B P Oil Hong Kong Ltd v. Chan Shu Sun

LDLA000019A/1983

Landlord and Tenant - Part IV - prevailing market rent - usually best evidence of comparable rents is within subject development - Sections 115 and 119K Landlord and Tenant (Consolidation) Ordinance, Cap.7.

IN THE LANDS TRIBUNAL OF HONG KONG

Application No. L.T. 19/83

Coram: TRIBUNAL: M.W. Phillips, Esq., Member

Date: 25th day of August, 1983

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JUDGMENT

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1. The applicant is the tenant and the respondent is the landlord of premises described as Flat D1, Stanley Green, which is situated at No. 66, Stanley Village Road, Stanley, Hong Kong.

2. The premises, which includes one covered car parking space, were let to the applicant from 16th November 1979 for 2 years at a rent of $13,000 per month, exclusive of rates but inclusive of maintenance charges (the land-lord bears the cost of maintenance and the tenant pays the rates).

3. Since November 1981 the tenancy has continued in force under Part II of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7 until 19th December 1982 when it came within Part IV of Cap. 7 by reason of the rateable value being in excess of $60,000.

4. On the 20th December 1982, a notice of termination of tenancy was served by the respondent notifying the applicant that the tenancy would be terminated on 30th June 1983 and that the respondent would not oppose an application for the grant of a new tenancy to the Lands Tribunal. The applicant has applied for a new 2 year tenancy commencing on 1st July 1983. The commencement date and the duration of 2 years, as well as the terms of the new tenancy based on those of the former tenancy but with a deposit of $9,000, have been agreed. The Tribunal is only required to determine the prevailing market rent as at lst July 1983.

5. The applicant submits that the prevailing market rent per month is $21,900, exclusive of rates and maintenance charges (the tenant pays maintenance charges and rates). The respondent is prepared to let the premises at $28,000 per month, exclusive of rates but inclusive of maintenance charges. Apart from the rent, this is the same basis as the former tenancy.

The Premises

6. The premises which are the subject of this application are in a three-storey block of flats known as Stanley Green which is situated on the high side of Stanley Village Road, near to its junction with Carmel Road.

7. Stanley Green was completed about seven years ago, and consists of eight duplex flats with gardens and 4 single level flats above. The suit premises, which is one of the duplex garden flats, is one removed from the Stanley Village Road end of the block. It has an area of about 168 m² (1,800 sq. feet), and is let together with one car parking space in a separate car port structure adjacent to the approach road.

8. The gardens are for the exclusive use of each of the duplex flats and seem large by comparison with those in similar developments. Apart from being overlooked by the flat above, they are reasonably private being bounded on two sides by high concrete walls and a row of mature trees at the far end. The garden for the subject flat, D1, appears to be one of the largest, having an area of over 160 m² or 1,750 sq. feet.

9. It was noted that the top storey single level flats are the same size as the duplex flats and each have the exclusive use of the roof immediately above which makes a feature of planter boxes along the edge of the building.

10. The suit premises' split level living and dining room is on the ground floor with sliding glass doors opening on the garden. The kitchen and a small adjacent courtyard are also on the ground floor and the three bedrooms together with two bathrooms are on the first floor. There is also a guest toilet on the ground floor near to the front entrance. These flats are well designed and have ample storage and cupboard space throughout.

11. The best view over Tai Tam Bay is from the 1st floor main bed-room, but there is a somewhat obstructed view through the trees at the ground floor level. The proximity of the main road is not noticeable from the suit premises, the site being well above the road level and the premises well set back.

Prevailing Market Rent

12. The applicant's valuer, Mr. Lo, submitted a report supporting his assessment of $21,900 per month, exclusive of rates and maintenance charges, by comparing with recent rents for a newly completed development, comprising 19 townhouses, known as Banyan Villas at 9 Stanley Village Road.

13. It was established during the hearing that the rents at Banyan Villas are exclusive of maintenance charges, the tenants being obliged to pay an additional $2,000 per month as a maintenance fee. Therefore, the Banyan Villas rents, inclusive of the maintenance fee, range between $26,500 and $27,000 per month, exclusive of rates.

14. Mr. Lo rejected as unreliable the evidence of lettings of identical flats to the subject Flat D1 in Stanley Green. The tenancies for flats A1, A2 and B1 Stanley Green were referred to by Mr. Lo as being renewed with each of the existing tenants for $28,000 per month, exclusive of rates. (These rents are inclusive of maintenance charges.)

15. Flat Al was renewed for only 7 months from 1st December 1983. Mr. Lo considered this "advanced" renewal to be for too short a period to be a reliable comparable.

16. Renewals for Flats A2 and B1 were agreed in February and March this year when, Mr. Lo says, the market was stronger. He believes the recent completion of the large developments at the top end of Garden Road in the Central area, has reduced the demand for the larger luxury flats on Hong Kong Island.

17. The respondent, Mr. Chin, explained that the letting of Flat A2 was not a renewal to a sitting tenant. It was let to a new tenant. Only Flats A1 and B1 were renewals. He said he originally asked $30,000 per month for Flat A2 before agreeing to accept $28,000. He then offered the same $28,000 to his existing tenants in Flats Al and B1, which rents were accepted.

18. It was noted that the rents he agreed in 1981 and 1982 for top floor flats were $35,000 and $30,000 per month respectively. These flats have the exclusive use of the roof to compensate for no garden and are the same size as the duplex flats. Mr. Chan considered them to be worth the same as the duplex flats.

19. Banyan Villas is new and the view of Tai Tam bay is similar to that at Stanley Green. The Banyan Villas townhouses have much smaller and less private gardens than the Stanley Green garden flats, but this is compensated to some extent by the provision of the communal swimming pool and garden which is overlooked by most of the townhouses. The layout and split level design of the Banyan Villas townhouses is very different to the Stanley Green, two storey, flats. The Banyan Villas houses are larger but the difference in design makes direct comparison on a unit rate basis unreliable. The Banyan Villas houses have each of the main rooms and the entrance lobby on different levels, and thereby lose a lot of useable space because of the staircase. In fact, the size of the living and dining rooms appears smaller than that for Stanley Green as does the size of the main bedroom.

20. Although he preferred the Banyan Villas design, Mr. Lo agreed that it is a matter of taste as to which might be considered better or worse. Mr. Chan, the respondent, considered the additional privacy and larger gardens made Stanley Green slightly superior to Banyan Villas.

21. In the recent Lands Tribunal judgment Sentry Holdings (Asia) Ltd. and The Colonial Treasurer Incorporated v. Cali Enterprises Ltd. L.T. 11 and L.T. 43 of 1983, it was emphasised that save for the purpose of verifying that the comparables are in line with the general market level, it is usually unnecessary to compare with rents for properties outside the subject development.

22. Other than the dates of the agreements being in March and April 1983, there are no special circumstances concerning the rents agreed for Flats A2 and B1 requiring the evidence of these lettings to be rejected. Mention was made of a "break" clause to allow early termination of the tenancy for Flat A2, being an advantage to the tenant and affecting the rent agreed. The respondent claims that this clause was not included at the request of the tenant. He requires that the clause be included in all the new tenancies for Stanley Green, and therefore no deduction for the provision of the break clause should be made in this case.

23. The renewal for Flat A1 for a mere seven months would on its own be hardly comparable and is best ignored, although it appears that the respondent asked and received the rent of $28,000 per month for this flat for the shorter term based on the agreements, he reached for the other two flats for a term of 2 years. No distinction for new rents or renewals has been made by the respondent with respect to the rents he asked.

24. The Banyan Villas comparables to some extent indicate a fall in the market since early 1983 when the rents for Flats A2 and B1 were agreed. Given that a rent of about $28,000 per month was the prevailing market rent for a Stanley Green flat in the first quarter of 1983, I determine that Flat D1 should reasonably let as at 1st July 1983 at $27,000 per month, exclusive of rates but inclusive of maintenance charges, for a term of two years. There will be no order as to costs.

25. DATED this 25th day of August, 1983.

Representation:

Mr. Derry Wong instructed by Wilkinson & Grist for the applicant.

The respondent in person.