Archive for the ‘Building Management Ordinance’ Category

Do owners of sub-divided units count as owners for general meeting purposes?

September 21, 2016

In Chow Chui Chui v Kafull Investment Ltd ([2016] HKEC 1889, CA) the DMC for a building divided the building by allocating 48 shares to a ground floor shop, 12 shares to each of the first to third floors (the ground to third floors being described as the ‘non-domestic accommodation’), one share to each domestic flat on the floors above the non-domestic accommodation and one share to the main roof and external walls. There was a first sub-DMC that sub-divided the ground floor into five units and allocated the 48 ground floor shares amongst these units. There was a second sub-DMC that sub-divided the units on the first and second floors of the building and divided the shares in the main DMC among the sub-divided units. Resolutions were passed at an owners’ meeting. Present at the meeting were fourteen owners from the non-domestic portion and two from the domestic portion. The question was whether the meeting failed to meet the quorum requirements in schedule 3, para. 5(1)(b) of the Building Management Ordinance (requiring that 10% of the owners should be present).

The contention was that only those who were ‘owners’ in accordance with the main DMC could be considered ‘owners’ for this purpose. Thus, there could only be 4 owners from the non-domestic portion (one for each floor). The Court of Appeal  (Kwan JA giving the Court’s judgment) rejected this contention. Section 2 of the Building Management Ordinance defines an ‘owner’ as one who appears from the Land Registry to be the owner of an undivided share of land on which there is a building. Section 39 of the Building Management Ordinance provides that an owner’s share is to be determined in accordance with a DMC registered at the Land Registry. Here, the shares had been attached to the sub-divided units by the terms of a sub-DMC, the owners of the sub-divided units had the right to exclusive possession and the Land Registry records confirmed their ownership ([35]). They were owners and, as a result, the meeting was quorate.

There was nothing to limit the Ordinance’s references to a ‘deed of mutual covenant’ to the main DMC ([39]) especially where, as here, the main DMC contemplated the possibility of sub-division. In fact, it is enough that the main DMC does not prohibit sub-division ([40]).

Michael Lower

 

Can a developer retain exclusive use of the external walls of a building and pass repair costs onto the other owners?

October 14, 2015

In Green & Grace Ltd v Wang Lung Industrial Building ([2015] HKEC 1935, LT) the incorporated owners resolved to repair the external walls of the building. A later general meeting specified the contribution of each owner to the works that had been carried out, including the cost of repairing the external wall.

The DMC of the building retained the exclusive use of the external walls for the developer but provided that the developer would not be required to repair them. The question was whether the resolution to repair the external walls was void in the light of section 34H(1) of the Building Management Ordinance:

‘Where a person who owns any part of a building, has the right to the exclusive possession of any part of a building or has the exclusive right to the use, occupation or enjoyment  of that part as the case may be, but the deed of mutual covenant does not impose an obligation on that person to maintain the part in good repair and condition, that person shall maintain that part in good repair and condition.’

The incorporated owners responded by pointing out, among other things, that the DMC gave the Manager some limited control rights over the external walls and that, therefore, the developer’s rights were not ‘exclusive’. This contention failed as did the argument that the limited repairing and maintenance obligations imposed on the developer by the DMC meant that section 34H did not apply. The external wall, being for the developer’s exclusive use, was clearly not a common part.

Kot DJ found the reasoning in Uniland Investment Enterprises Ltd v IO of Sea View Estate ([1999] 4 HKC 141) especially helpful. This looked at the combined effect of sections 34H and 34C(2) of the Building Management Ordinance. The latter provision stipulates that section 34H takes priority over the terms of the DMC in the event of inconsistency. The conclusion was that the DMC provision purporting to relieve the developer from any obligation to maintain the common walls was inconsistent with section 34H and was void. It was for the developer, and not the incorporated owners, to repair the external walls or bear the costs of doing so.

Interestingly, Kot DJ commented on the Court of Appeal decision in 鄭惠娟 對 永利中心業主立案法團及另一人 . He found this unhelpful since the Court of Appeal’s attention had not been drawn to Uniland.

Michael Lower

House rules in the DMC

January 12, 2014

In Yuen Long Tin Shing Court (IO) v Wong Mau ([2013] HKEC 2021, LT) a flat owner was alleged to be keeping a dog in the flat in breach of the DMC. This problem was not resolved despite repeated requests to do so. The owners’ corporation sought, and was granted, an injunction to restrain the keeping of the dog. The Tribunal noted that the DMC’s prohibition on keeping dogs was in a schedule of the DMC that constituted the House Rules. This did not deprive it of its normal legal effect.

Michael Lower

Appointment of an administrator where the management committee had ceased to exist

January 4, 2014

In Smart Wealth Asia Pacific Ltd v Kelly Court (IO) ([2013] HKEC 2056, LT) Smart Wealth had acquired 92.5% of the shares in a building. All the members of the management committee had sold their shares and so ceased to be office-holders by operation of law. The owners meeting had resolved to dissolve the management committee and appoint an administrator but there was a serious doubt as to the validity of the resolution since the Building Management Ordinance required the management committee to call the owners meeting to consider such a resolution. This was an application by an owner for the dissolution of the management committee and the appointment of an administrator by the Tribunal under section 31 of the Building Management Ordinance.

The court made the orders sought. It was appropriate to dissolve the management committee to avoid doubts arising in the future as to whether or not one was in existence ([14]). It was also appropriate to appoint an administrator: there had to be a body capable of performing the duties and exercising the powers of the management committee under the terms of the Deed of Mutual Covenant and the Building Management Ordinance ([16]).

Michael Lower

Adverse possession of a common part by a non-owner

September 10, 2013

In Yeung Mau Cheung v Ka Ming Court ([2013] HKEC 1271, CFI) the plaintiffs and their predecessors had used two portions of the common parts of a building as a refreshment store and associated storage area since 1965. The DMC for the building was created in 1970. The question was whether the plaintiffs were entitled to declarations that they had a possessory title and that the defendant’s title had been extinguished by the Limitation Ordinance. The court was satisfied that the plaintiffs had been in adverse possession for the necessary length of time ([29] – [30]).

The next question was whether the adverse possession claim was defeated by the covenant not to convert common parts to private use implied into the DMC by section 34I of the Building Management Ordinance. This defence failed. The court relied on, and regarded itself as being bound by the Court of Appeal decision in Wong Kim Lin v Peony House (IO).

Michael Lower

The duty to convene and participate in management committee meetings

August 15, 2013

In Tzeng Li Wen Judy v Tam Lup Wai Franky ([2013] 2 HKLRD 790, LT) one member of a management committee brought proceedings against the chairman complaining that meetings had not been held every three months as required by schedule 2 of the Building Management Ordinance. The chairman sought to have the proceedings struck out on the grounds that the proceedings should have been brought against the management committee as a whole, that there was no business to discuss and there had been an agreement that no meeting was necessary. This striking out application failed. The management committee was not a separate legal entity capable of being sued ([19]). The chairman had a duty to convene a meeting every three months (though of course he could not compel anyone to attend) ([24]) and on the face of it he was in breach of this duty.

The action against the secretary was struck out. The secretary only had a duty to convene a meeting if requested to do so by two committee members and the secretary had received no such request ([27]).

The action against the corporation was struck out since it had no power to convene a meeting of the committee ([28]).

The members of a management committee are under a duty to participate so far as reasonable in the operation of the corporation and part of this duty is to attend management committee meetings ([24]).

IO asked to reimburse owner the cost of replacing an unauthorised structure that it had removed

June 20, 2013

In Lee Din Chun v Beverly Heights (IO) ([2013] HKEC 924, LT) L owned a parking space at the property. There was a canopy above the parking space. This was an unauthorised structure. The incorporated owners had it removed because it was impeding the progress of works on the sewers and drains beneath the parking space. L replaced the old canopy with a new canopy. The erection of the new canopy amounted to a breach of the DMC. Further, the Building Authority issued a notice requiring the demolition of the new canopy as it was in breach of the Buildings Ordinance. Nevertheless, L now sought compensation from the IO for the cost of erecting the new canopy. L failed. There was no basis on which the IO could be liable for the cost of the new canopy. Further, it was unreasonable to require it to pay for the cost of erecting an unlawful structure; this might expose it to the risk of having committed a criminal offence.

Michael Lower

Breach of DMC: landlord’s liability for tenant’s use of common areas

April 11, 2013

In 海怡閣(成和道) 業主立案法團v 泓璟集團有限公司 ([2013] HKEC 345, LT) L was the registered owner of shops forming part of a building. It permitted its tenant to use the adjoining common parts (though it did not purport to include them in the lease). The landlord and the tenant were each liable to the incorporated owners in trespass ([109] – [111]). The tenant was ordered to pay damages in respect of its use of the common parts assessed by reference to the market value for the rights that it exercised.

Liability of successor-in-title for unlawful works carried out by predecessor

March 1, 2013

In Wah Fai Court (IO) v Lee Man Ho Joseph ([2013] HKEC 270, LT) unauthorised works had been carried out by L’s predecessors-in-title. The incorporated owners sought an order requiring L to remove the unauthorised works. L argued that he was not liable since the work had been done before he became the owner. This failed. This was a continuing breach of a negative covenant and successors are liable by virtue of section 41(3) of the Conveyancing and Property Ordinance ([31]).

Duty of managers and incorporated owners to take proper steps

November 22, 2012

In Lee Ming Yueh v Broadway-Nassau Investments Ltd ([2012] 5 HKLRD 208, CA) water leaked through the walls and roof of a top floor flat. The managers asked contractors to look at the problem. Initial remedial efforts were not effective but eventually the problem was identified and resolved. The water seepage damaged the walls and floor of the flat. The owner of the flat claimed damages against the managers and the incorporated owners alleging breach of the Deed of Mutual Covenant and section 18 of the Building Management Ordinance (imposing duties on the Manager and the incorporated owners to keep common parts in repair). The claim failed both in the Lands Tribunal and in the Court of Appeal. The duty was one of ‘proper management’. The managers had promptly engaged contractors to investigate and remedy the problems when they received complaints. They could not delegate their duty to contractors but there was nothing to suggest that they had been negligent in their choice of contractor.