dated 30th May 2003 and those on the list of 25th April 2003 less suitable or unsuitable for valuation purpose. For example, Comparables 2 & 3 on the list of 30th May 2003 are within a development with good common facilities such as swimming pool, children play areas and a big podium for promenade purpose. Theses are the facilities that are not provided in the building (or on the site) of the Subject Premises. The said development is just next to the Subject Premises. Comparable 6 is at the other end of the same street and located in a bustling area with bus stops and shops nearby. Comparable 5 is not considered unsuitable but less suitable in relation to Comparables 1 & 4.

5. Comparables 4 & 6 on the list of 25th April 2003, though they are in the same building as the Subject Premises, of same layout and orientation, the tenancy agreement was struck six to nine months earlier. In view of the unstable rental market, the rent passing at that time can hardly be convincing market rental as at 24th April 2003. The same applies to Comparables 3 & 5 in terms of the tenancy commencement date. Comparables 1, 2 and 3 are within the same development. Comparable 1 refers to the same property/tenancy referred to in Comparable 6 on the list of 30th May 2003. The same comment given for the latter applies to Comparable 1 and therefore Comparables 2 & 3, too.

6. The Applicant considered the appropriate rent should be about $25,000 per month inclusive of the rent of a car parking space, but exclusive of management fee and rates.

The Respondent's Views

7. The Respondent's solicitor advised the Tribunal that Comparables 4 & 6 on the list of 25th April 2003, being within the same building, of the same size and layout as the Subject Premises are suitable for comparison. He said that the view of Comparable 4 is blocked by a low rise school (of three storeys) in front since it is on the 2/F of the building but the view of the Subject Premises whilst four storeys above, is not. He was of the view that Comparable 1, 2 & 3, though smaller in size, are suitable, too with due rental adjustment made for their smaller size.

8. Of those on the list of 30th May 2003, he considered Comparables 1 & 4 not suitable due to different orientation. He agreed with the Applicant that Comparables 2 & 3 are much newer building and should not be adopted for valuation. Comparable 5 is much smaller and is even smaller than Comparables 1, 2, & 3 on the list of 25th April 2003. Due to substantial difference in size, it is not a suitable comparable.

9. The solicitor considered that the appropriate rental be in the range of $29,000 to $30,000 per month exclusive of management fee and rates.

10. The Tribunal's Views

10.1 The Tribunal is of the view that Comparables 3, 4 5, and 6 on the list of 25th April 2003 are not suitable comparables as their tenancy commencement dates are five to nine months earlier than the valuation date of the Subject Premises. Although adjustment in rent based on rental indices is a possible means to assess their present value, either party did not produce such indices obtainable from the Rating and Valuation Department.

10.2 The management fee as also supported by analysis from those reported cases on the two lists is about $11 per sq. m. to $15 per sq. m per month. For newer developments with standard modern common facilities, it is likely about $16 per sq. m. to $18 per sq. m. Therefore, the management fee for Comparables 2 & 3 is $1,937.6 and based on the amount reported for Comparable 1, the fee for Comparable 4 is $1,446.

10.3 Based on the Applicant's description concerning Comparables 2 & 3 (on the list of 30th may 2003), which was not opposed by the Respondent's solicitor, Comparables 2 & 3 could command a rent 15% to 20% more than the Subject Premises. The adjusted rent due to modern facilities being provided, are therefore, $183.69 per sq. m. and $163.69 per sq. m. respectively.

10.4 Bustling locality could either be an advantageous or disadvantageous element. The advantage is its nearness to services and commercial facilities, but its disadvantage is the loss of tranquillity. Without knowing the relative quality of the two locations, the Tribunal finds it hard to draw a conclusion. As such, it is of certain risk to adopt for valuation purpose, Comparable 2 (on the list of 25th April 2003).

10.5 Except the Applicant's comment on size, there are no other adverse comments against the adoption of Comparable 5 (on the list of 30th May 2003) for valuation. If size is indeed a problem, then Comparable 1 (on the list of 30th May 2003) should also be discarded. Unless evidence is adduced that the larger size justifies deduction for quantum, the unit rent may serve to assess the rent.

10.6 Adjustment is required to the rents of Comparables 1 & 4 (on the list of 30th May 2003) as they face the mountain, which is considered inferior to comparables facing the road (as agreeable to both parties). In the Tribunal's view, it may cost the Applicant to pay more for the Subject Premises by 15%.

10.7 Following on from the above, the respective adjusted unit rents for the five comparables are $154.58, $183.59, $157.11, $185.55 and $163.02. For ease of analysis, they can be plotted on a graph with the unit rent on one axis and the floor level on the other. The position of a particular comparable on the graph is determined by its related floor level and unit rent (as above calculated) on the two axes. With a unit rent higher than all others but at a floor level being the lowest, it is quite certain that Comparable 4 is outside the possible trend of the so called market rent and should be ignored. Joining the positions of the rest four comparables, the extent of the likely trend of market rent in terms of floor level is roughly known. The southeastern boundary obviously sets the maximum achievable unit rent, which cuts the 6th Floor line at $175. At this unit rent, it is for sure that the Applicant's proposed rent of $25,000 per month exclusive of management fee and rates but inclusive of the rent of a car parking space is acceptable to this Tribunal.

Orders

I hereby order that a new tenancy be granted subject to: -

1. Two years term commencing on 24th April 2002.

2. Termination by tenant by giving the landlord two months written notice to be served after 14 months;

3. A monthly rent of $25,000 exclusive of management fee and rates, but inclusive of the rent of Car Parking Space No. 8 and Government Rent;

4. A new deposit in the sum of $50,000 payable upon execution of the new tenancy agreement and existing deposit held by the Respondent to be refunded at the same time;

5. Other conditions of previous tenancy to remain;

6. New tenancy agreement to be executed within 21 days from the date of these orders;

7. No order as to costs.