LCQ11: Handling of conflicts between flat owners and management committees over building maintenance and repair works

Following is a question by the Hon Emily Lau and a written reply by the Secretary for Home Affairs, Mr Tsang Tak-sing, in the Legislative Council today (July 2):

Question:

Recently, some flat owners of a housing court undergoing major maintenance works were dissatisfied with the exorbitant costs of such works, and they suspected that someone had secured the maintenance works contracts by means of bid-rigging so as to earn excessive profits. Hence, they participated in a campaign "against bid-rigging" in building maintenance but received letters afterwards threatening the safety of their families. On another front, paragraph 1(2) of Schedule 3 to the Building Management Ordinance (Cap. 344) (the Ordinance) provides that "the chairman of the management committee shall convene a general meeting of the [owners'] corporation at the request of not less than 5% of the owners for the purposes specified by such owners within 14 days of receiving such request, and hold the general meeting within 45 days of receiving such request". I have learnt that after securing the consent of 5% of the owners, some owners of a housing court requested the chairman of the management committee (MC) of the owners' corporation (OC) of the housing court to convene a general meeting in accordance with the aforesaid provision to give an account of the maintenance works for that housing court. However, the MC chairman concerned subsequently resigned, and the MC refused to appoint a new chairman. As a result, no general meeting can be convened since then. In this connection, will the Government inform this Council:

(1) of the new measures to effectively combat bid-rigging in building maintenance works, and the ways to protect the personal safety of owners who have raised queries on the maintenance works;

(2) given that even at the request of not less than 5% of the owners, no general meeting can be convened as long as the office of the MC chairman is vacant, whether it has assessed if there is any loophole in the Ordinance; if the assessment outcome is in the affirmative, whether the Government will amend the Ordinance shortly to plug the loopholes; and

(3) whether it has examined if the MC in the second aforesaid case has discharged the duties of an OC under section 18 of the Ordinance in good faith and in a reasonable manner; if the assessment outcome is in the negative, whether the Authority will order under section 40B of the Ordinance the MC to appoint, within a specified reasonable period, a building management agent for the purposes of managing the housing court?

Reply:

President,

(1) The SAR Government is very concerned about crimes involving building maintenance works. Relevant departments and organisations, including the Independent Commission Against Corruption (ICAC), the Hong Kong Police Force (HKPF), the Home Affairs Department (HAD), the Urban Renewal Authority (URA) and the Hong Kong Housing Society (HKHS), have been working closely together in adopting a multi-pronged approach through proactive measures such as publicity and education, enhancement to procedures, provision of better support for owners' corporations (OCs) and owners as well as active investigation and enforcement actions to prevent people from conducting unlawful activities in the course of building maintenance works.

On the fronts of publicity and education, the ICAC and the HKPF, in collaboration with the HAD, the URA and the HKHS, etc, have been making concerted efforts to provide OCs and owners with guidance on corruption and crime prevention, as well as guidelines on the tendering of building maintenance works. In mid-December 2013, the ICAC published a new edition of the Building Maintenance Toolkit, providing advice on effective corruption prevention measures, checklists on points to note and templates of documents for the reference of OCs and owners. With the assistance of the HKHS and the URA, the ICAC has also commissioned an independent academic institution to analyse the costs of maintenance projects completed under the Operation Building Bright (OBB) and study the feasibility of setting up a renovation cost database for public reference.

Moreover, through the RenoSafe Scheme, the HKPF provides OCs intending to carry out building maintenance works with an information package, listing crimes that may arise from improper handling of building maintenance works and offering advice on preventive measures. Posters or banners are displayed at conspicuous positions of the participating buildings for enhanced publicity and effective deterrence.

As for law enforcement, the ICAC and the HKPF take proactive action to follow up on and investigate all complaints and reported cases. The HKPF has earlier set up a special working group under its Organized Crime and Triad Bureau, and augments its intelligence gathering efforts through the Renosafe Scheme, under which the respective local anti-triad officers make direct contacts with the OCs and owners concerned and invite them to provide information on crimes. Anyone who consider their personal safety under threat or feel intimidated may report the case to the police and seek their assistance.

As regards the provision of better support for OCs and owners, the HAD has, through the Building Management Professional Advisory Service Scheme, engaged professional property management companies to form OCs for target buildings, assist OCs in taking forward maintenance works and follow up on tender matters. Moreover, in collaboration with three professional institutions, viz. the Hong Kong Institute of Surveyors, the Hong Kong Institution of Engineers and the Hong Kong Institute of Architects, the HAD launched the one-year "AP Easy" Building Maintenance Advisory Service Scheme in April 2014 as a pilot scheme under which expert teams comprising members of the professional institutions will, on a voluntary basis, offer professional advice on the engagement of consultants for tenders, including drafting of tenders and contract documents as well as analysis of tenders, to OCs intending to carry out large-scale building maintenance works.

In addition, the HKHS and the URA make enhancement to the procedural arrangements under the OBB and other building maintenance assistance schemes from time to time in a bid to eradicate the acts of bid-rigging. For instance, consultancy firms participating in a tendering exercise are required to submit to the OCs concerned working-hour allocation tables of authorised persons and relevant professionals so as to allow the OCs to have sufficient information to evaluate whether the fees charged by the firms are reasonable, thereby avoiding the risk of bid-rigging owing to an exceptionally low level of charges. Independent consultants are also engaged by the HKHS and the URA to provide the participating buildings with an evaluation of maintenance costs as a reference for OCs and owners to assess whether the tender prices are comparable with the market level before they decide on the suitable tender to be selected.

Furthermore, the HKHS and the URA participate in OC meetings and conduct briefings at different stages to explain points to note in preparing for maintenance works. In late 2013, the HKHS and the URA introduced a new tendering arrangement for building contractors under the OBB, by engaging an independent professional accountant to handle administrative work related to tendering exercises for the appointment of building contractors. The arrangement aims to create a more equitable, interference-free and competitive tendering environment. Meanwhile, the HKHS and the URA are displaying on their websites the information of buildings undergoing tendering exercise under OBB to encourage more contractors to participate in the tendering process. On another front, the URA launched the "Building Rehab Info Net", a website on building maintenance resources, early this year to provide useful information for those who intend to carry out building maintenance works.

The Competition Ordinance (Cap. 619) enacted in 2012 provides that an undertaking must not make or give effect to an agreement if the object or effect of the agreement is to prevent, restrict or distort competition in Hong Kong. A bid-rigging agreement between undertakings might contravene the Competition Ordinance. The Administration, the Competition Commission and the Judiciary are making preparation for the full implementation of the Competition Ordinance. The Competition Ordinance will be brought into full operation when all preparatory work is completed. After the Competition Ordinance has come into full force, the Competition Commission may conduct an investigation into the relevant case if it has reasonable cause to suspect that anti-competitive conduct has taken place.

(2) As stipulated in paragraph 1(2) of Schedule 3 to the Building Management Ordinance (BMO), the chairman of the management committee (MC) shall convene a general meeting of the OC at the request of not less than 5% of the owners for the purposes specified by such owners within 14 days of receiving such request, and hold the general meeting within 45 days of receiving such request.

The vacancy that occurs in the office of the MC chairman may be filled according to the mechanism stipulated in paragraph 6(4) of Schedule 2 to the BMO. The paragraph provides for two ways to fill the vacancy. First, the OC may, by a resolution passed at a general meeting of the OC, appoint a person, from amongst the MC members, to fill the vacancy till the next annual general meeting of the OC at which the MC members retire under paragraph 5(1) of the BMO; and second, if no general meeting of the OC has been convened or no appointment is made to fill the vacancy at a general meeting, the MC members may appoint a person, from amongst themselves, to fill the vacancy till the next general meeting of the OC.

When the office of the MC chairman becomes vacant, we encourage the OC to fill the vacancy according to the mechanism stipulated in paragraph 6(4) of Schedule 2 to the BMO as soon as possible for the normal operation of the OC.

There is a suggestion that paragraph 1(2) of Schedule 3 to the BMO be amended, so that a general meeting can still be convened at the request of not less than 5% of the owners even when the office of the MC chairman is vacant. In considering the suggestion, we have to examine carefully the feasibility of each option, and to take into account whether the approach will easily give rise to disputes among owners. Some possible options which may be considered include allowing the vice-chairman to convene the general meeting in place of the chairman; the MC members appointing one of its members to convene the general meeting, and allowing the owners who have requested to convene the general meeting to nominate a representative to convene the meeting, etc. We will study the above issues in detail in the process of reviewing the BMO.

The Government has established the Review Committee on the Building Management Ordinance earlier to study how to resolve or alleviate common building management problems through amending the BMO. We are following up on the recommendations of the Review Committee, with the objective of making initial proposals on legislative amendments for consultation with stakeholders and the public later this year. The consultation paper will include proposals for amending paragraph 1(2) of Schedule 3 to the BMO.

(3) As regards the management of private buildings, the Government's policy is to assist owners to discharge their building management responsibilities through multi-pronged measures, including the provision of a legal framework and appropriate support services. The BMO provides a legal framework for building management, formation and operation of OCs and other related matters. OCs are independent body corporates. In addition to empowering the OCs to act on behalf of the owners to handle matters relating to building management, the BMO also empowers owners to monitor the operation of OCs and MCs. Nevertheless, the BMO does not empower the Authority to make a ruling on building management issues or related disputes. According to section 45 of and Schedule 10 to the BMO, the Lands Tribunal shall have jurisdiction in relation to building management.

The duties and powers of an OC have been stipulated in the BMO. Under section 18 of the BMO, an OC shall maintain the common parts of the building and the property of the OC in a state of good and serviceable repair and clean condition. It shall also do all things reasonably necessary for the enforcement of the obligations contained in the deed of mutual covenant for the control, management and administration of the building. If the OC fails to act as required under the BMO, or the owners are of the view that the MC has not performed the duties specified in the BMO in good faith and in a reasonable manner, the owners may apply to the Lands Tribunal for a determination.

Section 40B of the BMO stipulates that where it appears to the Authority in the case of any building having an MC that no person is, for the time being, managing that building; the MC has failed substantially to perform the duties of an OC under section 18 of the BMO; and by reason of the circumstances mentioned above, there is a danger or risk of danger to the occupiers or owners of the building, the Authority may order that, within a reasonable period as specified, the MC must appoint a building management agent for the purposes of managing that building. The purpose of the provision is to protect the safety of residents by allowing the Authority to make a timely intervention in case of emergencies arising from the lack of effective management of a building. If any owners make such request, the Authority will consider carefully and thoroughly the specific circumstances of individual cases and the justifications of the owners according to the established procedures before making a decision

Ends/Wednesday, July 2, 2014
Issued at HKT 12:57