LCQ7: Third Party Risks Insurance of Building
Following is a question by the Hon Albert Ho and a written reply by the Secretary for Home Affairs, Mr Tsang Tak-sing, in the Legislative Council today (January 14):
Question:
Section 28 of the Building Management Ordinance (Cap. 344) stipulates that the owners' corporation ("OC") of a building shall procure third party risks insurance in relation to the common parts of the building and the property of the OC. Since there are still 1,300 buildings with OCs which have not yet procured third party risks insurance, the Government has recently proposed that the commencement date for the section be deferred by two years to January 1, 2011. In this connection, will the Government inform this Council whether:
(a) it knows, among the aforesaid buildings which have not yet procured third party risks insurance:
(i) the number of old single-block buildings which require completion of building maintenance works before third party risks insurance can be procured, with a breakdown of the number of buildings in each District Council district by the number of flats (20 or below, 21 to 50, 51 to 150 and 151 or above) in such buildings;
(ii) the number of buildings the OCs of which have attempted to approach insurance companies for procuring third party risks insurance, and the number of such OCs which have approached three or more insurance companies; and
(iii) the number of buildings the OC management committees of which are required to fill vacancies in their membership before meetings can be convened to discuss the procurement of insurance matters;
(b) it has studied if the proposal to group together certain old single-block buildings in close proximity with comparatively small numbers of flats to carry out building maintenance works and procure third party risks insurance is feasible; if so, of the results of the study; if not, the reasons for that; and
(c) it will relax the existing eligibility criteria for loans and grants under various building maintenance schemes, including relaxing the restrictions under the income and asset tests, offering interest-free loans and increasing the amounts of loans and grants, so as to encourage OCs to maintain their buildings and reducing difficulties in procuring third party risks insurance; if so, of the relevant details; if not, the reasons for that?
Reply:
President,
Procurement of third party risks insurance by owners' corporations (OCs) can protect the interests of owners and the third party in the event of accidents. Section 28 of the Building Management Ordinance (BMO) stipulates that the OC of a building shall procure third party risks insurance in relation to the common parts of the building and the property of the OC. After consulting the Panel on Home Affairs in December 2008, we propose to implement the relevant legislation on January 1, 2011 to allow sufficient time for OCs to make preparation. My reply to Hon Ho's question is as follows.
(a) Among the buildings which have formed OCs but not yet procured third party risks insurance, about 1 200 are single-block buildings. Most of them are located in the five districts with a higher concentration of old single-block buildings, i.e. Yau Tsim Mong District, Central and Western District, Kowloon City District, Sham Shui Po District and Wan Chai District. The breakdown is set out below.
District |
Number of single-block buildings |
Total |
|||
|---|---|---|---|---|---|
|
≦ 20 |
21-50 |
51-150 |
≧ 151 |
|
Yau Tsim Mong |
159 |
62 |
18 |
2 |
241 |
Central & Western |
177 |
28 |
8 |
1 |
214 |
Kowloon City |
87 |
60 |
11 |
2 |
160 |
Sham Shui Po |
78 |
63 |
11 |
1 |
153 |
Wan Chai |
71 |
23 |
2 |
0 |
96 |
(Note: The other districts have fewer single-block buildings, and detailed breakdown by number of flats is not available.)
While we do not have the statistics on the breakdown of the reasons for OCs not having procured third party risks insurance, our experience shows that these reasons include: some OCs do not fully understand the benefits of procuring insurance and hence are not eager to do so; some OCs are not active and hence have not convened management committee (MC) meetings to discuss the procurement of insurance; some OCs may need to fill up vacancies in their MCs first; and some cases involve building maintenance works.
The reasons for an OC having not yet procured third party risks insurance differ from case to case. Moreover, non-procurement is often not attributed to one single reason. Hence, we will adopt a targeted approach to encourage and assist OCs to procure insurance. We will contact individual OCs to understand their specific circumstances, and provide them with a full range of assistance which best suit their needs. These include promoting the importance of third party risks insurance among owners, assisting OCs to convene MC or OC meetings, and introducing to owners the various building maintenance grant and loan schemes offered by the Buildings Department (BD), the Hong Kong Housing Society (HKHS) and the Urban Renewal Authority (URA).
(b) The BMO provides for the procedural requirements for a building to carry out maintenance works, such as invitation to tender and convening owners' meetings. According to section 28 of the BMO, an OC shall procure third party risks insurance in relation to the common parts of the building and the property of the OC and shall ensure that the relevant insurance policy meets the requirements set out in the Building Management (Third Party Risks Insurance) Regulation. For example, the policy is required to provide the insured OC with insurance of not less than $10 million in respect of any prescribed liability that is incurred in respect of the death and bodily injury of a third party arising out of one event. We will endeavour to assist OCs to carry out maintenance works and procure third party risks insurance in a cost-effective manner, provided that the above requirements are met.
(c) To encourage and assist owners and OCs to repair and maintain their buildings and procure third party risks insurance, the BD, the HKHS and the URA offer a number of building maintenance grant and loan schemes to provide financial and technical support to owners and OCs. For example, under the "Building Maintenance Incentive Scheme" of the HKHS and the "Building Rehabilitation Materials Incentive Scheme" of the URA, an OC may in general apply for a subsidy of 20% of the total project cost or up to $3,000 per eligible unit. Upon completion of the maintenance works, the OC may apply for an annual subsidy of up to $6,000 or 50% of the annual premium for third party risks insurance for a period of not more than three years.
To further encourage owners of old buildings to carry out comprehensive maintenance works for the buildings, the HKHS relaxed the eligibility criteria of its "Building Maintenance Incentive Scheme" in November 2007 and September 2008 respectively. These measures include:
(i) raising the upper limit of the number of residential units in an eligible building from 200 to 400;
(ii) increasing the subsidy for small buildings with 20 flats or less to 30% of the total project cost, subject to a ceiling of $150,000. For buildings with more than 20 but fewer than 50 flats, a subsidy of 20% of the total project cost or $150,000 at maximum will also be available; and
(iii) relaxing the restrictions on the rental values of the relevant properties, so that the number of residential units that are eligible for the Scheme will increase to 623,000. This amounts to some 81% of the buildings aged over 20.
From April 2009 onwards, the URA will also implement the measures on enhanced subsidies as mentioned in item (b) above under its "Building Rehabilitation Materials Incentive Scheme".
In addition, the BD adjusts the income and asset limits of the low income category persons defined under its "Comprehensive Building Safety Improvement Loan Scheme" every year, taking into account the adjustments for the monthly income limits for singleton and family applicants of the Public Rental Housing Waiting List of the Hong Kong Housing Authority, as well as the monthly income and/or asset limits for the "Comprehensive Social Security Assistance Scheme" and the "Normal Old Age Allowance" (NOAA) of the Social Welfare Department, so that owners with financial difficulties can apply for interest-free loans. The latest adjustment was completed in April 2008.
In line with the policy objective of care for the elderly, the Government launched the $1 billion "Building Maintenance Grant Scheme for Elderly Owners" in May 2008 to help elderly owner-occupiers in need to repair and maintain their self-occupied properties and to improve building safety. The Scheme targets elderly owner-occupiers aged 60 or above. Each eligible elderly owner-occupier may receive a maximum grant of $40,000 within a period of five years. The grant can also be used to repay the loan(s) of the applicants with the BD, the URA or the HKHS in relation to building maintenance. The income and asset limits of the Scheme adopt the NOAA's limits as the general basis. In respect of assets, as most needy elderly have little recurrent income and they tend to rely heavily on their savings as their means of livelihood, we have adopted a more generous level of asset limit (i.e. doubling the asset limit of the NOAA) for the Scheme. The asset limit does not include the value of the self-occupied flat of the elderly owner-occupiers under application. Should there be any adjustments to the income and asset limits for the NOAA, the limits of the Scheme will also be adjusted correspondingly.
Ends/Wednesday, January 14, 2009