Category Archives: CM

Make Work, Make Money

Scaffolding: A common sight around DB
Scaffolding: A common sight around DB


It is common around DB to see buildings clothed in scaffolding, as yet another village embarks on the once-in-seven-years renovation exercise. No other residential estate in Hong Kong carries out major renovations so frequently. Why do we renovate our buildings so often?

Because City Management (CM) tells us to. Renovations are a nice little earner for Hong Kong Resort (HKR), as CM charges Manager’s Remuneration on all expenses. A major renovation exercise can cost $30 million for a small village like La Costa (including houses), to over $100 million for a large village like Greenvale. According to the 2013-14 audited accounts, the gross expenditure for the management of DB last fiscal year, not including renovations, was $148.42 million. Hence, a major renovation exercise creates a significant bump in expenditure — and earnings for CM/HKR — for relatively little work for CM.

Manager’s Remuneration is set at 5% of expenditure, including all salaries, rents and contract expenses. CM presently rebates 2% on renovation expenditure.

CM encourages Village Owners’ Committees (VOCs) to embark on a new renovation exercise by advising that the mandatory seven-year inspection under the Deed of Mutual Covenant (DMC) is due, and then issuing a three-stage tender document that includes survey, tender preparation for renovation, and project management. If any VOC objects, CM advises that stages two and three are optional. Of course, the survey is always designed in a way that encourages the VOC to proceed to the remaining stages.

Perhaps even worse, surveys are delayed until they can be combined with a renovation. Throughout the 30-year history of DB, only Headland Village (2014) has tendered for a survey without bundling tender preparation and project management.

Under the Building Management Ordinance (BMO), any expenditure of a kind not incurred annually requires the approval of the Owners’ Committee. VOCs can say no to a major renovation. But few do.

VOC members would be wise to review the DMC instead of relying on CM. Here is the relevant section of the DMC:

 … the Manager shall have the following duties :-
(1) At least once in every 7 years to employ a competent and qualified person or persons to inspect the entire City (save only the interior of the Residential or Commercial Units or Other Units) and the City Common Facilities and Village Common Facilities and to prepare a report of such inspection which report will be kept at the Manager’s office in the City and will be open to inspection by all Owners and tenants of any part of the City and the Manager will furnish to any such Owner or tenant on request a copy of such report at a reasonable charge.

Thus, the requirement under the DMC is very different from the practice followed by CM for the past 30-plus years. The DMC requires that CM employ “competent and qualified persons” to inspect buildings and city/village infrastructure, and to keep the report at its offices “open to inspection” by both owners and tenants. Any owner or tenant in DB is entitled to inspect any report for any building in DB, including the schools and commercial properties.

These reports in fact represent an audit of the standard of maintenance provided by CM and HKR. The inspections are not intended as the precursor to a renovation exercise, but as a useful reference for all owners and tenants.

Do you want to know whether Discovery Bay International School (DBIS) is properly maintained and safe for your children? Once in every seven years CM is required to hire competent persons to conduct an inspection of the school premises and keep the inspection report open for viewing at its offices.

Do you want to know a professional’s opinion of the condition of the main road? Ditto. The reason that water pressure from the common pipes is low? Ditto. The condition of the common drains? Ditto.

It is the right of every owner and every tenant in DB to view these reports and obtain a copy at nominal cost. No fuss, no waiting. That’s what the DMC says.

And knowing the actual condition of buildings would make it much easier to plan for and carry out a proper renovation when it is really needed.


2013-14 Audited Accounts

The Audited Accounts of the Management Funds for the financial year 2013-14 have now been added to the top menu, “Accounts”.

The main source of the Management Funds is the monthly management fee paid by owners and residents. However, in fact, all monies received by City Management (CM) in pursuance of its role as Manager of Discovery Bay must be deposited to the Management Funds — everything from parking fines to renovation charges to late payment fees.

The Management Funds (the DMC term, but more descriptively called the “Discovery Bay City Owners’ Fund” by the auditor) belong to all the owners of Discovery Bay. CM holds the funds on trust for the owners, and is entitled to draw on the funds to carry out its duties as Manager under the DMC. (This, incidentally, is why one should never withhold payment of management fees as a way of protesting the actions of CM — you are not punishing CM, you are punishing your fellow owners.)

CM is required by the DMC to produce a set of audited accounts within 180 days of the end of each financial year. In addition, the DMC authorises the City Owners’ Committee (COC) and each Village Owners’ Committee (VOC) to review any of the accounts itemised on the last page of these audited accounts throughout the year. This power is above and beyond the right of any owner to receive a copy of any of the budgets, account statements and audited accounts, as shown at paragraph 8 in the link above.

Thus, the owners potentially have significant power to ensure that the Management Funds are properly deployed. However, very few COC and VOC members are aware that they have this important right. Nor has CM volunteered this information. CM perpetuates the myth that the COC and VOCs are advisory bodies only, by selectively quoting the DMC and Sub-DMCs and ignoring the paragraph highlighted in the link above.