The Government is presently conducting a consultation exercise, to gather views on revision of the Building Management Ordinance (BMO) to address inadequacies in its implementation.
This prompted a resident of Mid Levels to write to the South China Morning Post on 29 December, 2014, under the heading Original Developer Must Not be Allowed to Manage Property. This insightful letter highlights the inherent conflict of interest involved when a subsidiary of the original developer manages an estate.
Given the clear conflicts of interest exposed on dbConfidential in the Open Letters to CM and other commentaries, many residents and owners in DB will be sympathetic to the views expressed in this letter.
The Government already recognises that owners may not be satisfied with the manager appointed by the developer under a DMC. The current version of the BMO provides a procedure to remove such manager: Owners must first form an Owners’ Corporation (OC) using the provisions of the BMO, and then apply the mechanism to remove the manager stipulated at Schedule 7, Paragraph 7.
However, in a classic Catch 22 scenario, the BMO makes it impossible for DB owners to form an OC. Unable to form an OC, DB owners thus have no means to remove City Management (CM).
In DB, the total number of Residential Development Undivided Shares is only 56,500, while the number of shares in aggregate is 250,000. The developer controls over 70% of the undivided shares in the Lot, and no OC can be formed without the developer’s support.
The present BMO consultation seeks views on whether to reduce the requirement from 30% of shares in aggregate to 20%. This will not change matters for DB, however. The developer will still control over 70% of the undivided shares in the Lot, and no resolution to form an OC can be passed if the developer is opposed.
There is no procedure in the DB DMC to call a general meeting of all the owners of the Lot. By specifying the voting rights at a general meeting of owners, the BMO has in fact given powers to the developer that the developer does not have in the DMC.
The only comparable procedure in the DMC relates to a meeting of the owners of a building in the event that such building becomes uninhabitable. In this event, only those owners holding undivided shares in the residential or commercial units in the building may vote — all other undivided shares are excluded.
It is also useful to know that, at the City Owners’ Committee (COC) — which is recognised as the Owners’ Committee under the DMC — the residential owners’ representatives are entitled to vote the Village Retained Area Undivided Shares (ie, the residential development retained area shares), not the developer.
It should further be pointed out that over 90% of the undivided shares held by the developer are not liable to pay management fees.
In the lead-up to the present BMO Consultation, many citizens’ groups proposed that shares that are not liable to pay management fees be excluded from voting on a resolution to set up an OC. This would provide a good solution for DB, ensuring that those who pay for the management of DB have the right to select their management company. However, the Government is hesitant to strip the voting rights from non-paying shares. Government’s view is stated in the Consultation as follows:
3.7 There is also suggestion that the counting of shares for the formation of OCs can make reference to that for the termination of appointment of DMC manager, whereby only the shares of owners who pay or who are liable to pay management fees relating to those shares shall be entitled to vote. However, it should be noted that owners who are not liable to pay management fees may still have the right to vote at an owners’ meeting under their respective DMCs. Therefore, it may not be entirely logical to exclude all of them from the counting of shares for the formation of OCs.
With respect to DB, this is to call black white.
The Government will not disenfranchise shares that are not subject to management fees in order to protect the developer’s right to vote shares owned by him. Yet, under the DB DMC, the developer has no right to vote Village Retained Area Shares. The BMO has tilted the playing field in favour of the developer, against Government’s own policy to give owners more say in the management of their buildings.
To correct this gross distortion, Government must revise the BMO to ensure that, on any vote to form an OC, “only the shares of owners who pay or who are liable to pay management fees relating to those shares shall be entitled to vote“. This is the only just way forward.
You may make your views known by making a submission to the Home Affairs Department on or before 2 February 2015:
Division V, Home Affairs Department
31/F Southorn Centre
130 Hennessy Road
Wan Chai, Hong Kong
Fax: 2575-1009
Email: bm_consultation@had.gov.hk
Details may be found at:
http://www.buildingmgt.gov.hk/en/whats_new/2_12.htm