Consumer Council Advocates 4 Recommendations to Strengthen Governance of the Home Renovation Industry Helping Consumers to Create Comfortable Homes

Having a comfortable and well-decorated home is the lifelong dream of many people. Characterised by a diverse range of residential properties in the market, Hong Kong has a constant and huge consumer demand for customised home renovation services, be it luxurious houses, public housing or nano flats. This is further spurred by the increasing number of domestic households, with figures from the Census and Statistics Department indicating an increase from 2.3 million domestic households in 2010 to 2.7 million in 2023.

Yet home renovation can be a stressful process owing to its often complex and intricate procedures which inevitably require some level of industry knowledge. According to the Consumer Council’s statistics from 2017 to 2023, a total of 1,205 complaint cases relating to home renovation services were recorded, with the majority pertaining to quality of services, followed by late/non-delivery and price disputes. The total amount involved exceeded a staggering HK$270 million, with the average amount involved per complaint case pushing HK$230,000. Litigation searches on actions commenced in the High Court and District Court revealed a similar pattern in terms of the dispute nature, with the majority of the claims related to contract (58%), followed by debts (24%) and service charges/work done (13%).

Adding to consumer woes are the drastically disparate service quality among traders due to the low entry barriers in the industry and the vast variety of market players with varying levels of quality. Besides, the industry has long been fragmented, without representative industry associations to unite and mobilise the whole industry. As a result, despite different efforts made by industry stakeholders and market players in recent years aiming to elevate the industry standards and intensify consumer education, the impact is limited or yet to be observed. Considering that Hong Kong is yet to have a specific regulatory regime governing the operations of home renovation companies and services, in the event of disputes, consumers have to rely on general consumer protection laws and the common law, which do not offer specific protection against specific pain points faced by consumers.

Recognising the unique characteristics of the home renovation industry in Hong Kong, the Council conducted a comprehensive study titled “Home Renovation Industry — Better Governance for Creating Comfortable Homes” (“the Study”) to systematically understand consumer perception of the home renovation industry, identify problematic trade practices, and with reference to laws, regulations and consumer protection measures in other markets, propose recommendations that fit the context of Hong Kong. The Study examined prevailing issues across the 4 common stages in a typical consumer’s home renovation journey, and puts forward 4 recommendations, namely establishing a standard form quotation, a Government-endorsed accreditation scheme, a cost-effective and efficient alternative dispute resolution (“ADR”) mechanism, as well as intensifying consumer education, for enhancing consumer protection and awareness in home renovation and improving the quality of the entire industry.

Redress Only Under General Laws in Case of Home Renovation Disputes

Many consumers spend a sizeable sum of money and effort in home renovation for decorating a “dream home”, yet there is often no assurance of the quality of services provided by home renovation companies, not to mention the possible consequence that may arise due to non-compliant works.

Hong Kong currently does not have specific laws and regulations to govern the operations of home renovation companies and their services, thus risking a higher possibility of occurrence of unscrupulous trade practices. Indeed, the Study uncovered a variety of issues in the industry faced by consumers when engaging with traders, such as varying quality of traders, with some even suggesting or endorsing non-compliant home renovation works and low information transparency. 

While certain works are required to be approved by the Buildings Department (“BD”) and/or to be carried out by registered minor works contractors, the contractual relationship between consumers and home renovation companies is subject to general consumer laws and the common law. For instance, the Trade Descriptions Ordinance (Cap. 362) (“TDO”) and Unconscionable Contracts Ordinance (Cap. 458) prohibit home renovation companies from engaging in unfair or unconscionable practices, while legal remedies are also available to consumers arising from companies’ misrepresentations.

However, given the average consumer’s inexperience or lack of related knowledge, matters such as misrepresentation or unfair practices of traders could only be discovered in the course of the home renovation work, by which point the consumers may be left with no practical option but to find ways of damage control and to claim damages. Any legal action to recover damage is protracted, expensive and subject to uncertainty of outcome. There is also no certainty that the trader will financially be able to pay any damages awarded.

On the other hand, property owners have legal responsibilities to ensure compliance with safety legislation (such as in relation to fire safety), occupier liability obligations and restrictions in the Deed of Mutual Covenant. Yet, they are generally reliant on the home renovation company’s knowledge and expertise in giving proper advice and taking the necessary steps to ensure their work is legally compliant.  The consequences and penalties arising from the company’s failure to do so may be visited upon the consumer.  

Issues Identified Through the 4 Stages of the Consumer Journey

The Study adopted a mixed-method approach^[1] and covered home renovation projects of various nature, size and value, while excluding services in the nature of piecemeal repair or maintenance of specific fixtures and fittings within the residential property. Upon examining the findings, the Council has identified various issues faced by consumers as well as the industry’s potentially unscrupulous trade practices, presented in the 4 stages of a consumer’s home renovation journey:

Stage 1: Awareness and Information Search

The Council’s consumer perception survey revealed family, relatives and friends (93%) as respondents’ main sources of information, followed by online channels (50%), yet the latter’s result by age of respondents reflected a digital divide, with over 80% of them aged 39 or below. At the same time, more than two-thirds of the respondents had never heard of online matching platforms for home renovation services despite their emergence in recent years, while among those who had, less than 10% indicated a high level of trust in them. In terms of main considerations when choosing a home renovation company, price and discount (79%) and company reputation (73%) were the top 2 factors, while key stumbling blocks included difficulty in making comparisons due to different quotation formats (58%) and too many home renovation companies with varying levels of quality to choose from (55%). Certain trade practices proved to be major consumer concerns, including exaggerated promotions (58%), high-pressure sales tactics (52%) and rough quotations (49%).

In light of the aforementioned consumer concerns, the Study reviewed 225 advertising samples for a deeper look at traders’ advertising tactics. Some advertisements were found to contain superlative and unverifiable claims and promises, such as “No. 1” (第一) and “risk-free” (零中伏), while some put forth ambiguous or untrue promotional offers, which may easily lure consumers but cannot be realised in the end. Further in-depth interviews with home renovation companies and online matching platforms suggested low information transparency in the industry as another issue, as interviewed traders pointed out that it was hard for consumers to know the price range for various kinds of works, and that traders seldom provided a comprehensive work schedule nor proactively informed consumers about legal and regulatory requirements. This may lead to disputes between consumers and traders at subsequent stages.

Stage 2: Pre-commencement

According to the Council’s mystery visits with 59 home renovation companies and 14 online matching platforms for quotations for pre-defined home renovation projects, potentially unscrupulous sales tactics were uncovered, some of which might have constituted unfair trade practices under the TDO, such as bait advertising or bait-and-switch.

Some home renovation companies displayed a lax attitude towards compliance with laws and regulations. Despite wide media coverage of the alteration of an alleged structural wall of a flat in a private residential development in Tseung Kwan O in May 2023, three quarters of the home renovation companies advised mystery shoppers that wall removal could be carried out simply by looking at the floor plan and without making further inquiries into the nature of the wall, while a same ratio replied that the kitchen door could be replaced by a sliding door, which in fact could violate the fire safety requirements under the Buildings Ordinance (Cap. 123). While most interior home renovation works such as internal plastering and painting do not require approval and consent from the BD, other works such as layout alterations, window replacement and external wall improvements may affect the structural, environmental or fire safety of the property and require such approval. 

Furthermore, the Council’s evaluation of 40 draft quotations, with professional support from the Hong Kong Institute of Surveyors, resulted in a rather mediocre average score of 58 out of 100, with only 8% scoring higher than 80, reflecting that the majority of quotations were not comprehensive or detailed enough for proper comparison by consumers. An inconsistency in the items included in the different draft quotations was observed. For example, while payment-related information such as “lump sum of payment” (100%) and “payment terms” (93%) were common, items such as “declaration of compliance with statutory regulations” (20%) and “declaration of compliance with the fitting out requirements of the property management office” (8%) were rarely mentioned. Only 38% of the quotations provided a detailed breakdown for all the works, only 28% specified the quantity and 20% provided the unit price for each work item.

Stage 3: Commencement

As reflected in the consumer perception survey, even when a home renovation company has been chosen, respondents had different worries, topping the list were unfinished work (73%), defective work (61%), and abscondence of home renovation company after payment (59%). 

Stage 4: Completion and Follow-up

A fifth (19%) of the respondents with real-life experience in home renovation had had disputes with the companies they appointed. The top 3 disputes were delay in work completion (61%), defective work (39%), and failure to rectify defects (30%). According to the Council’s subsequent in-depth interviews with traders, the lack of monitoring authorities and guidelines for the industry and the divergence in views between consumers and traders as to the standards of workmanship were the key underlying reasons for such disputes.

In the consumer perception survey, the respondents were asked whether they would arrange third-party inspection upon completion to assess the quality of the home renovation works. The majority (80%) responded that they did not intend to do so, mainly because of the high cost anticipated. In fact, respondents desired other measures and initiatives more to better safeguard their rights and interests along their home renovation journey.

With an overarching objective to alleviate challenges and issues in the current home renovation industry, and thus pave way for better consumer safeguards along consumers’ home renovation journey, the Council puts forward 4 major recommendations with reference to practices in 6 other markets for the consideration of the Government, relevant statutory bodies, professional associations, traders, and consumers to adopt in an incremental approach:

Recommendation 1: Establish a Standard Form Quotation

According to the findings from the consumer perception survey, respondents expressed near-unanimous consensus (99%) that contracts are necessary for home renovation projects. The availability of a standard form quotation ranked second (40%) on the consumers’ “wish list”, while some interviewed traders also concurred with consumers’ views that such standardisation could provide better consumer protection. Indeed, in most of the markets reviewed by the Council, mandatory written terms are statutorily required for various types of consumer contracts on material aspects such as price, scope of work, project period and payment schedule.

The Council recommends relevant Government departments or industry organisations to provide a standard form quotation which contains standard terms and suggests ways to present the breakdown of works, which would serve as a “safety net” to provide basic consumer protection. The template should be developed with an extensive consultation process, to ensure the prevailing industry best practices could be aligned and facilitate consumers in making comparisons between quotations, and to ensure the sufficiency and appropriateness of the terms and conditions.

Under a standard form quotation, the Council suggests a framework covering 20 key aspects under 3 major categories:

1. Work and price, including company information, price, scope of work and specification of work items and materials, standards of workmanship, project period (including start/completion dates and extensions), periodic payment schedule/payment terms, and deposits;
2. Operational aspects, including sufficient working areas, work variations, subcontracting, health and safety precautions, protection of finished works, compliance with laws, completion standards, and cleaning upon completion; and
3. Warranties, rights and remedies, including liquidated damages for delay/other remedies, warranty and guarantees, termination, remedies upon termination and insurance.

On top of the above elements, the Council recommends other provisions could be added in the standard form quotation, including the following:

1. Cooling-off period: Include clauses of cooling-off period of no less than 7 days for home renovation projects, enabling the consumer to cancel the purchase and obtain refund without the need to raise or litigate a dispute;
2. ADR mechanism: Incorporate a cost-effective and speedy ADR mechanism, as the possibility of disputes is not completely obviated despite the adoption of standard form quotation;
3. Payment protection: The Council considers that in the long run, wider promotion of escrow or trust arrangements ought to be studied for more comprehensive consumer protection, ensuring that funds paid by a consumer are properly utilised for their home renovation project, and mitigating against the risk of misappropriation of such funds.

Recommendation 2: Establish a Government-endorsed Accreditation Scheme

While registration or certification schemes of construction contractors currently exist in the public sector in Hong Kong, they do not primarily cater for home renovation projects. On the other hand, such schemes in the private sector do target the wider consumer market, yet the application cost may be prohibitive for some companies, in particular those operating in the mid-range and lower-end markets. Furthermore, some companies and consumers hold reservation about the reliability or credibility of such platforms and their services.

With this in mind, the Council recommends establishing a Government-endorsed accreditation scheme for home renovation companies, adequately covering different industry segments and various aspects of a home renovation project to enable consumers to make well-informed choices. This idea was welcomed by some traders, who opined that such a scheme could prevent unscrupulous traders from absconding.

The review on all other markets revealed that they have mandatory licensing requirements or voluntary accreditation schemes (or both) in place. For instance, in Mainland China and the United States (New York), home renovation companies are required to be licensed or registered upon demonstration of good financial and/or professional standing. In Singapore, the Consumers Association of Singapore (CASE) offers an accreditation scheme for home renovation companies with proven financial and track record. In the UK, a raft of voluntary accreditation schemes are available from the public and private sectors, with the government-endorsed TrustMark scheme sublicensing various certification and trade bodies as scheme operators which in turn are responsible for ensuring that their member companies operate according to the TrustMark scheme standards and requirements.

With reference to the current schemes available in Hong Kong and other markets, the Council recommends (i) that the accreditation criteria should cover both objective and subjective core competencies (objective criteria may include safety, financial health, management and manpower commitment, track record and dispute resolution processes while subjective criteria may include customer satisfaction, business procedures and practices, and ethics and integrity management); (ii) a tiered accreditation with different accreditation requirements for home renovation companies of different size and scale, thus allowing companies operating in different market segments an opportunity to become accredited; and (iii) that drawing reference from the UK’s TrustMark scheme, instead of directly accrediting home renovation companies, the scheme could seek to approve trade or professional associations and other bodies as accreditation bodies which, in turn, shall be responsible for ensuring compliance with the scheme requirements by their accredited member companies.

Recommendation 3: Adopt a Cost-effective and Efficient Alternative Dispute Resolution (“ADR”) Mechanism

Notwithstanding the adoption of recommendations 1 and 2, disputes may still arise due to reasons such as delay in completion or substandard workmanship, and where such disputes cannot be amicably resolved, court litigation may not be in the best interests of the consumer in view of its cost and the dragged-out process involved; not to mention that the trader might be financially incapable of satisfying a judgment obtained against it.

The Council considers ADR to be a more viable, time and cost-efficient alternative to court proceedings. In most of the markets reviewed, certain ADR services are offered free of charge to consumers to resolve home renovation disputes, such as in Mainland China, the people’s courts are encouraged to invite parties to attend mediation before filing a case, which has led to launching of the online People’s Court Mediation Platform and various mediation commissions set up by trade associations to offer mediation services in the home renovation sector.

Existing ADR services marketed for home renovation disputes in Hong Kong include mediation^[2], arbitration^[3] and expert determination^[4]. The Council supports “Mediation First”, which is interests-based rather than focusing only on the parties’ legal rights and has been promoted by the Judiciary since as early as 2009, citing benefits of reduction in stress, saving of time and costs and achievement of a satisfactory solution, and thus would better meet consumers’ interest which lies in completing the renovation as early as possible. Stakeholders engaged in the Study were also generally supportive of the use of mediation to resolve home renovation disputes. If the mediation is unsuccessful, arbitration or expert determination could take place to resolve the disputes.   

To enhance recognition, fairness and long-term viability, ADR mechanisms would need to be underpinned by suitably qualified and experienced professionals serving on panels of mediators, arbitrators and experts, and procedures that appropriately balance between fine considerations of time, cost, procedural fairness and robustness. The Council suggests that all these matters should be reviewed and refined as part of the establishment of standard form quotation and accreditation scheme, in close collaboration with stakeholders. 

Recommendation 4: Intensify Consumer Education

Given that most consumers only need to conduct home renovation projects for limited times in their life, lacking industry-specific knowledge to handle home renovation projects has always been a pain point among consumers. Besides, the Council recognises the need to address certain consumers’ laxity towards the formality of contracts and critical items in the home renovation journey, as revealed in the Study. For instance, nearly 30% of the consumer perception survey’s respondents considered a revised quotation unnecessary in the event of variation in work orders, a mindset that should be discouraged.

In most reviewed markets, the government and government-established bodies provide consumer education and tips on home renovations. Remodelling their educational directions, the Council, aside from putting forward a series of useful tips in the Study (see p.129 of the report) to help consumers prepare for their home renovation works, recommends relevant Government departments or organisations to intensify consumer education by sharing basic home renovation information for better consumer safeguards. Campaigns such as online “info-kits”, seminars, and information booths around different residential estates are worth considering, which would enable consumers to learn about the topics and thus empower themselves. Suggested topics to be covered include common home renovation workflow, critical items in quotations/contracts, lists of registered contractors under different official schemes, property owners’ legal liabilities, and ways to prevent and resolve disputes, etc.

Collective Efforts to Enhance Governance for Realising Dream Homes for Consumers

Through the release of the Study, the Council hopes to raise public awareness of problems pertaining to the home renovation industry and calls for collaborative efforts of the Government, relevant statutory bodies, professional associations, traders and consumers for the execution of the recommendations suggested above in a progressive manner, with a view to assuring consumers of a smooth and well-protected home renovation journey. In the meantime, the Council would continue its public education and industry monitoring work to assist consumers in realising their dream of having a comfortable home.