Tsuen Wing Lau Mutual Aid Committee v. Commissioner of Rating and Valuation

LDRA000010A/1984

Rating - twofold basis of valuation - first conditions of hypothetical tenancy prevail over actual tenancy conditions but not over conditions of ownership - secondly the physical tenement must be valued on the basis of lawful uses within the same mode or character as the actual existing occupation - in exceptional circumstances where the actual tenant would be the only hypothetical tenant the actual rent is generally the best indicator of the market rent - Held: Rateable value of mutual aid committee room reduced from $21,600 to $5,400 - Sections 7(2)(5), 44 Rating Ordinance, Cap. 116.

IN THE LANDS TRIBUNAL OF HONG KONG

(Appellate Jurisdiction)

Rating Appeal No. 10 of 1984

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

Date of Judgment: 16th October 1984

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JUDGMENT

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1. The appellant has appealed against the respondent's assessment of the rateable value of $21,600 in respect of its committee room being Unit 2432A, Tsuen Wing Lau, 24th Floor, 16 Lai Tak Tsuen Road, Hong Kong. The appellant is a tenant of the subject tenement under a tenancy agreement from the Hong Kong Housing Society. The agreement provides for the subject tenement to be let on a monthly tenancy from the 1st day of February 1983 originally at a monthly rent of $429 exclusive of rates. The monthly rent was subsequently increased to the current rent of $450 which amounts to $5,400 per annum.

2. The rateable value of $21,600 was to come into effect on the 1st day of April 1984. Under Section 12 of the Rating Ordinance, Cap. 116 the designated date for the ascertainment of the rateable value was the 1st day of July 1983 - Volume 30 Volume CXXV "The Hong Kong Gazette" G.N. 2412.

3. The grounds of the appeal were that the actual rent is only $5,400 per annum; the subject tenement is used for non-profit making social purposes; water, bathing room, toilet and kitchen are not available; it is situated in a low-cost estate surrounded by squatter areas; the tenement was created from a former play ground area.

4. The Commissioner considered that he was obliged, under the Rating Ordinance, to value the subject tenement on the basis of the statutory hypothetical tenancy. Accordingly he ignored all the subjective factors raised by the appellant. After considering the same office, shop, medical clinic and storage comparables earlier adduced in evidence in the prior appeal Lai Kit Lau Mutual Aid Committee v. Commissioner of Rating and Valuation R.A. No. 9/84, the Commissioner also considered the rents for storage and a cleaning contractor's tenements at 2A and 16 Lai Tak Tsuen Road. These latter three comparable were also referred to in Lai Kit Lau Mutual Aid Committee v. Commissioner of Rating and Valuation. The Commissioner was aware that the Housing Society, which is the owner of the Tsuen Wing Lau blocks under the same Crown lease, had granted the tenancy to the appellant on the basis of its welfare rent calculated at $11 per square metre.

5. The tenancy agreement was also in similar terms to the tenancy agreement granted to the Lai Kut Lau Mutual Aid Committee. Clause 3(f) restricted the appellant occupation of the subject tenement as follows:-

"To use the premises for the sole purpose of being a conference room of the Mutual Aid Committees. "

6. The subject tenement was in fact used by four mutual aid committees, namely the Mutual Aid Committees of Tsuen Wing Lau Blocks 5, 6, 7 and 8. After making a series of adjustments to the office comparables the Commissioner arrived at a unit rate of $43 per square metre and applying that rate to the subject tenement he arrived at the rateable value of $21,600.

7. As in the case of the other appeal, the subject tenement had been created from what was formerly designated in the Crown lease as a play area. We hold that there are no material differences between the facts in the prior appeal and the present appeal. We would record as a matter of fact that the subject tenement is even less susceptible of any alternative use than the Lai Kit Lau Mutual Aid Committee Room. The latter was on the 1st Floor of Block I. The subject tenement, while in a larger block with more non-domestic uses on the ground and 1st Floors, is situate on the much higher 24th Floor. Domestic passenger lifts only service the 23rd and 27th Floors. The best access is by lift to either the 23rd and 27th Floor, then by staircase to the 24th Floor.

8. The first step is to apply the hypothetical conditions of the statutory tenancy to the subject tenement. The non-profit making social purposes of the appellant are therefore irrelevant. The restriction on user is a condition of ownership. It is not merely a private contractual restriction or arrangement between the parties as landlord and tenant. The user restriction in this particular case therefore remains relevant.

9. The other matters raised by the appellant are among the matters which may be taken into account in determining the annual market rent. In considering the market rent we hold that none of the respondent's comparables are within the same mode or character as the subject tenement. The only evidence of actual rents for meeting halls, such as the subject tenement, are those based on the Housing Society's rate of $11 per square metre.

10. For the same reasons set out in Lai Kit Lau Mutual Aid Committee v. Commissioner of Rating and Valuation we consider the best evidence of the market value of the subject tenement in this appeal is the actual rent being paid. We therefore find that the rateable value of the subject tenement is $5,400.

11. We accordingly uphold the appeal and order the Collector of Rates to amend the valuation list by reducing the rateable value for the subject tenement from $21,600 down to $5,400 and to make any refund of rates which may become necessary. Liberty to apply is reserved to both parties.

DATED this 16th day of October 1984.

Representation:

Mr. C.S. Ip, by leave, for the appellant.

Mr. Alfred Chow, Crown Counsel, for the respondent.