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Following is the speech by the Secretary for Home Affairs, Mr David Lan, in moving the second reading of the Building Management (Amendment) Bill 2000 in the Legislative Council today (Wednesday):

Madam President,

I move that the Building Management (Amendment) Bill 2000 be read a second time.

The Bill seeks to implement suggestions made in the Consultation Paper on "Proposals to improve fire safety in private buildings" and to remove the deficiencies in the Building Management Ordinance.

The Consultation Paper on "Proposals to improve fire safety in private buildings" was published in mid-1998 for public consultation. The outcome of the consultation shows that the public generally accepted the various proposals for improving building management and fire safety and recognized that proper building management and fire safety went hand in hand. We therefore propose to amend the Building Management Ordinance to implement measures to improve building management put forward in the consultation paper.

The Bill contains three major proposals -

(1) Specification of building management and maintenance standards

At present, section 18(1) of the Building Management Ordinance stipulates that an owners' corporation ("corporation") shall be responsible for the management and maintenance of the common parts of a building but it does not provide for specific standards of management and maintenance.

We propose to amend the Ordinance to empower the Secretary for Home Affairs to publish in the Gazette a Code of Practice on Building Management and Maintenance for corporations to comply with. The Code will be drafted in layman terms to make it easy for the public to understand. It will refer to existing legislation related to the common parts of a building including building safety, fire safety, gas installation, lift and electrical installation and slope safety etc. but will not replace them. The respective Ordinances will continue to be enforced by the Departments concerned (e.g. the Buildings Ordinance by the Buildings Department and the Fire Services Ordinance by the Fire Services Department). Since enforcement should not be duplicated, we do not propose to impose additional penalties on corporations for non-compliance with the Code.

(2) Mandatory management

Whether a building has building management organizations (e.g. owners' corporations or property management companies) has much to do with the fire and building safety of a building.

For buildings without a manager but having serious management and maintenance problems, our proposed amendment will empower the Authority to order the corporation of such a building to appoint a management agent from a list of building management agents to be gazetted for the purposes of managing that building. The Authority will consider whether to make such an order in the light of the objective criteria set out in the Code of Practice that I have mentioned just now. As far as actual operation is concerned, the inter-departmental District Building Management Coordination Committees chaired by the respective District Officers will identify problematic buildings and advise the Authority on whether an order should be made. Corporations that fail, without reasonable excuse, to comply with the order within the specified time limit shall be guilty of an offence and shall be liable on conviction to a maximum fine of $50,000 and to a further daily fine of $1,000. I would like to emphasize that it is not the Government's intention to penalize the owners concerned, instead our aim is to require, through penalties that have a deterrent effect, owners to appoint an effective building management agent to manage their property properly.

In dealing with problematic buildings that have not set up their own corporations, we shall take administrative measures to encourage and assist owners to form such corporations. In case the owners fail to do so, the Authority may apply to the Lands Tribunal for an order under which one of the owners shall convene a meeting of owners, to form a corporation and to appoint a building management agent to manage that building.

After consultation with the relevant Departments and professional bodies, we will draw up a list of building management agents. The list will be published in the Gazette subject to enactment of the Bill. The proposed criteria for inclusion in the list of building management agents are similar to those for the Approved List of Property Management Agents for public housing estates currently kept by the Housing Department. The Authority will review the list from time to time and has the right to revise it.

(3) To facilitate the formation of corporations in new buildings

Under the existing Ordinance, the formation of a corporation of any building requires the owners to, first of all, convene a meeting of owners in the manner provided under section 3, 3A or 4 (by owners holding not less than 50% of the shares; or by an application to me for an order in case of owners holding not less than 30% of the shares; or by an application to the Lands Tribunal in case of owners holding not less than 20% of the shares) for the appointment of a management committee. It may then proceed to register the corporation in the Land Registry. The term of office of management committee members is two years, renewable through the resolution of the annual general meeting of owners which requires a quorum of not less than 10% of the owners.

We shall continue to encourage owners of existing buildings to form corporations in accordance with the above provisions. We have considered a provision for compulsory formation of owners' corporations. However, if no owner is willing to participate in the work of the management committee of a corporation, the corporation could not function. Except for a building with serious management and maintenance problems whereby the Lands Tribunal may order the owners to convene a meeting and appoint a building management agent that I have just mentioned, we consider that owners should decide on whether or not to form corporations. Owners may also form owners' committees under the deed of mutual covenant or other forms of owners' organizations. Therefore, we propose to amend the Ordinance to streamline procedures for owners of new buildings to convene a meeting for the appointment of a management committee. We propose that the quorum of the meeting shall be not less than 10% of the owners in the light of the quorum now required (10% of the owners) for a management committee to be re-appointed by a corporation. A management committee may be appointed by a resolution passed by a majority vote of the owners and upon appointment, it shall register the corporation in the Land Registry.

Apart from adopting the three measures put forward in the consultation paper, we would like to take the opportunity to make improvements to the Ordinance.

Quite a number of corporations have not taken out insurance in respect of third party liabilities for the common parts of their buildings. In the case of Sun Hing Building, the court ordered the corporation to pay about $20 million to compensate a worker for injuries suffered when carrying out maintenance works for the building. There was widespread public concern about this case. We propose to amend the Ordinance to require corporations to take out third party insurance in respect of the common parts of their buildings on a mandatory basis. Requirements of the insurance (e.g. scope of coverage, minimum indemnity and qualifications of insurers) will be stipulated in subsidiary legislation to be enacted separately under the Ordinance. Corporations that fail, without reasonable excuse, to take out insurance as prescribed in the legislation shall be guilty of an offence and shall be liable on conviction to a maximum fine of $50,000. The commencement date of the above requirements will be published in the Gazette in due course (upon enactment of the subsidiary legislation).

At present, section 27(1A) of the Ordinance provides that accounts of a corporation may be audited by a professional accountant or such other person as may be approved by the corporation by a resolution passed at a general meeting. Since the accounts of corporations of multi-storey buildings can be quite complicated and persons other than professional accountants may not have the necessary experience and expertise to audit the accounts properly, we propose to amend section 27(1A) to delete the provision relating to the appointment of non-professional accountants to audit the accounts of a corporation. However, corporations of buildings of 50 flats or less shall be exempted from this requirement. Corporations that fail, without reasonable excuse, to comply with the mandatory requirements in respect of audit of accounts shall be guilty of an offence and shall be liable on conviction to a maximum fine of $50,000.

Our proposed Bill also contains a number of minor and technical amendments that seek to facilitate the formation and operation of a corporation. As these amendments have been set out in detail in the Bill, I do not intend to elaborate on them.

Apart from introducing the above proposed amendments, the Home Affairs Bureau and the Home Affairs Department have in recent years vigorously implemented related administrative measures to assist private building owners in performing their duties to manage their own properties. Here I would like to briefly mention the administrative measures we have taken.

In early 1998, an inter-departmental Central Steering Committee on Fire Safety was established under my chairmanship to formulate strategies on fire safety and building management. It comprises the heads of the relevant policy Bureaux and Departments and seven unofficial members. At district level, District Fire Safety Committees (DFSCs) have been established in all 18 districts in Hong Kong. Each DFSC, chaired by the District Officer, comprises community leaders and professionals. Its role is to help promote fire safety. The major achievements of the Central Steering Committee on Fire Safety include the public consultation on "Proposals to improve fire safety in private buildings" and recommendations on the details of the legislative amendments. The Committee also conducted several high profile inter-departmental joint inspections of building fire safety, and co-ordinate and organize publicity and educational activities to promote public awareness of fire safety and building management with a view to fostering a building management and fire safety culture in Hong Kong.

Located in Yaumati, Kowloon, the first Building Management Resource Centre of the Home Affairs Department came into operation in mid-1998. Seven professional bodies have assisted by making their members available in the Centre to provide preliminary professional advice free of charge to the public. The service is well received by the public and the second Centre will be open day after tomorrow in Central, Hong Kong Island. To further extend our scope of service, we are actively planning for the establishment of a third Centre in the New Territories this year. The aim of the above-mentioned administrative and legislative measures is to promote a building management culture in the community in order to improve our living environment and quality of life so that members of the public can have a better place to live in.

Madam President, with these remarks, I commend the Bill to this Council.

End/Wednesday, January 26, 2000

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