Court approved existing rent of £5/month, rejecting landlord's claim for increase based on property investment.

[*1684] 1972 April 3

(HADJITSANGARIS, D. J.)

IN THE DISTRICT COURT OF LIMASSOL

Manolis D. Georghiades,

Applicant,

and

Costas Kombos,

Respondent.

(Application No. 40/71).

Landlord and Tenant - Statutory Tenant - Business premises - Determination of rent payable in respect of - Section 7 of the Rent (Control) Business Premises Law, 1961 (Law 17 of 1961) - Matters to be taken into consideration - Procedure - Evidence - Return on capital value.

Rent Restriction ~ See under “Landlord and Tenant”.

Chr. Michaelides, for the Applicant.

K. Maouni, (Mrs.), for the Respondent.

JUDGMENT

The following judgment was delivered by: -

HADJITSANGARIS, D.J.: This is an application to the Court to determine under the provisions of the Rent (Control) [*1685] Business Premises Law 1961, the rent of a shop used as Business Premises.

The landlord considering himself aggrieved by the quantum of rent payable by the Respondent applied to the Court under Section 7 of the Statute for the increase of rent from £5.- per month payable at present to £15.- per month.

Section 7(1) and (2) of the Law reads as follows:

7(1) "It shall be lawful for the tenant or the Landlord of any business premises, if he considers himself to be aggrieved to apply to the Court to determine the rent payable in respect of such business premises.

(2) Where such application is made to the Court, the Court shall consider it and after making such inquiry as it may think fit, and giving to each party an opportunity of being heard, shall either approve the rent payable under the tenancy or increase, or reduce it to such sum as the Court may in all the circumstances think reasonable".

The undisputed facts of this application are as follows: -

The premises subject matter of this case is an old small shop built in the year 1933. The said shop is situated at 85(B) Anoxartisias Street Limassol, one of the shopping centres of the town. [*1686]

The Respondent tenant leased the said shop on the 15.10.1965 from a certain Kleopatra Demetriou the owner at the time; the original contract of lease has been produced and is before me as Exhibit 2. The said contract of lease was originally made for one year and under clause 5, the parties had the option to renew same for a term of another year. This was apparently done with the consent of the parties and the contract expired on the 15.10.1967. Prom that date until the 16.4.1971 the tenant occupied the premises as a month to month tenant. Prom the I6.4.1971 when this tenancy was terminated Respondent is in occupation as a statutory tenant. The rent was at all times unchanged at £5.-per month.

Under clause 2 of Exhibit 2 the landlord was at all times responsible for all repairs unless caused due to the fault of the tenant.

The tenant uses the subject shop for running his small tailor’s business. He alleged that his profit from the said business is about £5.-£6- per week. This evidence of Respondent has not being contradicted by any other evidence before me. The landlord is a wealthy man. According to his own evidence he purchased the property part of which is the subject shop on the 1.5.1971, for the sum of £6,000- The payment was made in cash and the certificate of Registration is before me as Exhibit 1. The property in question is described as a ground floor house, consisting of 4 rooms, kitchen, W.C., shop and yard. In addition to the aforesaid property applicants said that he is the owner of other properties valued at £20,000. [*1687]

No valuers were called by either side but applicant called two witnesses and respondent one witness who gave evidence of comparable rents in the vicinity of the subject shop.

P.W. 1 Andreas Gregoriou is the tenant of a shop situated next to the shop of the respondent and which he rents at £30.- per month The said shop is a modern shop built only 10 years ago.

P.W, 2 Leonidhas Demosthenous is the tenant of an old shop situated at Anexartisias street opposite the shop of the Respondent. This according to his own evidence is a double shop much bigger than the shop of the Respondent and for which he pays £18.per month.

D.W.1 Loizos Antoniou is a tailor and he rents a shop at Anexartisias street 84, again almost opposite the subject shop. He said that his shop and that of the Respondent are about of the same size, and condition as that of the Respondent. He pays £4 per month as rent.

At the invitation of both litigants I visited the subject shop and all the above three shops referred to by P.W. 1., P.W. 2 and D.W.1 as comparative shops and 1 intend to express my own views of what I saw. Before I do so I shall make reference to some authorities on this point.

In R. v. Brighton and Area Rent Tribunal Ex Parte Marine Parade Estates (1936) Ltd. (1950)1 all S. R. 946 at page 950 Lord Goddard had this to say: [*1688]

"The procedure which I have indicated can only work if the Tribunal can act on their knowledge and on their own inspection. If the evidence of witnesses is tendered I have no doubt it is the duty of the Tribunal to hear them, and if cross-examination of such), witnesses is desired, it is the duty of the tribunal to allow that cross-examination".

The same principles were adopted in R. v. Rent Tribunal for Paddington North and St. Marylebone. Ex Parte Ferry and others (1955) 3 All E.R. p. 391.

In Halsbury’s Laws of England Third Edition Vol. 23 at page 870 we read: -

"The Tribunal is not bound to act on evidence or on any particular principles and can act on its own views, knowledge and opinion".

My opinion from the inspection of all properties is as follows: -

(A) The subject shoo is the old entrance of a house built in 1933 or earlier; it is about 1.0 feet wide and 17 feet deep, it can be described as a slum and it looks as if it had never undergone any repairs for years, its condition is. So dreadful that it can hardly be inhabited.

(B) The shop of P.W.1 is a modern shop with all [*1689] amenities larger than the shop of the Respondent. It cannot he considered as a comparable property.

(C) The shop of P.W.2 is an old shop hut in a much better condition than the shop of the Respondent and is double in size and has also a shop window.

(D) The shop of D.W. 1 is a shop in about the same condition of Respondent’s shop although slightly smaller. It is the only comparable property to the subject shop.

Principles which must guide the Courts in determining Judicially the rent of business premises were referred in Savvas Savvides v. Garnigllos Eoscovits (1965) 1 C.L.R. 116 and Level Tachexcavs Ltd. v. Kargotis (1970) 6 J.S.C. 540.

In the last case at p. 544 and 545 the then President of the Supreme Court Mr. Vassiliades had this to say: -

"After hearing counsel on both sides I have no difficulty in reaching my conclusions as to the disposal of the appeal. I take the view that in ’making such inquiry as he may think fit’ for the purposes -of determining the rent of a Business premises under section 7 of the statute in question, the judge appointed under section 4, must act judicially and in making use of his very wide powers thereunder, he must be guided by the [*1690] object of the statute and the intention of the legislature to protect the tenant from eviction. from his business premises, with all due regard to matters ’connected therewith and incidental thereto' as put before him by the parties.

These matters include, in my view, the nature of the tenant's business; but they also include the market value of the property and its rental value; the capital investment which it represents and its development prospects within the landlord's proprietary rights, which are put under certain limitations and certain judicial control for the sake of the general welfare of the State; but are fundamentally protected under the constitution and cannot be completely ignored or put in cold Storage indefinitely. They must, I think, be taken into consideration together with the nature of the tenant’s business and his income therefrom, (found on proper and satisfactory evidence, lacking in this case) and assessed and weighed with other relevant matters in the interests of the community as a whole, and these, no doubt, Include its development and progress".

At pages 549 and 550 of the same judgment Hadjianastassiou J. had this to say: -

"With this in mind, I am of the view, that the legislature under the provisions of section 7(2) of our law has given to the trial Court wide [*1691] powers in deciding what would be the reasonable rent of business premises in each particular case, with a view to reducing it or increasing It to such sum after taking into consideration All the circumstances. In my opinion, the words all the circumstances must mean that the Court should take into consideration the personal circumstances, both of the tenant and of the landlord, including the nature of the work or of the profession carried out in such premises by the tenant, as well as the income derived therefrom, in addition to other relevant factors and circumstances. Furthermore the Court should also take into consideration the age, character and locality of such business premises, as well as the rents of comparable properties in that neighborhood at the time of making such inquiry".

Learned counsel for the Applicant put forward the allegation that his client is entitled to increase of rent as he invested the sum of £6,000 - for the purchase of the subject property.

In R. E. Kegarry TheRent Acts Tenth edition Vol. 1 At page 393 we read the following on the subject Return on capital value.

"Due consideration had to be given to the return which the landlord obtained for his investment; But this could not be conclusive, for otherwise a Landlord who purchased the premises for an [*1692] excessive price could, have claimed that the commensurate rents which he chained, were necessarily reasonable. It was for the tribunal to decide what weight to give to the return to the landlord".

In the present case from my local inspection to the subject property I can say with certainty that the investment which the applicant made by purchasing the subject property was for the value of the building side only. The building including the subject shop is in such a ruinous condition that cannot give any return to the owner as it has trivial capital value.

In the present application no evidence has been adduced before me to show any upward change in the rental value of the subject shop to satisfy an increase from the presently paid rent of £5.-per month.

In the result the present rent of £5.-per month payable by Respondent to the Applicant for the subject shop is hereby approved. Applicant to pay the costs of this application. Costs to be assessed by the Registrar.

Application refused

With costs.