Provisional Legislative Council

PLC Paper No. CB(2)1125

Paper for the House Committee Meeting
on 6 March 1998

Report of the Bills Committee on
Building Management (Amendment) Bill 1998

Purpose

This paper reports on the deliberations of the Bills Committee on the Building Management (Amendment ) Bill 1998 and seeks Members’ support to resume Second Reading Debate of the Bill on 18 March 1998.

The Bill

2. The Bill seeks to amend the Building Management Ordinance, Cap. 344, in order to -

1. expressly empower an owners’ corporation (OC) to carry out renovation, improvement or decoration works to the common parts of their buildings;

2. increase the requisite owners’ shares from 10% to 30% for objection to convening a meeting of owners to appoint a management committee;

3. add an alternative means of serving a notice by placing the notice in the letterbox of the recipient; and

4. make technical amendments.

Background

3. The Building Management Ordinance, Cap. 344 (the Ordinance) was revamped from the former Multi-storey Buildings (Owners Incorporation) Ordinance in 1993 to facilitate, inter alia, the formation of OCs for the management of private buildings, and to extend the jurisdiction of the Lands Tribunal to adjudicate building management matters.

4. In 1995, the High Court ruled in the case of Incorporated Owners of Bayview Mansion v Chan Cheung Kit Mui that although OCs could carry out maintenance works, they were not empowered under the Ordinance to renovate or improve the common parts of their buildings unless with the full consent of all owners. The court judgment has given rise to concerns among OCs and building management practitioners because building repairs and maintenance usually entail a certain degree of renovation and improvement. To address this concern and other related problems, the Administration has reviewed the Ordinance and proposed legislative amendments. The proposals were discussed by the Panel on Home Affairs of the Provisional Legislative Council (the Council) in October 1997.

The Bills Committee

5. At the House Committee meeting on 13 February 1998, Members agreed to form a Bills Committee to study the Bill. Hon CHAN Kam-lam was elected Chairman of the Bills Committee which met on 20 February 1998 to discuss with the Administration. The Bills Committee also noted the views expressed by the Panel on Home Affairs.

6. The membership list of the Bills Committee is in Appendix I.

Deliberations of the Bills Committee

Renovation, improvement or decoration works

7. Members generally agree to the need to expressly empower an OC to carry out renovation, improvement or decoration works upon passing a resolution at a meeting of the corporation. Members note with concern that following the court ruling on the Bayview Mansion case, some OCs and building management committees have been reluctant to carry out maintenance works which often involve some amount of improvement works. In view of the growing number of ageing buildings in need of repairs and improvements to bring the safety and living environment up to a reasonable standard, members support amending sections 14 and 18 of the Ordinance to put beyond doubt that OCs may carry out renovation, improvement or decoration works for the common parts of their buildings. In this connection, the Bills Committee notes that ‘common parts’ as defined in the First Schedule of the Ordinance include facilities and fire fighting equipment and installations of buildings. Members also note that the Third Schedule of the Ordinance provides that all matters arising at a meeting of a corporation at which a quorum is present (10% of the owners) shall be decided by a majority of votes of owners.

Requisite owners’ shares of objection to appoint a management committee

8. At present, section 3A of the Ordinance states that not less than 30% of the owners shares may apply to the Authority (Secretary for Home Affairs) who may order that a meeting of owners be convened to appoint a management committee. However, the order shall be nullified if 10% owners’ shares object to the appointment of a management committee. The Administration considers it unreasonable to allow 10% owners’ shares to override an application from 30% of the owners’ shares, and the imbalance is not in line with the Government objective of encouraging owners to form OCs. The Administration therefore proposes to rectify this by increasing the requisite owners’ shares of objection to 30%.

9. Whilst agreeing that the existing 10% threshold for objection is inappropriate, a member questions the basis for raising it to 30% of the owners’ shares. He asks whether a higher percentage should be required for objection to an order issued under section 3A. The Administration explains that the proposed 30% owners’ shares for objection is fair and reasonable as an equivalent percentage is required for applying an order under section 3A. Moreover, experience reveals that there will be practical difficulties in obtaining a larger amount of owners’ shares for the purpose.

10. On the convening of an owners’ meeting to appoint a management committee, a member has pointed out that such meeting is normally convened in accordance with the deed of mutual covenant, or by owners of less than 5% of the shares, in accordance with section 3 of the Ordinance. Section 3A applies only when owners fail to obtain the requisite 50% support at the meeting to appoint a management committee under section 3(2)(b). In such circumstances, 30% of the owners’ shares may apply for an order to convene a meeting for this purpose. The Bills Committee notes that so far only 6 orders have been issued by the Secretary for Home Affairs under section 3A and one of the orders was nullified by objections from owners of not less than 10% of the shares.

11. Some members have asked whether the proposed requisite owners’ shares for objection to the appointment of a management committee will unduly restrict the Government in its consideration of mandatory formation of OCs. The Administration has responded that the latter proposal and the legislative framework are still under consideration. Where necessary, further legislative amendments will be introduced into the Legislative Council.

Alternative means of serving notices

12. The Bill also provides an alternative means of serving notices to owners and notices of resignation of managers by placing the notices in the letterboxes of the recipients. In response to members, the Administration has clarified that serving of notices may be by any one or a combination of the methods specified in the Ordinance. Should there be litigation concerning the delivery of notices, the court will rely on the evidence relating to the serving of notices such as the presence of witnesses and records of delivery.

Mandatory public liabilities insurance for private buildings

13. A member has asked the Administration to consider requiring all private buildings to take out public liabilities insurance. The Administration has responded that section 18(2)(d) already provides that OCs shall insure their buildings against fire and other risks. The question of mandatory insurance of all private buildings will require public consultation and consideration by the central committee which has been set up recently under the chairmanship of the Secretary for Home Affairs to coordinate building management matters.

Government assistance to OCs

14. The Administration informs members that the Home Affairs Department will continue to assist in the formation of OCs and promote good building management practices. A Building Management Resource Centre is scheduled to open in April 1998 to provide free preliminary professional advice to owners of buildings.

15. Two members have asked the Government whether financial assistance or loans will be provided to OCs which have difficulties in financing large-scale maintenance works or in recovering costs from owners. In this respect, the Administration has informed members that a Building Safety Improvement Loan Fund and a Fire Safety Improvement Loan Fund will be set up shortly subject to approval of the Finance Committee of the Council. OCs may apply for loans from these Funds to carry out improvements works to the structure and fire safety of buildings.

Public consultation

16. The Bills Committee notes that the District Boards and property management bodies were consulted in April 1997 and they support the Bill.

Committee Stage amendments

17. As requested by the Bills Committee, the Administration has proposed some minor textual amendments to clauses 4 and 5 to improve clarity and consistency of the provisions.

Recommendations

18. The Bills Committee supports the Bill and recommends the resumption of the Second Reading Debate on 18 March 1998.

Advice sought

19. Members are invited to support the resumption of the Second Reading Debate of the Bill on 18 March 1998.

Provisional Legislative Council Secretariat
27 February 1998

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Appendix I

Bills Committee on Building Management (Amendment) Bill 1998

Provisional Legislative Council Secretariat
20 February 1998