Consumer Council’s Views on the Proposed Licensing Regime for Property Management Companies and Property Management Practitioners

18 February 2019
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  1. The Consumer Council (“the Council”) is pleased to submit its views in response to a consultation paper on the Proposed Licensing Regime for Property Management Companies (“PMCs”) and Property Management Practitioners (“PMPs”) for consideration of the Property Management Services Authority (“the Authority”).

 

  1. While appreciating that the PMCs and PMPs play a vital role in assisting property owners to manage their buildings, the Council considers the proposed mandatory licensing regime can signify a recognition of the professionalism of the property management services and increase consumers and public understanding in engaging qualified PMCs and PMPs.

 

  1. Concerning the proposals set out in the consultation paper, the Council has the following comments:

 

Exemptions of the licensing regime

 

  1. The Council notes the exceptions to prohibition of unlicensed activities under Section 7 of the Property Management Services Ordinance (“PMSO”) include the case of a PMC whose business does not involve the provision of property management services falling within more than one category or sub-category of services specified under Schedule 1 to the PMSO.  Moreover, Section 7 exemption of the PMSO applies to an owner organisation or owner(s) managing a property of less than 1,500 flats without engaging any PMC or PMP.  

 

  1. The Council understands that these exemptions are prescribed under the PMSO.  However, it would be of concern if the licensing requirements could be avoided through setting up separate subsidiaries or outsourcing to take up one category or sub-category of service each and thereby satisfy the exception conditions. 

 

  1. In addition, small-scale or single block residential properties containing less than 1,500 flats are numerous in Hong Kong.  For individual owner’s interest as well as promotion of the quality and standards of the property management industry as a whole, the Council therefore urges the Authority to seek alternative ways monitoring the quality standard of property management services and the capability in providing professional property management services of those exempted properties; advise ways of good property management for reference of these exempted properties to upkeep standard of the industry; and assess their capability of providing quality property management service to the market.  The Council also views that the public should be properly informed of whether their properties and the proportion of flats or units in Hong Kong are within or outside the current regulatory licensing regime scope.  

 

Prescription of property management services

 

  1. Apart from the daily services and routine liaison provided in relation to the management of a property, the Council is of the view that handling enquiries and complaints from residents are frequent tasks in property management and suggests the PMCs to have an effective resolution mechanism with conciliation services provided to address complaints from residents, so that disputes against PMCs and PMPs could be properly handled. 

 

  1. To increase transparency and improve quality of property management service, the Council also suggests that PMCs should be required to reveal the complaints received anonymously for information of the residents.  Besides, PMCs should report to the Authority about the nature of complaints, such as quality of property management, security and cleaning services, received in regular intervals and serious/crisis incidents, such as safety issues regarding fire prevention facilities and lift maintenance matters, happened within a reasonable timeframe such as 3 working days.  Likewise, the Authority should closely monitor, take measures and commend the concerned PMCs as appropriate in pursue of enhancing the professionalism of the property management service.

 

Licensing criteria for PMCs and PMPs

 

  1. Regarding the licensing criteria for PMCs, the Council is of concern that there was only limit on the number of the PMCs (not more than 6 PMCs) a director, partner or sole proprietor holding a PMP licence act in his/her capacity, without taking into consideration about the size or scale of the PMCs under the licence provision.  As the number of flats managed by a PMC increases, the responsibility and the job complexity of its director, partner or sole proprietor also increases.  The Council therefore suggests the Authority to strengthen its licensing criteria for PMCs concerning both the number and the size of the PMCs a director, partner or sole proprietor holding a PMP licence could act in his/her capacity, so as to properly reflect the breadth and depth of one’s responsibility.

 

  1. The current proposal suggests that there will be no requirement for the amount of minimum registered capital of PMCs.  The Council acknowledges the Authority’s consideration of not creating unnecessary barriers to the market, so as to avoid any shortage of supply of PMCs.  However, as financial circumstances are important to the sustainability of the PMCs in the provision and continuity of their services, the Council suggests an amount of minimum working capital of PMCs be set, such as at 10% of their total management fees received, to secure healthy operation of the PMCs, as well as to ensure smooth delivery of their services to consumers in any financial incident, be part of their licensing requirements.

 

  1. As for the licensing of PMPs, Hong Kong retains one of the top valuable property markets in the world and residents depend largely on the PMPs, who act on behalf of their interest, to maintain and manage the property on a day-to-day basis.  While the Council recognises the shortage of relevant expertise in the industry may increase pressure on associated management fees, it does not agree to compromise the requirement of the property management experience that is needed to provide high quality professional services across multi-disciplines for PMPs in managing or supervising the services.  The Council therefore considers the requirements of minimum cumulative local work experience in property management set for licensed PMP (Tier 1) and licensed PMP (Tier 2) are not adequate enough, and suggests that the licensed PMP (Tier 1) should possess at least 6 years related work experience, instead of the proposed 3 years, and with management experience in at least 2 large-scale residential properties; whereas the licensed PMP (Tier 2) should possess at least 3 years, instead of the proposed 1 year, related work experience.

 

  1. Moreover, in order to keep the requirements of the professional and academic qualifications up-to-date, the Council suggests that specified professional bodies and recognised professional bodies for awarding professional qualifications for PMPs should submit relevant information to the Authority for re-assessment in every 3 years instead of 5 years.

 

  1. In regard to the proposed licensing criteria for provisional PMP under the transitional arrangement, the Authority accepts applicants with at least 10 years of cumulative experience in assuming a managerial or supervisory role in local property management services without the necessary professional qualifications.  The Council is of concern that if the experience only covers managing property of a specific nature or condition, it would be difficult to determine one’s capability in managing other types of residential properties.  Therefore, the Council suggests the Authority to impose regulatory oversight and have further assessment on the experience portfolio of the provisional PMPs during the transition period.

 

Notification of change to the Authority

 

  1. It is stated in the consultation paper the matters requiring notification of change in writing to the Authority in specified forms with relevant supporting documents if applicable, within 31 days (assumed as calendar days).  The Council proposes that the notification period should be shortened to 7 working days (similar arrangement can be found in the Securities and Futures Commission’s notification requirements about cessation of business or acting as a licensed representative), as well as electronic channels be used, particularly in cases when there is cessation of the operation of a licensed PMC or termination of a licensed PMP’s engagement.  The Council further urges that there should be requirement for the PMC/PMP to promptly notify all concerned property owner organisations, owners and residents for necessary property management arrangements through notices and digital means.

 

Provision of information to clients/residents

 

  1. The common issues in the property management industry are lack of communication and transparency regarding financial information.  The Council therefore appreciates the proposed requirements set for the PMCs for ensuring their provision of information relating to conflict of interests and contracts, and financial information to clients and residents of properties.

 

  1. Similar to the financial information requirements in Schedule 7 to the Building Management Ordinance (BMO) which set out the information required and timing for provision of the information, the Council suggests that an appropriate timeframe period be set for provision of information relating to conflict of interests and contracts to avoid any unnecessary delay.

 

  1. As for financial information, the requirements on the contractual duties of a manager to undertake proper financial management are stipulated in Schedule 7 to the BMO.  It is also noted from the consultation paper that the current proposals for the regulation of the property management services industry aim to provide for the standards, including the financial duties, to be complied with by licensed PMCs.  As such, there will be requirements on the transparency of budget preparation, account keeping, and obligations of a licensed PMC after its appointment has ended, etc. to be stipulated in the codes of conduct or other guidelines. 

 

  1. The Council is aware of the Authority’s proposed requirement that balance sheets provided by licensed PMCs in respect of each property must include a detailed breakdown by each income and expenditure item, and must not only give a general figure.  To enhance information understanding by general clients or residents, the Council suggests the Authority to prescribe some standard forms with explanations and definitions to facilitate PMCs to fill in precise financial information and thereby to ensure the submission/reporting is accurate, complete, standardised and comparable across different service providers.  

 

  1. To increase information transparency, the Council suggests that the above information as well as those that are related to the licensing of PMCs and PMPs be made available in both hard and soft copies so as to keep residents well informed in a most convenient way.  The timeline to report should also be included in the codes or guidelines.

 

PMC Register

 

  1. In addition to the name and address of the PMC, the Council suggests that the names of the director, partner or sole proprietor of the PMC should be revealed in the PMC register, if that are not required under the current proposal. 

 

  1. The consultation paper proposes the ranges of the number of licensed PMPs (e.g. 11 to 50 PMPs), the number of household units (e.g. 1,001 to 10,000 units, 10,001 to 40,000 units) and the non-residential part for which property management services to be provided by the licensed PMC in the register.  While market information is not available for the Council to comment as to whether the proposed ranges would provide any meaningful reference to the public, the Council urges the Authority to review regularly the ranges with respect to market situations so as to enhance the effectiveness of the regulation.

 

  1. To further enhance information transparency and industry professionalism, the Council appreciates that the Authority would publish a list of the licensed PMPs (i.e. the PMP register) and their tier of licence on the Authority’s website for reference by the residents/consumers.

 

Conclusion                            

 

  1. Property management service fee represents a substantial and regular expenditure of a household, and consumers should be entitled to enjoy quality property management service as a result.  To promote the professionalism of property management service in information transparency and consumer protection, the Council will appreciate that, in formulation of the codes of conduct or other guidelines such as handling of complaints, the Authority will collect opinions and experiences of owner organisations and owners/residents on property management services and fees, and exchange views with the Council, for better understanding of the property management services from the users and consumer protection perspectives.