Over half of Hong Kong’s population lives in private housing, many of which are multi-owned residential buildings. In general, all owners of these buildings share co-ownership of the common areas and facilities, thus are jointly responsible for the costs in managing and maintaining these common parts in the form of management fees.
Hong Kong’s property management fee market is marked by distinct characteristics, such as the requirement of collective action by owners to influence decisions, and a bargaining power asymmetry between owners and developers. In addition, owners have shown a general unwillingness to participate in building management matters, while the Council has also received property management complaints from time to time. In view of the above, the Council conducted a study titled “Transparency and Governance – Optimising Value of Property Management Fee in Hong Kong” (the Study) to better understand, identify and assess the effectiveness of the existing system of private residential property management fees in Hong Kong, and issues giving rise to consumer concern.
Consolidating the findings from all surveys, analyses and stakeholder consultations, the Council identified the following prevailing issues:
1. Lack of transparency in the basis of allocation of shares;
2. Difficulty in obtaining unanimous owners’ consent to amend unfair terms in DMCs;
3. Potential influence of the developer or major owner or management committee members on property management matters;
4. Service quality issues of PMCs including financial risks and dissatisfaction over performance;
5. Passive owners’ participation in property management matters and insufficient communication between OOs/ owners’ corporations (OCs), PMCs and owners; and
6. Owners lack knowledge and information on property management, as well as planning for property’s maintenance needs, resulting in substantial rises in management fees.
With an overarching objective to promote a healthy, competitive and sustainable marketplace in property management for the benefit of consumers in Hong Kong, the Council puts forward 8 recommendations to achieve the following objectives:
Enhancing Market Transparency, Fairness and Efficiency
1. To boost transparency on the basis upon which property management fees are shared between owners;
2. To make available updated property management information to promote the general public’s understanding and knowledge of the industry;
3. To promote fairness through allowing amendment of the terms of DMC (other than those on undivided shares) with majority consent;
4. To avoid conflict of interest from over-engagement in property management decisions;
5. To improve performance efficiency of property management services with new technologies and intelligent solutions;
Encouraging Participation of Owners
6. To promote active participation of owners with more effective communication in property management activities;
7. To facilitate the early set-up of OCs or join forces of owners to address property management issues; and
Enabling Safe and Sustainable Buildings
8. To maintain building sustainability for expected repair and maintenance expenditures with reasonably sufficient reserve in the special fund.
The Way Forward
The Council carried out in-depth and constructive discussion with various stakeholders, and put forward the aforesaid recommendations. It is hoped that a fair marketplace with strengthened consumer protection could be achieved and that the value of the owners’ contributions to the management of their property could be truly optimised.