Court fixed rent at £44/month, balancing market value against tenant's hardship and long-term low payment history.

[*200] 1976 April 14

(PIKIS, AG.P.D.C.)

IN THE DISTRICT COURT OF LARNACA

Lili Emilia Emilio Branco and Others,

Applicants,

and

Andreas Fandousis,

Respondent,

(Rent Control Application No.9/75)

Landlord and tenant - Determination of rent - Section 7(2) of the Rent Control Law, 1975 (Law 36 of 1975) - Purposes and ambit of the Law - Rental value of property - Methods for discerning of - Matters to be inquired into in an inquiry under section 7(3) of the Law - Existence of comparable properties - But views of experts conflict regarding the comparison to be made between the subject propery and the comparables.

E. Emilianides, for the Applicants-Owners.

I. Avraamides, on behalf/of N. Papaioannou, for the Respondent-Tenant.

JUDGMENT

The following judgment was delivered by:-

PIKIS, AG.P.D.C.: The applicants are the [*201] owners of two adjoining shops situate at the corner of Zenonos Kitieos and Evanthia Pieridou streets, at Larnaca , leased to the respondent-tenant at £27 per month. The tenant has combined the two shops into one and uses them as a jewellery shop. He has been paying the same rent since he first moved into the premises in 1964.

The landlords have applied, under the provisions of section 7 of the Rent Control Law of 1975 (36/75) that the rent be increased to £70 per month. In support of their contention that the rental, paid at present, is inordinately law, they called as a witness Mr. Christos Patrikios, an experienced valuer, who made a survey of the rents paid in the area and concluded that the market rental value of the premises under consideration is £60 per month. The tenant disputed the increase of this valuation and called as a witness Mr. Frixos Kimonis, an equally experienced land valuer, in whose testimony the market rental value of the premises is much below £60 per month and should be somewhere in the region of £40 per month. The tenant testified himself and referred, inter alia, to the composition of his family, consisting of his wife and five children aged 22,20, 18, 12 and 8 and his business circumstances. The events of 1974 had an adverse impact on the profits realized from his work. The returns of 1975 showed an improvement but they are still far away from the results of 1973.

Before I turn to the conflicting valuations it is advisable to make brief reference to the purposes and [*202] ambit of section 7 of the Rent Control Law, 1975, a provision of the Law that has not, till today, so far as I am aware, received consideration by the Supreme Court.

Section 7 of the Rent Control Law

The Rent Control Law, 1975, is an

important piece of social legislation enacted after the calamitous events of 1974, primarily designed to alleviate the hardship that has befallen a

large section of the population. Like any piece of social legislation it must be interpreted against the background that made necessary its introduction and always with a live memory of the mischief it purports to remedy. One of the objects of the Law is to regulate the tenancy of business premises in a way conferring greater security of tenure on the tenant. This is sought to be achieved by conferring power on the Court to fix the rental by reference to the totality of the circumstances of the parties. In this way a breathing space is afforded to tenants to build up their business once more, something that will benefit the community as a whole.

In particular, section 7(3) of Law 36/75 confers wide powers on the Court to conduct a wide survey into the totality of the circumstances compounding the rental value of the premises and the circumstances of the parties, including, no doubt, the ability of the tenant to pay rent. On an application under section 7(3), the first task of the Court is to find. the rental value of the premises. The best way of discerning such a rental is by studying the rentals payable for comparable properties. If evidence of [*203] comparable rents is not forthcoming the rental may be assessed by reference to the value of the property in combination with data illuminating the relationship between the value of immovable property and the return ordinarily derived therefrom. Thereafter the Court must enquire into the circumstances of the parties, the tenant in particular, and decide whether there are any reasons justifying a reduction of the rent below the market rental value of the premises .

Findings

The two valuers are in agreement that there are comparable properties, the rental of which may be relied upon for establishing the market rental of the shops in question and further agree that six properties in particular may be relied upon for the purpose. That there should be numerous comparables is understandable, considering that the property is situate, in part , on Zenonos Kitieos street the most commercial road of Larnaca. The views of the two experts conflict when it comes to the comparison that should be made between the subject property and the comparables.

The rental realized from the lease of the six comparable properties per square foot is as follows: 58 mils, 66 mils, 100 mils, 108 mils, 99 mils, and 100 mils. If one strives to ascertain the average of these six figures he would come to number 88. I must confess that it was with surprise that I heard Mr. Patrikios maintain that the subject property should be valued at 110 mils per square foot. If that were to be the case, one may legitimately wonder what is the comparability between the subject property [*204] and the first comparable, considering that the rental fetched from the lease of the latter is one half of that suggested for the subject property. One may go further and say that the premises of Mr. Patrikios become weaker still if one reflects that comparable 1, more than any other comparable, bears resemblance to the subject property: It is adjoining to it, it was built at the same period of time and has a wider frontage on Zenonos Kitieos street, a factor which is offset in many ways by the fact that the subject property is situate on a corner site. Mr. Kimonis, on the other hand, contended that the subject property Is inferior to every one of those to which it had been compared and that it market rental should not exceed 78 to 80 mils per square. foot. The subject property, unlike many of the comparables, as Mr. Kimonis stated, lacks certain facilities such as a lavatory and a loft (sende). Moreover, the subject property had no water supply and the installation was made at the expense of the tenant.

Mr. Fandousis, the tenant, testified that as a matter of fact all the comparables, except for comparable 1 , had been built after 1957, whereas the subject property and comparable/were built some time in 1952 or 1953.

Having carefully studied the evidence in its totality, I find that the rental market value of the premises under consideration is 80 mils per square foot. I accept the evidence of the tenant that he suffered a sharp drop in profits in consequence of the events of 1974 and that his business has not picked up fully, despite the [*205] lapse of nearly two years. On this score he is entitled to a reduction. On the other hand, I cannot overlook that he has been paying a very low rental since 1964, a factor that has no doubt enabled him to build up his business without the financial strain that a high rental imposes on a business man. This being the case, and striving to do, to whatever degree this is possible, justice to the interests of both parties, I do not believe that the rental should be fixed below its market value.

In the result, the rental is fixed at £44 per month, beginning from 15th April, 1976. The tenant is adjudged to pay £15 costs.

Rent fixed at £44.-

per month. Respondent to

pay £15.- costs.