Union Carbide Asia Ltd v. United French Film Ltd

LDLA000049/1982

Landlord and tenant- new tenancles under part IV- where the parties agreed upon date of commencement of the new tenancy is before the date of hearing - in the absence of agreement to the contrary proper date on which to detcrmine the fair markct rent is the date of commencement of the new tonancy and not the date of the hearing - Section 115, 119I, 119K Landlord and Tenant (Consolidation) Ordinance, Cap. 7.

IN THE LANDS TRIBUNAL OF HONG KONG

Application L.T. No. 49 of 1982

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Coram: TRIBUNAL : His Honour Judge Cruden, President and M.W. Phillips, Esq., Member.

Date of Judgment: 17 September 1982

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JUDGMENT

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1. The applicant is the tenant of Apartment E, 9th Floor, Grenville House, Magazine Gap Road, Hong Kong of which the respondent is the landlord. The applicant has applied under Part IV of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7 for a new tenancy.

2. The parties have agreed that the new tenancy should be for a period of 2 years from the let day of August, 1982. The parties have further agreed that the new tenancy shalli be on the same terms as the prior tenancy agreement except that Clause 4(e) thereof, which contained a right of renewal for 2 years, shall not be included in the new agreement and finally the parties were unable to agree on a new rent.

3. Under the prior agreement, which was for a period of 2 years from the 1st day of July 1979, the monthly rent was 16,000 exclusive of rates and management charges. At the hearing Mr. L.P.Lui, Chartered Surveyor, who gave evidence for the applicant, stated that in his opinion the fair market rent of the premises was $37,000 per month exclusive of rates and management charges. Mr. P.K. Cheung, Chartered Surveyor, who gave evidence for the respondent, stated that the fair market rent was $39,300 per month exclusive of rates and management charges. So this was an application where there is relatively little difference between the valuers.

4. However, before going on to determine the fair market rent we must refer to the final submission of the applicant. The applicant submitted that the fair market rent to be determined is that which existed as at the date of the hearing, namely the 13th day of September, 1982. This submission no doubt was advanced because of the current falling market in relation to the following differences in dates :

5. Mr. Lui, the valuer for the applicant, stated that his valuation report, dated the 9th day of September, 1982 aecurately gave the fair market rent for the premises as at the lst day of August, 1982. He further stated that Part IV premises similar to the suit premises were subject to a downward rental market trend. Mr. Cheung for the respondent also stated that his valuation report, dated the 7th day of the September 1982, was an accurate indication of the fair market rent for the premises at the date of hearing. He stated that there has been a slight downward movement of the market in recent months. In relation to his Comparable No. 1 which was Fiat E, 5th Floor, Block EF, Grenville House, a new tenancy agreement was recently negotiated for a period of 3 years from the 1st day of August, 1982 at a rent of $40,000 per month exclusive of rates and management charges. Mr. Cheung, in adjustments to his 4 comparables, allowed a deduction of 1% against that rent to allow for the falling market from the 1st day of August, 1982 to the date of his report. It was put to him in cross-examination that the proper allowance for that time difference was 7.5% but he rejected that higher percentage.

6. The applicant submitted that, on the evidence, the Tribunal might come to the conclusion that the fair market rent of the premises, at the date of the hearing, was less than at the date of the agreed commencement of the new tenancy, namely the 1st day of August, 1982. In that event, the applicant further submitted, that the rent to be fixed for the new agreement would not be the higher fair market rent at the 1st day of August, 1982, but the lower fair market rent as at the 13th day of September, 1982.

7. In view of these submissions it is therefore necessary for us first to determine the applicable date. We were referred to the fact that under Section 119I, in the absence of agreement, the new tenancy "shall begin on the coming to an end of the current tenancy." In the present application, although rent is not agreed, the parties have at least agreed to the new date of commencement. For the reasons set out in Union Carbide Asia Ltd. v. The Hong Kong Land Co. Ltd. L.T. No. 17/82, at page 24 of that judgment, we are of the view that even though other terms may be in dispute, the parties still have the separate power to agree on a new commencement date other than the statutory alternative commencing on the expiration of the current agreement. The applicant also reminded us, that under Section 119K, the fair market rent may be determined at the hearing. It was submitted that the new rent in the absence of agreement, is therefore to be assessed at the date of the hearing. A "current tenancy" is, of course, extended or continued under Section 117 until terminated in accordance with the various provisions of Part IV.

8. We agree that Section 119K empowers the Tribunal to determine the new rent. Where, as here, that task is not delegated to a valuation surveyor, the Tribunal will normally make an order determining the new rent in terms of Section 119K at the end of the hearing. However, Section 119k does not go on to stipulate that the rent so determined is to be the fair market rent existing at the date of the hearing or the order. Section 119K places no such restrictions on the Tribunal's powers.

9. Common sense would seem to dictate that where the parties have agreed upon a date of commencement of the new tenancy different to the date of the hearing, the new rent should be the fair market rent which exists at that date of commencement.

10. The provisions of Section 115 clearly indicate, that not only does that view accord with common sense, but it is also the law. For the definition of "fair market rent" in Section 115 is that :

11. So the fair market rent is that payable in relation to "the terms of the new tenancy." An important terra of any tenancy is the date of commencement. The terms of this new tenancy provided that the date of commencement is the 1st day of August, 1982. In the absence of any express contrary agreement by the parties, it is in reference to that date of commencement that the fair market rent must be fixed. Hill & Redman's Law of Landlord and Tenant (16th Edition) 675 emphasises, that the new rent cannot be fixed under the comparable English legislation, until all the other terms are known. For those other terms are variables which until fixed necessarily prevent any fair market rent being determined.

12. The date of commencement is one of those variables which certainly must first be fixed before the new rent can be determined. In this case the date of commencement has been agreed upon as the1st day of August, 1982. For the foregoing reasons we are satisfied that we are required to fix the fair market rent as it existed on the 1st day of August, 1982. In other words the applicable date is the date of commencement of the new tenancy and not the date of the hearing. On the other hand, it is always open to the parties to agree otherwise. But in this application there is no contrary agreement.

13. In our view the legislation which obliges us to come to this conclusion is quite unambiguous. Nor do we anticipate it will give rise to any practical problems. The Tribunal endeavours to hear applications promptly. This should ensure that normally only a short time will elapse between the agreed data of commecement of a new tnency and the date of hearing in those cases where the former precedes the latter. No evidential or other difficulties should therefore arise from the Tribunal having to determine the fair market rent of premises at a date other than the date of hearing.

14. Our task is therefore to determine the fair market rent at the agreed date of the commencement of the tenancy, namely the 1st day of August 1982.We have had the benefit of two well prepared valuation reports produced by Mr. Lui and Mr. Cheung. As we have already noted Mr. Cheung assessed the rent at $39,300 and Mr. Lui at $37,000. Both valuers agreed the other's valuation was reasonable. Both also agreed that the market for domestic premises of this type had in the months immediately before and since the 1st day of August 1982 tended to fall. The relatively small difference between the two valuers is in part due to slightly different adjustments, quantification of subjective factors and the assessment of the degree to which the market has fallen.

15. After considering the whole of the evidence, and having had the considerable assistance of both valuers evidence, we determine the fair market rent of the suit premises for the agreed upon period of 2 years from the 1st day of August, 1982 at $38,000 per month, exclusive of rates and management charges. If there are any remaining consequential matters, liberty to apply is reserved. There will be no order as to costs.

DATED this 17th day of September, 1982.

Representation:

Mrs. M. Liu of Ronald Wong & Co. for the applicant.

Mr. K.K. Pang instructed by Y.T. Chan & Co. for the respondent.