Homeowners locked i
Homebuyers are locked into property management contracts. finds developers both sell and manage properties. Owners cannot exercise competitive tendering without 50 percent votes to remove the manager. Residents’ share can fall below the 50-percent thresho
Property developers can, under existing Building Management Ordinance (BMO) regulations, foist their own property management subsidiaries on homebuyers. The agreement — Deed of Mutual Covenant (DMC) — to contract a property management company for an entire development, can be sealed by the first unit buyer.
Davis Wong, president of the Federation of Hong Kong Property Management Industry, cautions that “The covenant can easily run over 100 pages. It is impossible for the first purchaser to scrutinize it carefully, especially when the buyer is eager to move into a new apartment.”
Even for multi-block housing complexes like Whampoa Garden, Mei Foo Sun Chuen and Laguna City, the first purchaser signing the DMC contract locks in all residents to the document — without choice.
In many cases, developers would name their subsidiary companies to manage the property under the DMC. If individual homeowners later find the manager’s performance unsatisfactory, agreement is needed from 50 percent of undivided shares to terminate the contract. This is often difficult to muster.
Individual owners are at the mercy of corporations who hold considerable shares of shopping malls or parking lots. If developers rent these commercial units out rather than sell them, developers remain the dominant owners.
This fundamental inequity imposed on citizens investing their life savings, continues without challenge. The BMO mechanism, in the matter of property management, favors developers.
The hundreds of clauses in the legal jargon of the DMC can hide traps for homebuyers. Wong cites many cases of unfair DMCs signed in the 1980s where owners had to pay maintenance for public areas, or maintenance of external walls, while advertising income derived from them go to the developers.
Legislator and a member of the Business and
The low participation rate of individual owners at general meetings is another reason why DMC managers have wide leeway to take major decisions unilaterally.
Owners’ corporation option
Apart from the DMC, owners can form their own independent body corporate to hire and supervise building managers. It is not mandatory to set up an owners’ corporation under the BMO, but a housing estate can have only one DMC manager and one owners’ corporation. Termination of the owners’ corporation has to conform with the provisions in the BMO that apply to the DMC.
Responding to a China Daily enquiry, the Home Affairs Department confirms there are currently about 40,500 private buildings in Hong Kong, of which 26,100 are serviced by property management companies. About 8,800 buildings are managed by owners’ corporations or other informal resident bodies.
About 5,600 buildings are without any form of property management.
2014 public consultation
In 2014, the Home Affairs Department launched a public consultation exercise to review the BMO. The key points were to consider lowering the threshold for terminating the DMC from 50 percent to 30 percent aggregate share, and to limit the DMC appointment term to five years.
The department retained the threshold for termination at 50 percent, citing a lack of consensus to lower it. The Department feared that “lowering the threshold for the termination of appointment might lead to disputes and affect the quality of building management”.
However, the Home Affairs Department proposes that the term of DMC appointment be automatically terminated five years after the formation of the owners’ corporation. That would allow the owners’ corporation to renegotiate terms, or replace the DMC manager through open tender. So far, no regulatory revision has