Robert Chung and Others v. Hsin Chong Real Estate Management and Agency Ltd

LDLA000130/1983

Landlord and tenant - Part IV - application for new tenancies - landlord's monopoly - importance of comparables outside subject block - effect of detracting factors common to one flat only in a block of otherwise identical flats - Sections 115 and 119K Landlord and Tenant (Consolidation) Ordinance, Cap. 7.

IN THE LANDS TRIBUNAL OF HONG KONG

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

Date: 17th day of November, 1983

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JUDGMENT

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1. These were two applications pursuant to Section 117 of the Landlord and Tenant (Consolidation) Ordinance, Cap. 7 by the tenants of Flats A7 and B1 respectively, Celestial Garden, No. 5 Repulse Bay Road, Hong Kong for new tenancies, which were consolidated for hearing.

2. At the commencement of the hearing we were informed that the parties were agreed that two new tenancies should be granted including the following terms:

3. The only term in dispute was the new rent for each of the new tenancies.

4. Celestial Garden is a 20-storey residential block completed in 1978. Although having legal access to Repulse Bay Road it has no actual access to that Road. In fact access is gained from Tai Tam Reservoir Road which in turn joins the Wongneichong Gap Road - Repulse Bay Road - Deep Water Bay Road round-about. Unlike ether Repulse Bay addresses there is therefore no direct passing public transport and pedestrians are obliged to walk to the various public bus stops at the Roundabout. The reverse journey by pedestrians from those bus stops to Celestial Garden is initially steep and relatively long.

5. The buildings have a high standard of finish and maintenance. Their facilities include a large swimming pool, squash court, gymnasium and barbecue area. However, unusually for this type of development -the single tower structure comprises 3 rather than 2 flats per floor. Blocks B and C within the tower have excellent views overlooking Deep Water Bay. Block A has inferior views restricted to Aberdeen and Wong Chuk Hang in the distance to the front and to the hillside and reservoir to the rear.

6. The particular layout of Celestial Garden has two practical consequences which are relevant to the present application. First, in order to provide a third flat en each floor an alternative was found to the typical 2 flats per floor layout which usually results in the front door opening into an entrance hall to the living rooms or direct into the living rooms with kitchen and servant quarters to the rear. The Colostial Gardon alternative is to have the front door opening into the entrance hall with the next doors on one side going to the kitchen and on the other to the servants quarters. Beyond those areas are the living rooms and bedrooms. Secondly, the position and restricted views from Block A gives the appearance of that block being to the rear and in an inferior location to Blocks B and C. In addition to these disadvantages all the flats have relatively small balconies. These balconies as originally designed were not large but after design it was apparently decided to use half of the designed space for the installation of air-conditioning plant for each flat. Approximately half of the designed balcony space was therefore used for this purpose. The balance is very much smaller than the size of balconies for similar flats and has the further disadvantage that it immediately adjoins the air-conditioning plant. Against this background we will now consider each flat in turn.

Flat A7

7. Both valuers produced a list of comparable recent rents for other flats in Celestial Garden. Whatever the initial differences between rents for the three blocks, at this stage they showed little difference to reflect the better views enjoyed by Blocks B and C compared with Block A. The rents of the comparables within Celestial Garden also appeared to be a little higher than existing Road. rents for other fiats elsewhere in Repulse Bay Road. These other flats were referred to in evidence either in a valuer's report or by reference to recent decisions of the Tribunal in respect of other Repulse Bay properties of which we may take judicial notice.

8. Mr. P.L. Brown, the valuer for the 1st applicant, asserted that both the relatively high rents for other Celestial Garden flats and the small difference in rents between the Blocks, did not reflect the prevailing market but were evidence of what he termed a "landlords monopoly". This he described as the ability of a particular landlord to maintain artificially high rents by comparison with the general level of the market. This is the same concept which we referred to in Rhoades v. Lee Wai Lee L. T. 42/83.

9. To support his opinion that therefore less weight should be given to comparable within Celestial Garden, Mr. Brow compared Celestial Garden with similar developments of Fortuna Court, No. 25 Repulse Bay Road and Royal Garden at No. 27 Repulse Bay Road. Mr. Brown's analysis produced a unit rate per month of $112.50 per square metro exclusive of rates for Fortuna Garden and $118.50 per square metro exclusive of rates for Royal Garden.

10. Mr. Brown's valuation for Flat W of $22,000 per calendar month exclusive of rates is equal to a rate of $120 per square metro. However, in arriving at that rental he relied more on comparables within Celestial Garden, to which he then made a deduction of 5% for landlord's monopoly and a further 9% to reflect the poorer views from Block A compared with the views enjoyed b by Blocks D and C.

11. Mr. F. Choir the values for the landlord, produced his report which supported a rent of $28,000 per month exclusive of rates but inclusive of management charges. This assessment was largely based on comparables within Celestial Garden but also took into account rentals in Manhattan Tower, No. 63 Repulse Bay Road, which was the subject of our decision in Sentry Holdings (Asia) Ltd. Anor v. Cali Enterprises Ltd. L.T. Nos. 11 & 43/83. In that case the relevant date was also the 1st day of July 1983. Without a break clause the Tribunal considered that the prevailing market rent for those flats would have been $27,500 exclusive of rates. Maintenance charges were $1,500 per month so an equivalent rent would be $29,000 per calendar month.

12. Relevant lettings from Celestial Garden comparables were Flat A2 for 2 years from 15th February 1983 at $28,000 per month; Flat A17 for 2 years from 15th April 1983 at $27,000 per month; and Flat Al for 2 years from 1st July 1983 at $26,500. Recent lettings in Blocks B and C included Flat C19 let for 2 years from 1st September 1983 at $28,$00 per month. Other recent lettings in Block B ranged between $27,000 and $29,000 with the exception of Flat B14 which was lot on 1st June 1983 at $30,000 per month.

13. Mr. Choi made no distinction in the value of Block A compared with Blocks D and C in arriving at his valuation of $28,000. This equates to $153 per square metre compared with the equivalent rate for Manhattan Tower of 152.28 per square metre. Manhattan Tower's facilities included a similar large pool but did not include a squash court or exercise room. Mr. Choi considered that Celestial Garden was relatively superior to Manhattan Tower. We do not agree. Manhattan Tower has only 2 flats per floor with a resulting more conventional and attractive layout. We agree with Mr. Brown's criticism that the 3 flats per floor at Celestial garden , with the kitchen and servants quarters adjoining the front door, is inferior to Manhattan Tower where these rooms are confined to the back of the flat. There is also a lack of storage space available in Celestial Garden compared with the space usually provided. In addition, as we have already observed, there is a very small balcony in the Celestial Garden flats the enjoyment of which is complicated by the adjoining air-conditioning plant. Manhattan Tower also has batter access to public transport.

14. After considering all these factors we are satisfied that the landlord has been able to maintain rents at Celestial Garden slightly higher than the prevailing market particularly for Block A which has an inferior view and location. Thus we find that a typical Block B or C flat might reasonably be expected to be let, as at 1st July 1983, at $27,000 per calendar month exclusive of rates and a typical Block A flat at $25,000 per calendar month exclusive of rates.

15. We find that Flat A7 is a typical Block A flat and determine the new rent as at the 1st day of July 1983 at $25,000 per month exclusive of rates.

Flat B1

16. We have already found that a typical flat in Block 3 might reasonably be expected to be let at $27,000 exclusive of rates. The only remaining issue is whether Flat B1 is a typical Block B flat. We heard a substantial amount of evidence adduced by the 2nd applicant which, it was submitted, establishes that Flat B1 is noticeably inferior to the other flats in Block B. No valuer was called by the 2nd applicant but he himself gave evidence during which he indicated that he was a registered engineer and an authorised person under the Buildings Ordinance, Cap. 123.

17. We accept that as a first floor Flat B1 would tend to suffer from disabilities common to such flats although because of the elevated site on which Celestial Garden is built there would not be any noticeable loss of view. However, Mr. Philcox in addition emphasised that a number of disadvantages flowed from the flat's position and in particular that it was built, in part, immediately over the squash court. After completion the respondent installed air-conditioning for the squash court but was obliged to install the plant above the squash court in a position immediately outside one of the windows to the main bedroom of Flat B1. Apart from the unsightly appearance of this plant which spoils the view from the bedroom, it generates noise when in use. From. time to time, Mr. Philcox stated, he was obliged at or after midnight to seek out the management staff to have the air-conditioning plant turned off after use when this had been overlooked.

18. The squash court itself is apparently built as an integral part of the main building with the result that the noise of the ball striking the wall carries up to Flat B1. According to Mr. Philcox properly constructed squash courts in residential buildings, are built as structures independently of the main building, to avoid what is otherwise recognised as a major noise disturbance problem. According to this witness squash is regularly played at this court, particularly during weekends, from as early as 7 a.m. until midnight. The closer proximity of Flat B1 to the barbecue area, swimming pool and management rooms also, it was claimed, because of the resulting activity and noise, made this flat inferior to others in Celestial Garden.

19. Mr. Choi, for the respondent, in his pre-hearing valuation report had already reduced his valuation by $1,000 per calendar month down to $27,000 to allow for the nuisance created by the presence of the air-conditioning plant. During his oral evidence and having heard Mr. Philcox particularise what he alleged were defects associated with Flat B1, Mr. Choi very fairly was  prepared to reduce his valuation by further $2,000 down to $25,000 per calendar month.

20. Both parties therefore agree that Flat 731 has certain disadvantages which are not common to the other flat; in Celestial Garden . We have already found that the typical flat in Block B Would let at $27,000 per calendar month. After considering the whole of the evidence in relation to Flat B1 we find that it would be reasonable to make a reduction of $5,000 per month to make due allowance for these disadvantages. Accordingly we determine the new rent for Flat B1 to be $22,000 per calendar month exclusive of rates but inclusive of management costs.

DATED this 17th day of November, 1983.

Representation:

Mr. Raymond Chow of Deacons for the 1st applicant.

Mr. Melville Boase of Robertson, Double & Boase for the 2nd applicant.

Mr. F.K. Au of Johnson, Stokes fez the respondent.