IN THE LANDS TRIBUNAL OF HONG KONG
LANDS TRIBUANL APPLICATION NO. 861 of1994
TRIBUNAL : Member M.W. Philips (Esq.)
D E C I S I O N
1. This is an application for a new tenancy under Section 117(1) of Part IV of the Landlord and Tenant (Consolidation) Ordinance Cap.7. The applicant is the tenant and the respondent is the landlord of Flat B, 6th Floor, Magazine Heights, No. 17 Magazine Gap Road, Hong Kong.
1. The tenancy was terminated by the serving of a form CR101 dated 12th October 1993. It terminated the tenancy on 19th April 1994. The landlord did not oppose the granting of a new tenancy which is to be for two years from 20th April 1994 on the same terms and conditions as the previous tenancy which included a “break clause” entitling the tenant to terminatethe tenancy on three months’ notice after one year. This is a clause which in a rising market can be an advantage to a landlordas well as a tenant. It should attract no added value.
2. Expert evidence was led by both parties. The applicant, Mr. Thomas Liang, also gave evidence. He has leased these premises since1986. He said he refurbished the bathrooms at this own expense in 1986. Other than that no work has been done to the subject flat. Most other flats in the block which was built in 1971 have been extensively refurbished. He still has the original windows, someof which do not close properly, the original kitchen and, as he said, rusting plumping.
3. Mr. Pendletion, a chartered surveyor, gave evidence on behalf of the applicant. Originally be valued the subject premises as beingable to command a Prevailing Market Rent of $73,000 per month. However in the light of a recent Lands Tribunal Decision, in whichMr. Pendleton was an expert witness, where the Prevailing Market Rent for flat 11A in the same building was determined at $83,000per month as at Mid-March 1994, he decided to amend his assessment to $76,500 per month.
4. Miss Kong, a chartered surveyor called by the respondent, determined the Prevailing Market Rent at $89,500 per month. There is aclause in the tenancy allowing the landlord to regain possession on six months’ notice in the event of redevelopment. If therewere no such clause she considered the value to be $94,000 per month. As the landlord was presently carrying out a very elaboraterefurbishment of his top floor flat, the prospect of redevelopment seems extremely remote. Miss Kong relied mostly on the lettingof Flat 3B which let at $90,000 ex per month from 15th April 1994. However Flat 3B had been extensively renovated and was far superior to the subject flat. She had not inspected 3B butMr. Pendleton had. He was able to describe in detail its appearance compared to the subject 6B. Mr. Pendleton considered the differencein value to be $11,000 per month. Miss Kong also seemed to ignore the fact that 3B had been given a rent free period which effectivelyplaced the rent as the equivalent of $88,000 per month for a full two year lease.
5. The comparable letting of 3B does lend support to the, finding in the previous case, that generally the refurbished flats in thisblock were worth as at March 1994 about $85,000 per month. I do not agree that the refurbishing was worth $11,000 per month as statedby Mr. Pendleton. In that hearing, his evidence pointed to a $7,000 difference.
6. In the case also the evidence of rents obtained in No. 15 magazine Cap Road next door suggested the going rent for No. 17 in March1994 should have been $82,000 per month. However what evidence there was for the subject No. 17 suggested this to be too low and$85,000 was more appropriate. It seems to be agreed that rents were rising about 3% per month at this period so a typical flat asat Mid-April would expect to realize about $87,500.
7. However we now have the evidence of the applicant who resides in the building and more particularly the subject flat itself. Hisunchallenged evidence concerning its condition being more in keeping with the original finish than any other in the building, particularlywith respect to the kitchen and the windows, leads me to make a deduction for this. A 10% deduction seems to me to be reasonable. (Mr. Pendleton allowed $11,000.) $87,500 less 10% is $78,750. I intend to fix the Prevailing Market Rent as at 19th April 1993 at 79,000 per month.
8. Accordingly I order that a new tenancy shall be granted for two years from 20th April 1994 at $79,000 per month exclusive of rates and management fees. The new tenancy shall otherwise be on the same terms andconditions as the previous tenancy save for the deposit clause which shall be altered to reflect the new rent.
9. No order as to costs.
Dated this 21st day of July 1994.
Mr. Wong Wai Man of C.Y. Kwan & Co. for the Applicant.
Mr. Daniel Tang instructed by Lu, Lai & Li for the Respondent.