Government Tightens Building Management Regulations

Management and Maintenance Standards
Appointment of a Building Management Agent
Formation of Owners Corporations in New Buildings
Duty to Insure
Duty to Have Accounts Audited
Increased Penalties
Comment

There are two major difficulties to be faced with respect to the management of multi-storey buildings in private ownership in Hong Kong. One is lack of management. Under the common law system of private property, landowners have no positive duty to set up any management structure. The second difficulty is that there is no formal set of rules by which the quality of management may be judged.

In order to tackle these problems, the Building Management (Amendment) Ordinance 2000 was introduced to improve the management of private buildings and to rectify certain deficiencies in the Building Management Ordinance. Most of the ordinance came into effect on August 1 2000.

Management and Maintenance Standards

The secretary for home affairs is empowered to prepare, review and publish in the Gazette a Code of Practice on building management and maintenance for compliance by the owners corporation. The code will provide specific standards in layman's terms for owners corporations to discharge their building management and maintenance duties.

There will not be any duplication of enforcement since the code refers to, but will not replace, the existing laws dealing with building safety, fire safety, gas installation, lifts, electrical installations and slope safety in respect of the common parts of buildings.

Appointment of a Building Management Agent

The secretary for home affairs has power to order the management committee of the owners corporation of a problematic building - that is, a building with serious management and maintenance problems and without a manager - to employ a building management agent from a gazetted list.

The existing district building management coordination committees will be responsible for identifying problematic buildings and recommending them to the authority to consider issuing the orders.

Formation of Owners Corporations in New Buildings

The ordinance simplifies the way in which owners of new buildings can convene meetings to appoint management committees. The quorum of the meetings must be not less than 10% of the owners, and a management committee may be appointed by a resolution passed by a majority of the owners voting either personally or by proxy. When a management committee is appointed, it must apply to the Land Registrar for registration of the owners corporation.

Duty to Insure

The ordinance requires owners corporations to take third-party insurance in respect of the building, including the common parts. The requirements of the insurance, such as scope of coverage, minimum level of indemnity and qualification of insurers, will be provided in a regulation to be made by the Legislative Council.

Duty to Have Accounts Audited

Where a building contains more than 50 flats, the owners corporation must have its income and expenditure account and balance sheet audited by an accountant approved by a resolution passed at a general meeting.

Increased Penalties

The ordinance significantly increases sanctions for management committees that fail to comply with their obligations. These include the following:

• Improper use of information, or provision of false information, will carry a fine of up to $10,000 instead of $5,000;
  
  
• Obstruction or failure to comply with a reasonable requirement by the authority or an authorized officer will carry a fine of up to $25,000 instead of $10,000;
  
  
• Failure to comply, without reasonable excuse, with an order of the authority to appoint a building management agent will carry a fine of up to $50,000, and in the case of a continuing offence, a further daily fine of $1,000 for each day during which the offence continues;
  
  
• Failure to keep proper accounts will carry a fine of up to $50,000 instead of $2,000; and
  
  
• Failure to procure and keep in force a policy of third-party insurance will carry a fine of up to $50,000.

Comment

It is clear that the government is taking building management seriously. The ordinance marks a shift towards increased compulsion, both in terms of penalizing recalcitrant owners and making owners more accountable if they do incorporate.

For further information on this topic please contact May Chang at Baker & McKenzie by telephone (+852 2846 2478) or by fax (+852 2845 0476) or by e-mail ([email protected]).