Archive for the ‘Building Management Ordinance’ Category

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.

Incorporated owners can be compelled to take action to enforce the DMC

November 19, 2012

In See Wah Fan v Ki Tat Garden (Phase I) (IO) ([2003] 3 HKLRD 1, CA) W owned the ground floor and cock loft in a building covered by a DMC. T owned the first floor and roof and the stairs and landings above (but not at) the cock loft level. In breach of the DMC, T had enclosed the landing at cockloft level and prevented W from obtaining access to the roof for repair purposes or as a means of escape in emergency. The owners corporation had not taken any action. W brought proceedings. Could he do so given that section 16 of the Building Management Ordinance makes the corporation the proper plaintiff? The Court of Appeal held that the Lands Tribunal can compel the corporation to enforce the terms of the DMC.

‘To take an extreme case, if the majority of the owners had decided to act in bad faith in a matter concerning the management of the common parts, is the minority owner precluded from seeking redress in the court? The answer must be no. This cannot be the intention of the legislation. This being the case, if a minority owner can show he has a legitimate complaint regarding the common parts of the building and yet the management committee had chosen to ignore him, we see no reason why he cannot seek relief from the court. This must be one of the means to ensure that the corporation will observe the intention and requirement of the Ordinance in the proper management of a multi-owner building.’ ([25] per Cheung JA).

Owners corporation liable under BMO s.16 even in respect of pre-incorporation debts

November 13, 2012

Hang Yick Properties Management Ltd v Tuen Mun Kar Wah Building ([2005] 2 HKLRD 499, CA) concerned a claim by the managers of a building against an owners corporation for reimbursement of management expenses alleged to have been incurred by them. Such expenses could be recovered by the managers against individual owners under the terms of the Deed of Mutual Covenant. The liability to pay ran with the owners’ undivided shares by virtue of section 41 of the Conveyancing and Property Ordinance. The owners corporation argued that it could not be liable since this was a pre-incorporation debt. The Court of Appeal held that if the alleged liability was a liability of all of the owners  in relation to the common parts of the building then it was enforceable against the owners corporation even though the liability was incurred before incorporation (Building Management Ordinance, s.16 and [40] of the judgment).

Knowledge of DMC and decoration guidelines

October 25, 2012

In Jing Hui Garden v Ng Kei Sang ([2007] HKEC 874, LT) the owner of a flat in a building covered by a DMC carried out works (new air conditioner and water pipe) in breach of the DMC and contrary to decoration guidelines promulgated by the Management Committee after the building had been redecorated. Part of his defence to the action brought by the incorporated owners was that he had knowledge of neither the terms of the DMC nor the decoration guidelines. This failed. Knowledge of the DMC was imputed to him. The decoration guidelines had been on public display in the building. He also argued that he had been unfairly singled out by the owners since other breaches had, he alleged, gone unchallenged. The Tribunal cast doubt on this allegation but pointed out that, in any event, the Incorporated Owners were under a duty to enforce the Deed of Mutual Covenant.

Squatter of land subject to a DMC takes subject to DMC covenant not to convert common parts to private use

October 15, 2012

In Mountain View (IO) v Heart Cuisine [2012] 4 HKLRD 628, CA) S was a former owner of a shop in a building covered by a DMC. There was a service lane next to the shop which was a common part of the building. S sold the shop but retained possession of the service lane. The IO brought proceedings to enforce the covenant not to convert common parts to private use (implied into the DMC by s.34I of the Building Management Ordinance). The practical effect was that S would have to give up possession. The IO succeeded; S’s possessory title was subject to the implied covenant (section 41(3) of the Conveyancing and Property Ordinance and the general law on restrictive covenants as applied to possessory title in Re Nisbet and Potts’ Contract[1906] 1 Ch 386). The Limitation Ordinance did not apply since this was not an action to recover possession but an action to enforce the covenant. The Lands Tribunal’s jurisdiction to deal with matters of this nature was confirmed by the Court of Appeal.

Building Management Ordinance only vests a cause of action in the Incorporated Owners where it is one common to all owners

October 9, 2012

Incorporated owners can bring proceedings under section 16 of the Building Management Ordinance provided the cause of action relates to common parts and is one enjoyed by all owners (and not only some of them).

Incorporated Owners of One Beacon Hill v Match Power Investment Ltd ([2012] HKEC 1338, CA) concerned proceedings brought by incorporated owners against the developer of the building. The proceedings alleged that sub-standard materials had been used and poor workmanship allowed in the construction process. The developer, Match Power, sought to strike out the action on the basis that the incorporated owners had no locus standi. The relevant duty concerned the common parts but it was a contractual duty owed to only some of the original purchasers: different forms of sale contract were used at different stages of development and only some incorporated the relevant duty. Match Power argued that incorporated owners could only bring proceedings where the relevant duty was owed to all of the owners. They sought to strike out the proceedings.

The Court of Appeal held that the cause of action did not vest in the Incorporated Owners: section 16 of the Building Management Ordinance only made the Incorporated Owners the proper party where the cause of action was one that had accrued to all of the owners ([21]). Section 18(2)(g) is a management power that assumes that the cause of action has already vested in the Incorporated Owners. It is not an independent right to sue. Further, it only gives a power to bring proceedings in respect of matters in which all the owners have the same legal interest ([69]).

The Building Management Ordinance aims to facilitate management of multi-storey buildings owned by several people and to avoid multiplicity of suit. It is not permissible, however, to resort to a ‘purposive’ interpretation of section 16 that would do violence to the plain meaning of the text ([17] – [19]).  Further, there were several reasons why a distinction should be drawn between claims where all owners have the same legal interest and those where only some owners have the interest. If the Incorporated Owners could bring proceedings to enforce the rights of only some of the owners concerning common parts, the decision to enforce (or not) contractual rights owed to individuals would be under the control of the majority of the owners meeting ([30]). The costs and risks of litigation to enforce these rights owed only to some would become the common liability of all ([31]). In cases where the owners were the defendants, the contractual liability of some would become the shared liability of all ([32]).

‘Common parts’ where the DMC does not expressly identify them

September 6, 2012

Chung Yuen Mansion (IO) v Fully King Trading Ltd ([2012] HKEC 1228, LT) concerned the ownership of open areas to the side of the flat owned by the respondent. The incorporated owners sought a declaration that they were common parts. The DMC did not expressly identify the common parts and the Tribunal applied the definition in section 2 of the Building Management Ordinance (all areas other than those designated for exclusive use in an instrument registered at the Land Registry). The Tribunal reminded itself of the principles to emerge from the CFA decision in Jumbo King. It looked at the DMC and the first assignment. Only ‘floors’ were identified as being for exclusive use and open areas were not ([54] – [57]). So the open areas remained in common ownership ([59]). This conclusion was supported by the fact that the DMC made the repair and maintenance of external areas the responsibility of all of the owners while internal areas were the responsibility of individual owners ([60]). The DMC and first assignment were the crucial documents.

IO’s duty to repair

September 4, 2012

In 顏小明v 多福大厦業主立案法團 ([2012] HKEC 1202, LT) the applicant owned a flat in Tsim Sha Tsui. Water was leaking from the roof into the flat causing damage to it. This was due to a failure to keep the water tanks on the roof, the water proof roof membrane and the external walls in repair. This was the responsibility of the IO under section 18 of the Building Management Ordinance. This repairing obligation is one of proper management and requires the incorporated owners to do all that is reasonably required in the circumstances ([48]). In this case the incorporated owners had to take adequate steps to discover the cause of the water leakage and the steps needed to deal with it ([54]). Although they had taken some steps, they had not done enough to properly perform this duty ([55]). Although dealing with the problem involved some work that was the flat owner’s responsibility, there was no point in carrying this work out until the incorporated owners had dealt with the problems affecting the common parts. Nor did the appointment of a manager absolve the incorporated owners from their duties under section 18 of the Building Management Ordinance since the manager would be the agent of the incorporated owners. The incorporated owners were ordered to carry out the necessary repair works to the common parts and to pay damages to reflect the cost of repairing the flat and the loss of rental income.