LCQ18: Formation of owners' corporations in large private housing estates

Following is a question by the Dr Hon Priscilla Leung and a written reply by the Secretary for Home Affairs, Mr Tsang Tak-sing, in the Legislative Council today (January 11):

Question:

In accordance with section 8(1A) of the existing Building Management Ordinance (Cap. 344) (the Ordinance), "[t]he Land Registrar shall not issue a certificate of registration to more than one corporation for a building in respect of which a deed of mutual covenant is in force". At present, certain mega private housing estates in Hong Kong (e.g. Whampoa Garden, Mei Foo Sun Chuen and Laguna City, etc.) with a large number of building blocks and residents, are each covered under only one deed of mutual covenant (DMC) for the entire estate, thus under the Ordinance, only one owners' corporation (OC) can be formed in respect of the respective mega private housing estates each with nearly 10 000 residents. In this connection, will the Government inform this Council:

(a) of the number and names of those large private housing estates in Hong Kong which comprise more than 30 blocks and still do not have an OC at present;

(b) whether it knows if the owners of the large private housing estates in (a) which do not have an OC have made any attempt to form an OC; if they have, of the difficulties encountered by them in the course of forming an OC that had rendered their efforts in vain; given that at present, section 4(10) of the Ordinance requires that a quorum of at least 10% of the owners be present at any meeting resolving to form an OC, whether this was one of the difficulties that they encountered when they were preparing for the formation of an OC; and even for those housing estates where an OC can be formed, whether the OCs concerned have encountered difficulties in maintaining their daily operation and convening meetings;

(c) what assistance the authorities will offer to the owners of the large private housing estates in order to facilitate their formation of OCs, and whether such assistance includes the provision of legal advice or support; whether the authorities have ever given any assistance to those owners of large private housing estates who encountered difficulties in forming OCs; if they have, of the details; and

(d) whether the authorities have considered amending the provision under the Ordinance which requires that only one OC may be formed in respect of each DMC, so as to allow those mega private housing estates with only one DMC to split and form many different OCs according to the number of building blocks or development phases?

Reply:

President,

One of the effective means to properly manage a large private housing estate is to form an owners' corporation (OC). The Building Management Ordinance (Cap. 344) (BMO) provides a legal framework for owners to form OCs to facilitate proper management of buildings. Notwithstanding a relatively large number of building blocks and residents in some housing estates, the owners concerned were able to form OCs under the relevant deeds of mutual covenant (DMCs) with the assistance of the Home Affairs Department (HAD) and its District Offices (DOs). For instance, between 1997 and 1999, a total of eight OCs were formed in Mei Foo Sun Chuen in accordance with the BMO and the DMCs of each phase of the estate. Apart from forming OCs, owners may, having regard to the respective needs of their estates, choose to set up other forms of resident organisations (such as owners' committees) or to appoint a DMC manager to handle the daily building management and maintenance work.

My reply to the three parts of the question is as follows:

(a) and (b) Currently, there are about 15 large private housing estates which have more than 30 blocks in Hong Kong, among which six have formed their OCs. The number of housing estates which have not yet formed an OC by district is as follows:

There are various reasons for large private housing estates not forming OCs. The common reasons may fall into three categories. First, quite a number of buildings have already set up other forms of owners' or resident organisations and have engaged property management companies to effectively manage their buildings. Second, DMC managers are providing the estates with good building management and maintenance services to the residents' satisfaction. Third, despite the fact that some owners may wish to form an OC, the statutory requirements of forming an OC have yet to be met.

In the past three years, owners of three large private housing estates had sought DOs' assistance in the formation of OCs. Through briefings on the formation of OCs and their meetings with the owners, staff of the DOs explained the method and procedures of forming an OC. However, given the large number of owners in such estates and that the owners held different views on the formation of an OC, no adequate support was obtained although it only requires the support of 5% of the shares in aggregate to appoint an owner as the convenor of an owners' meeting to form an OC.

(c) Should owners decide to form an OC, DOs will offer advice and assistance to them in respect of the formation procedures, which include providing relevant information such as the booklet and CD-ROM of "How to Form an Owners' Corporation" produced by HAD, as well as forms and samples of the documents required; attending briefings on the formation of OCs to inform owners of the formation procedures and the rights and obligations involved; and issuing an exemption certificate to the convenor for obtaining a free copy of record of owners of the building from the Land Registry to facilitate the convening of an owners' meeting to form an OC, etc. If owners encounter legal problems, we will refer them to the Property Management Advisory Centres of the Hong Kong Housing Society for free preliminary legal advice from duty lawyers by appointment. Staff of DOs will also attend owners' meeting for the formation of an OC and give advice on the procedures of the appointment of a management committee (MC).

If owners have attempted to convene an owners' meeting under Section 3 of the BMO but failed to appoint an MC and form an OC, and that they have genuine difficulties in obtaining the support of owners of 30% of the shares in aggregate as prescribed under Section 3, DOs will assist owners of not less than 20% of the shares in aggregate in applying to the Secretary for Home Affairs under Section 3A for an order to convene an owners' meeting on forming an OC.

According to our experience, given the huge number of owners in large housing estates, the communication and liaison among owners is practically difficult. Hence, in the process of forming an OC, we will assist the convenors in arranging a series of briefings about OC formation, so that all owners in the estates may understand the procedures of forming an OC and the related matters. Moreover, DOs will assist the convenors in their communication with the property management companies, so that the management companies can render assistance as far as possible, such as assisting in the distribution and posting of notices of owners' meetings, as well as helping the convenors handle business of meeting and voting procedures, etc.

(d) The BMO provides a mechanism for owners in setting up an OC for better building management. Buildings (together with the land) have to be in common ownership or held for the common enjoyment of owners and occupiers. The basis of common ownership among owners is set out in the DMC of the building. A DMC is a private contractual agreement among the owners, the manager and the developer of a building, stipulating the rights and obligations of the parties to the agreement, including the undivided shares of each owner. As such, owners of housing estates governed by a single DMC can only form one OC for the management of the estates in their common ownership.

To keep the BMO in pace with the changing circumstances and to address public concerns, the Home Affairs Bureau established in January 2011 the Review Committee on the Building Management Ordinance (Review Committee), which is now studying in detail the common problems in building management, including DMC problems such as multiple buildings with one OC, the quorum for convening an owners' meeting, etc. The Review Committee will examine if these problems should be resolved through amending the BMO. It will also make recommendations to the Government on measures to improve the operation of OCs and protect the interests of owners. We expect that the Review Committee will submit an interim report to the Government by the first half of 2012. We appreciate Members' concern for the formation of OCs in large private housing estates, and have reflected the views to the Review Committee.

Ends/Wednesday, January 11, 2012
Issued at HKT 12:15