Purpose

This paper addresses the following issues:

1. the proposal for mandatory/automatic formation of owners' corporations (OCs); and
   
   
2. the percentage of shares required for appointment and termination of managers
   
   as raised in the letter dated 14 June 1999 from the Clerk to Legislative Council Panel on Home Affairs to the Secretary for Home Affairs (SHA).

Formation of owners' corporations

2. Government policy is to help owners of private buildings to help themselves in the context of properly managing their own properties. We encourage them to form OCs. The Building Management Ordinance (Cap.344) (the BMO) provides a legal framework for the owners to form OCs and carry out their responsibilities for managing their buildings. Officers of the Home Affairs Department help them to form OCs and provide them with advice and information on effective building management.

3. Government conducted a public consultation on "Proposals to improve fire safety in private buildings" in 1998. One of the recommendations was to introduce mandatory/automatic formation of OCs in new buildings. The Home Affairs Bureau (HAB) is working with the Department of Justice and other parties with a view to amending the BMO and bringing the proposal to fruition. We wish to stress that the proposal, if implemented, will apply only to new buildings with multiple ownership. The proposal will not be applied retrospectively to existing buildings. Government will continue to encourage the owners of existing buildings to form OCs under the existing BMO. The deeds of mutual covenant (DMCs) of many new buildings already provide for formation of owners' associations like owners' committees, and/or professional building management. Government's view is that forming an OC is not the only way to achieve good building management. If the DMC of a new building already provides for the formation of an owners' association and/or professional building management, the owners of that building can determine for themselves whether to form a owners' committee under the DMC, or to activate the automatically formed OC under the BMO (subject to amendments) by appointing a management committee. HAB is fine-tuning the proposals with the relevant parties with a view to introducing a Building Management (Amendment) Bill into the Legislative Council in the 1999/2000 session.

Appointment and termination of managers

4. Paragraph 7(1) of the Seventh Schedule to the BMO provides that at a general meeting convened for the purpose of the Ordinance, an OC may, by a resolution of the owners of not less than 50% of the undivided shares, terminate by notice the manager's appointment without compensation. The OC may then proceed to appoint another manager.

5. Termination of a property manager's appointment is an important building management decision which warrants support from no less than 50% of the undivided shares. Owners may vote either personally or by proxy at a general meeting convened for this purpose. Government is of the view that this percentage is reasonable and the system has worked well. If the percentage is lowered, it cannot reflect that the termination of the manager is a decision of the majority of the owners. If the required percentage of undivided shares is raised, terminating the appointment of a manager may become too difficult and impractical. Government considers that the existing percentage requirement is appropriate. In this connection, a copy of SHA's reply to a question from the Hon CHENG Kai-nam at the Legislative Council's sitting on 12 May 1999 is at the Annex for reference.

Epilogue

6. Under the principle of encouraging owners to self-manage their buildings, Government will continue to actively provide assistance for OCs and owners of private buildings in order to achieve the objective of "a good home is a safe home".


Home Affairs Bureau
June 1999