PLC Panel on Home Affairs
Meeting on 15 December 1997
Responsibilities and Liabilities of Owners' Corporation in Management of Buildings
Purpose
This paper addresses the issues raised in the letter of 19 November 1997 from the Clerk to Provisional Legislative Council Panel on Home Affairs. The issues are responsibilities and liabilities of owners' corporations (OCs); control of vice establishments in buildings; assisting and educating OCs; arbitration of disputes; and review of the Building Management Ordinance (BMO).
Government policy
2.Government's policy is to encourage owners to form OCs under the BMO and to manage their buildings effectively.
Responsibilities of OCs
3.The duties and powers of OCs are stipulated under Sections 14 and 18 of the BMO. The duties and powers include maintaining the common parts in a state of good and serviceable repair and clean condition; and exercising control, management and administration of the common parts of the building.
Liabilities of OCs
4.An OC is a legal entity formed under the BMO. Pursuant to Section 8 of the BMO, the OC shall, with effect from the date of issue of the certificate of registration by the Land Registry, be a body incorporate with perpetual succession, capable of suing and be sued and to hold undivided shares in the building. Its powers and duties are defined in the BMO. Please refer to paragraph 3 above.
5.There is some distinction between an OC incorporated under the BMO and a company with limited liability as set out in Sections 4(2)(a) and (b) of the Companies Ordinance. Upon winding up of an OC, the provisions of Part X of the Companies Ordinance for unregistered companies apply. The owners' liability, upon winding up of the OC, is set out in Section 34 of the BMO i.e. the owners shall be liable, both jointly and severally, to contribute, according to their respective shares, to the assets of the corporation to an amount sufficient to discharge its debts and liabilities. Further, an OC is incorporated for the purpose of managing a building whilst a limited company is usually incorporated for profit making objectives.
Insurance
6.The BMO, inter alia, empowers an OC to insure the building against fire and other risks. Pursuant to Section 18(2)(d) of the BMO, an OC may in its discretion, insure and keep insured the building or any part thereof to the reinstatement value thereof against fire and other risks. As illustrated in the Sun Hing Building case, owners own a duty of care to the visitors and have the duty to keep their premises under good repair; and victims have the right to be properly compensated. OCs should seriously consider invoking the power under the BMO to have their buildings properly insured.
Vice establishments in buildings
7.If the vice establishments are in breach of the Deed of Mutual Covenant (DMC) of the building, the OC may bring the case to the Lands Tribunal (as outlined in paragraph 11) and seek an injunction on the vice establishments.
8.If it is suspected that the vice establishments have broken the law, the OC should report the case to the Police.
Assisting and educating OCs
9.Home Affairs Department (HAD) proactively assists owners to form OCs and advise them on building management matters. HAD has an ongoing programme to promote and publicise good building management. It organises seminars, talks, training courses, etc in the Districts. Owners are instilled the knowledge of building management.
10.A popular promotional booklet entitled " Building Management " which includes two comprehensive chapters on building insurance and employees' compensation is available free of charge at all District Offices. A series of educational video tapes on building management, maintenance and insurance were produced for loan (also free of charge) to interested members of the public at the District Offices. Roving exhibitions on building management are held from time to time in the Districts. In conjunction with Radio Television Hong Kong, HAD is planning to produce a series of TV programme on building management in 1998. A Building Management Resource Centre will be established in mid-1998 to provide a wide range of services, including free preliminary professional advice from lawyers, accountants, surveyors and property managers for owners and OCs.
Arbitration of disputes
11.Section 45 of and the Tenth Schedule to the BMO has addressed this. The jurisdiction of the Lands Tribunal has been extended to deal with building management cases, e.g. interpretation and enforcement of the BMO and DMC.
Review of Building Management Ordinance
12.Since the implementation of BMO in 1993, we have identified several deficiencies in the Ordinance. We are proposing amendments to the BMO. The major amendment relates to Sections 14 and 18. OCs will be expressly empowered to carry out renovation, improvement or decoration works to the common parts, facilities and services of their buildings in addition to the repairs and maintenance works. We will introduce a Building Management (Amendment) Bill 1998 into the Provisional Legislative Council in February 1998.
Epilogue
13.We will continue to promote the concept of effective building management and review the adequacy of our services with a view to assisting owners to uplift the standards of building management.
14.Any constructive comments on how the Administration could further help with the management of private buildings will be welcome.
Home Affairs Bureau
December 1997
