By and large, we do
appreciate and recognize the efforts and reforms that have been made
and to be made by the authority in pursuing the perfection of the legal
framework for better management of building. Our opposition to some of
the proposed changes is indeed consistent to the master theme of the
Consultation Paper and the aspirations of the general public.
1. The Background From Our Perspective Of View.
1.1 The Untold Story
We admit that the background as narrated in the paper is absolutely
true but it is not the whole story. We all saw the outbreaking of
rampant collusive tendering or bid-rigging in recent years and the
helplessness of small owners when facing gigantic real estate
developers and their agent performing as DMC managers working in
collaboration with a number of "friendly" contractors. This in turn
gives rise to the populism and the pan-politicalization of the society.
As a matter of fact, now we are fighting on three battlefronts against,
namely the developer together with DMC manager, unethical contractor
and populist.
1.2 3 Battlefronts for Owners
1.2.1 Developer and DMC Manager
About a decade ago, small owners were mainly fighting against gigantic
developers who continued to grab the extended benefits from the
buildings they developed by running subsidiaries that catering
management services to property owners. They charge high manager
remuneration(MR), for instance, up to 15% of the total spending.
Moreover, on top of the MR, they were allowed to charge administration
fee at about 10% of the total amount of all maintenance and repairing
projects. In light of the unfair terms and conditions provided in the
DMC, small owners were nothing more than cash dispensers of DMC
managers. Then we witnessed the lowering of the requirements for the
deployment of DMC manager in the BMO and this reform have eased a lot
of pressure from small owners on the government. However, as some
developers hold a significant or even deterministic percentage of
ownership of the building, it is deemed to be impossible for the
majority of small owners to terminate the employment of DMC manager.
However, the proposed change in the Consultation Paper does not provide
any cure to the problem. It can be foreseen that more and more small
owners who suffered from the "exploitation" of the DMC manager will
thus turn to seek political means instead of legal support to fight for
their interest.
1.2.2 Contractors
To be fair, not all contractors are unethical and not all kinds of
competition are healthy and beneficial to owners. The services of
construction industries including building, amenities installation,
maintenance and repairing cannot be evaluated without expertise and
user experience for a significant long period of time. We understand
that collective pricing was once a common approach to prevent vicious
competition which resulted in the adverse phenomenon that the high
quality service providers were driven out from the market by the low
quality service providers. If the quality or standard of service cannot
be well defined and enforced, price competition will only end up with
tragedy. We still remember the lift casualties caused by under-quality
maintenance. On the other hand, bid-rigging definitely harms the
benefits of small owners as the user actually pay unjustified high
price for the services procured. The modern building amenities include
air-conditioning, fire equipments, water supply, drainage, electricity
supply, telecommunication network and gas supply(in Chinese
abbrievation , 風，火，水，電，煤), of which each is too complicated for a
layman to fully understand how it works, be maintained and repaired.
Sometimes we do not even have choices. Take lift and escalator as
examples, once a brandname product is chosen, it is almost a lifetime
engagement with the supplier. Without an efficient and secured market
supply of parts, few third party service providers can compete with the
manufacturer. Therefore, some unethical contractors take the advantages
of the ignorance or inability of the final users to raise up the
contract price and boost up the scale of project, sometimes alleged by
small owners that they set the bidding price collusively with the
management company. For people who know some more about construction
industries, bid-rigging is just one of the many ways to acquire
unjustified benefits. For instance, the cost of spalling repair varies
tremendously according to the extent of damages. If the management
company leaves the damages unattended for enough time, the cost may
multiply by many times. Even worse is that the damages to the structure
may never be recovered. The proposed amendment in the consultation
paper does not directly deal with the problem but tries to motivate
more owners to vote directly on choosing the service providers. We do
not understand the logic anyway.
1.2.3 Political Activists and their Populist Copycats
Since the conflicts as mentioned above remain unresolved, desperate
owners turn to political for assistance. We have no intention to negate
the function and achievement of political activists in fighting against
injustice. Nevertheless, in some of the cases, we witness the wisdom of
some old sayings like "
Squeaky wheel gets the oil" and "
Ignorant is fearless".
The freedom of speech endow us with the right to voice out our
grievances. However, whether an outspoken complaints is justified or
not is another issue. A complainant may be a whistle blower giving
alarming signal to us or a Squeaky wheel intending to get more oil than
it deserves. When our society keeps entertaining those noisy minority
while penalizing or ignoring those silent working gear, more copycats
will try to satisfy their personal desires by doing the same thing.
Here are some real life examples:
- An owner blamed the management company in the meeting for
charging "skyhigh" MR and the current MC members were vicious as they
allowed them to make such levy. In fact, the MR was about 3% of the
total expenditure while the study carried out in 2016 by a political
party show that the average MR was 5-7% on average. He was ignorant
about the MR, not to mention the "Guideline for DMC" published by the
Lands Department which permits a even higher rate of MR.
- An owner claimed that the minimum wage was not applicable to
clerical staff and got confirmation from the liaison officer of HAD.
Then her followers were cheered up and jointly demanded for cutting the
salary to a level less than the statutory amount. She misinterpreted
the words of government official and misled the owners with false
information.
- An owner said that the voting system and the relevant law behind
was unjust when his choice was voted down and said that head counting
was just. Obviously, he had never thought about the adverse effect of
head counting on ordinary owners when a car park owner who hold less
than 1 tenth of UDS could have the same right as an ordinary unit owner.
- In order to cut the spending, an owner as an MC member repeatedly
moved in every meeting for a resolution to stop the repair work of
external wall defect that caused waterseepage in the premises of
occupant, ignoring the explanation of estate manager and other MC
members. In fact, he violated the rules of order and his opinion was
dangerous in the light that the defect might cause public nuisance or
casualties subject to serious penalty.
It is beyond our imagination if a building or housing estate is managed
by laymen of theses kinds. However, the proposed amendments seems to
recognize those "squeaky wheels" who are more eager to join the meeting
in person and voice out their "outrageous" opinions.
2. Our Opinions on the Proposed Amendment
The Consultation Paper comprise of 9 parts of which part 1 through part
VI discuss the amendments to the ordinance per se by section. To make
it efficient, we only discuss those we do not accept
2.1 Amendment related to the Procurement and Large Scale Maintenance Project2.1.1 Our Opinion on the Proposed Amendment
It seems to us that the proposed amendments rely on more extensive
participation of owners especially those owners come in person to solve
the bid-rigging problem. We do not understand its logic. When all the
choices are bad choices, more attendants can do nothing with them. The
meeting is just a roll call for owners to give a ritual recognition to
something that they do not desire.
The owners situation becomes even worse if the project contain a repair
work to be completed before a deadline under a statutory order. Even a
majority of owners do not have the legitimate right to vote it down.
According to our practical experience, a lot of large-scale maintenance
project are "manipulated" by adding renovation items intended for
upgrading or beautifying the current facilities or decorations. When
separating those critical repairs like spalling repair for structure on
the must-do list from those optional items, most large scale
maintenance may be crossed out for their optional nature. Hence, we
should rely on reliable and experienced managers or MC members to
carefully identify and classify the maintenance and repairing items
according to their priorities. Any delay for those high priority work
such as spalling and waterseepage does not save money but end up with
losing more money. In dealing with professional work, to tell the
truth, there is no room for mass opinions. On the contrary, those
owners who are laymen will feel that they are forced by the proposed
amendment to give their endorsement to the large scale project of which
they have no sufficient knowledge to make a sensible choices.
Therefore, we do not admit that the proposed change in the quorum and
the percentage of personal owners is necessary and relevant.
2.1.2 Our Counter Proposal
Necessities must be separated from luxuries. We need a clearer
definition of critical maintenance and repair work. As a matter of
fact, all members of building management industry know very well what
kind of jobs should be put on the top priority list. Some managers mess
up the necessities with luxuries only because the administration fee
create a strong incentive for them to initialize a large -scale
project. We propose three amendments to the BMO
- In the light that many of the grievances targeting on bid-rigging
relate to DMC managers and their excessive power provided by DMC,
adding a Sunset Clause for the employment term of DMC manager which
automatically turns DMC manager into contract manager after some
conditions have been met will solve the problem of this kind.
- In all cases, all large scale maintenance and repair projects
must be itemized and classified into critical works which completion
are required by law or statutory order and optional items which may be
chosen according to the free will of the majority of owners in the
meeting.
- Moreover, a cooling-off period,
say 30 or 60 days, is required by BMO for the confirmation of the
elected optional project which means that a two round voting is
required.
2.2 Amendment to the Proxy Instruments
2.2.1 Lack of Operability and Logical Sense in Dealing with Bid-rigging
We believe that the proposed amendments to the proxy instrument is
intended for curbing the suspected false proxies alleged by those
owners who lose in the voting. Logically, in response to the
allegation, we should develop some kinds of validation method to ensure
that all proxies are true original documents as far as possible. Yet,
once again, we do not understand the logical relation between the
deterrence of false proxies and the new provisions including
- percentage limit of proxy holding for one representative,
- the failing of proxies in excess over the limit and
- the voting intention in the proxy.
If there is really bid-rigging activities by means of false proxies,
all these deterrent measures can be easily disarmed by employing
additional labours to hold all the necessary proxies in the meeting.
However, for those faithful owners, the new mechanism can do nothing
but add complexity and workload to the working staff. In the absence of
effective validation means, the proposed criminal charge of pretext in
BMO is just a hollow threat. It is also a redundant provision with
respect to the prevailing law.
Proxy is commonly used in commercial environment and its legitimacy is
widely recognized in various jurisdictions. It should be noted that
those people choosing to authorize representatives to act for
themselves must have their own reason. Failing the proxy in excess over
the limit is equivalent to the deprivation of their legitimate right to
vote without attending the meeting. It will give rise to numerous
disputes or lawsuits and is considered to be inconsistent with the
provision of other ordinances.
It should be noted that all voting systems are unable to please all
voters. Voting result must disappoint the losers by default. For some
people, it seems that they never understand or accept a voting system
under which they are the losers. The real problem to be dealt with is
the bid-rigging but not the disappointment of losers in the voting.
Once the problem is solved and all the owners are provided with good
choices, they will feel happier than facing a number of bad choices.
2.2.2 Our Opinions on the Use of Proxy Instruments
If validation of the proxy is considered to be critical, additional
marking like IO seal, serial number or third party certification should
be employed. With all these measures, the law enforcement department
will be easier and more confident in the determination of false proxy
and in turn forming an effective deterrence to the potential offender.
2.3 Criminal Sanctions
2.3.1 Our Opinions on the New Penalty Provisions
Except a small number of ill-minded persons, those who volunteer to
participate in the building management as MC members should have no
intention to commit criminal offence. Nevertheless, it is quite easy
for them to be alleged by owners who are harsh and mean when they
perform their duties. In statistics, 5% is almost the lowest end of
significance that is qualified to be taken into consideration. In the
worst case, a building may divided into 20 minus rivalry groups at
maximum based on this setting. Especially in some building or housing
estate where there are a large number of small owners, it is too easy
to motivate 5% of fanatic owners to act collectively against some
members of the current MC or the MC as a whole. Let alone effective and
efficient management, the stability of MC is undermined. The enthusiasm
if owners to take part in the building management will be overshadowed
by the threat of prosecution which can be triggered by the allegation
of 5% owners and the burden of proving innocence is put on the
prosecuted. The principle of the new provision indeed violates the
spirit of our legal system. It is too easy to be abused by ill-minded
people for achieving malicious purpose.
The proposal also reflects that the role of MC members as surveillance
body are confused with the paid services provider. The liability of
non-performance or the fault of estate managers and his staff is
shifted to their surveillant according to the new provision. We do not
understand its rationale.
2.3.2 Our Counter Proposal
In our opinions, in the practical environment, the non-performance of
MC pursuant to BMO such as S26(i) and S27(3) as stipulated in the
consultation paper is very often not the fault of MC member. Sometimes,
it is not even the fault of the manager and his staff but the
consequence of a lot of factors out of their control. Again, the
proposed provision equips the authority with a handy prosecution power
without the need for collecting sufficient evidence but put the burden
of proof to the prosecuted who are responsible for the surveillance
only. In other words, the defender must seek and present evidence to
prove his innocence in the court. However, the court is not the right
place to perform the investigation.
Frankly speaking, in many cases, the above mentioned problem is found
when there is a handover between management company or sessions of MC.
The current management company or the current MC does not commit any
mistake in reality. To be fair, the prosecution must be supported by
investigation to ensure that the ultimate offender is penalized.
2.4 Regulation of Managers and Contractors
We are disappointed by the consultation paper because it does not
mention any provision for the regulation of management company and
contractors. They are the core of the problem and also the key parties
of the solution to the problem. We do believe that those ethical
professionals working in these industries welcome the regulation so
that their competition will be more healthy. A comprehensive licensing
and ranking system are viable methods to regulate all these service
providers so that we do not have to pay too much effort in information
searching and validation.
3. Conclusion
We can be quite sure that majority view cannot replace professional
knowledge or guarantee righteous decision in handling problems
involving scientific knowledge like maintenance and repairing. When
there is conflict, both the community education and government
intervention are needed. A good legal framework must incorporated the
public view and professional knowledge in the provision and reconcile
their conflict in a just and tactful way so that it can work properly
in the practical environment. For layman of law like us, clarity,
simplicity and operability are the indispensable qualities of good law.
We hope that the amendments will equip us with a better BMO for the
management of building in the future.