Purpose

This paper informs Members of the Administration's proposed amendments to the Building Management Ordinance (Cap.344) (the BMO) to implement the relevant recommendations in the "Public Consultation on Proposals to Improve Fire Safety in Private Buildings".

Background

2. The Secretary for Security and Secretary for Home Affairs jointly issued the above-mentioned consultation document in June 1998. A copy is at the Annex.

3. During the two-month public consultation period which ended on 24 August 1998, Government consulted the Legislative Council and its Panel on Security, 18 Provisional District Boards or their committees, over 50 professional bodies, interest groups, political parties and district organizations and received a total of 75 written submissions. The community is generally supportive of the various proposals to improve fire safety and building management of private buildings. We issued a Legislative Council Brief on 7 October 1998 on our plan to formulate detailed measures including legislation to bring the proposals to fruition, having regard to the public views gathered from the consultation exercise.

4. The Home Affairs Bureau is responsible for taking forward the long term measures on building management for all private buildings as proposed in paragraphs 27 to 29 of the Annex. The details and other proposed legislative amendments are in paragraphs 5 to 13 below. The Security Bureau is working separately on legislative proposals to upgrade the fire safety standards of private buildings contained in other parts of the consultation document.

Problem

5. In the consultation document, we proposed to introduce the following long term measures to improve the management of private buildings -

1. to specify management and maintenance standards for compliance by owners' corporations (OCs) and to provide for sanctions against non-compliance;
   
   
2. compulsory/mandatory management of problematic buildings as identifiedidentifed by the Director of Fire Services and/or Director of Buildings; and
   
   
3. automatic/mandatory formation of OCs in new buildings.
   
   

6. Legislative amendments are necessary in order to implement these proposals. The BMO which provides for the incorporation of owners of buildings and management of buildings is considered to be a suitable venue to incorporate these proposals. We will take the opportunity to propose other amendments to the BMO, as described in paragraphs 7 and 8 below, to improve the operation of OCs

Insurance

7. In addition to the proposals contained in the consultation document, we have noted that many OCs do not effect any insurance to cover fire, public liability or other risks in respect of the common parts of their buildings. The case of Sun Hing Building in which the OC was ordered by the court to pay a huge amount of compensation to a worker injured while carrying out repairs in the building has aroused considerable public interest. Since the OC of the building had not effected any insurance to cover such liability, the owners were personally required to contribute to the compensation. Section 18(2)(d) of the BMO has provided a discretionary power for OCs to "insure and keep insured the building or any part thereof to the reinstatement value thereof against fire and other risks". In practice, many OCs have not effected insurance to cover the common parts of their buildings. To protect the interest of owners and users of a building, we consider it necessary to make the insurance of common parts of a building against fire, public liability or other risks a compulsory requirement. The sum to be insured will have to be determined by the OcCs themselves.

Audit

8. At present, the accounts of an OC can be audited by an accountant or such other person approved by the OC by a resolution passed at a general meeting of the owners under section 27(1A) of the BMO. We consider that the accounts of an OC of a multi-storey building can be fairly complicated because an OC is analogous with a company. An unqualified accountant may not have the relevant experience and expertise to audit an OC's accounts properly. We therefore consider it necessary to require an OC's accounts be audited by qualified accountants only. Under section 2 of the BMO, accountant means a certified public accountant within the meaning of the Professional Accountants Ordinance (Cap.50). We will consider introducing a clause to exempt some small buildings from complying with this requirement, e.g. buildings with less than 50 flats.

The proposals

Specification of management and maintenance standards

9. Section 18(1) of the BMO provides for, inter alia, certain obligations of an OC in relation to the management and maintenance of the common parts of the building. Briefly, an OC shall maintain the common parts of a building in a state of good and serviceable repair and clean condition, and shall carry out such works as may be ordered in respect of the common parts by any public officer in exercise of the powers conferred by any Ordinance. However, this provision is not specific as to the standards of management and maintenance that are expected of an OC. Further, there is no sanction against an OC if it fails to fulfill its obligation of managing and maintaining the common parts of the building. We propose to amend the BMO to empower the Authority (SHA) to prepare, review and publish in the Gazette a Code of Practice on the management and maintenance standards, after consultation with the Director of Fire Services (DFS), Director of Buildings (DB), Director of Electrical and Mechanical Services and Director of Home Affairs for compliance by the OCs or owners.

Compulsory/mandatory management of problematic buildings

10. From the territory wide survey of buildings by Fire Services Department conducted in 1998, many problematic buildings were found lacking in management. A properly managed building has lower fire risks. At present, there is no statutory requirement for owners of buildings to employ a building manager. We consider that owners of problematic buildings (as identified by the Director of Buildings (DFS or ) or the Director of Fire Services (DB)) should be compulsorily required to (a) effect specific building management measures to improve the fire safety of their buildings and/or (b) employ a building manager with adequate and relevant experience. There would be clear sanctions stipulated in the law against non-performance of (a). Regarding (b), if the owners decline to employ a proper building manager, the Authority (SHA) may appoint one for them and recover the costs and administrative fees from the owners. The recurrent management costs will be payable by the owners to the manager.

Automatic/mandatory formation of OCs in new buildings

11. The existence of an OC in a building will help improve the management of the building. However, the formation of OC under the extant BMO is voluntary. While we will continue to encourage owners of existing buildings to form OCs, for new multiple ownership buildings we propose to introduce a mechanism whereby an OC will automatically be formed the owners will be compulsorily required to form an OC within one year after they when the owners register their respective titles with the Land Registrar.

Mandatory insurance

12. The discretionary power of OCs to effect insurance under Section 18(2)(d) should be changed to a mandatory requirement. The insurance to be taken should expressly include public liability in respect of the common parts of the building.

Accounts of OCs to be audited by qualified accountants

13. Section 27(1A) of the BMO should be amended to provide for mandatory appointment of qualified accountants to audit the accounts of the OCs. For a building with [50] flats or less, this requirement will be waived. The Authority (SHA) shall have the discretion to exempt a building from this requirement upon receiving an application with full justifications in writing from the OC.

Current position

14. We are finalising the details of the above proposed legislative amendments. We are bidding for a legislative slot to introduce an amendment bill into the Legislative Council in the 1999-2000 session.

Views sought

15. Members are requested to note the content of this paper and to give their views.


Home Affairs Bureau
February 1999
File Ref: L.M(6) in HAB/V/BM/2/12


C/paper/BMO/2-99amendBMO.doc