Archive for the ‘building management’ Category

Developer retains exclusive right to use the external walls. Are they common parts?

November 14, 2019

Introduction

In Kong Wai Hsien v Tai Wai Glamour Garden (IO) ([2019] HKCA 1229) the Court of Appeal had to consider whether the external walls of a building were common parts even though the DMC reserved to the developer the exclusive right to use them.

Individual owners claimed that they were not liable to contribute to the cost (of over HK$5 million) of carrying out maintenance works on the external walls and other common parts.

The individual owners argued that these walls were not common parts since the DMC granted the developer exclusive rights over them.

Were the external walls ‘common parts’ in the sense that they were not part of the estate the exclusive use of which had been allocated to an owner? This was a question of contractual interpretation of the DMC.

Relevant DMC provisions

The DMC for the building allocated 20 shares to the common parts, expressly defined to include the external walls. The developer retained the ownership of these 20 shares and the associated rights over the common parts.

The rights given to the owner of the common parts by the DMC included the exclusive rights to use the external walls: (a) by placing pipes, wires, machinery etc on them; and (b) the exclusive right to use, or allow others to use, the external walls for advertising purposes,

The owners argued that the rights granted to the Developer over the external walls were so extensive that there was no use left for other owners.

The decision

The Court of Appeal decided that the walls were common parts despite the DMC’s grant of the exclusive right to make certain types of use of them.

All of the owners derived benefit from the external walls despite the rights granted to the Developer: ‘ the External Walls by providing the external framework to the Building also serve to hold and support the Building and prevent damage to its interior. All the co-owners or occupiers of the Building have the right to enjoy such use’ ([40] Au JA).

The Developer did not have exclusive right to use the external walls. They were common parts and all owners could be made to contribute to the maintenance costs through the management charge.

Michael Lower

 

Building management: Management fee for handling renovation works needs owners’ approval

September 9, 2016

In Flora Garden (IO) v Li Do Wai ([2016] HKEC 1830, LT) the owners’ meeting approved the carrying out of renovation and improvement works at the estate. The incorporated owners added a 10% fee on top of the cost of the works to cover consultancy, contract and administrative fees and other ancillary costs (‘ancillary costs’). The owners’ meeting had approved the cost of the works but not the ancillary costs. When the works were complete, each owner was asked to pay the due share of the cost of the works including the ancillary costs. Deputy Judge Kot held that the ancillary costs could not be charged to the owners. They had not been approved by the owners nor had this aspect of the works been put out to tender. The incorporated owners’ submission that owners had paid such costs before without express approval and that this practice provided the necessary authorisation failed ([33] – [36]).

The DMC authorised the owners’ corporation to levy a 5% surcharge on late payers as well as a collection charge of HK$150. A demand for these sums was made of the owners who had paid late. They argued that these sums were a penalty and so irrecoverable. This argument failed. It did not matter that the sums were not a genuine pre-estimate of loss. The surcharge clause protected a legitimate commercial purpose of the incorporated owners and was not extravagant or unconscionable in amount ([47] – [48]).

Michael Lower