LAI PING FAN v. THE INCORPORATED OWNERS OF WAI YIP BUILDING AT CHEUNG SHA WAN ROAD

[English Translation - 英譯本]

LDBM 337/2004

 IN THE LANDS TRIBUNAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

BUILDING MANAGEMENT Application No. 337 of 2004

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J U D G M E N T

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1.  The Deed of Mutual Covenant (DMC) in respect of Wai Yip Building, which was entered into on 30 September 1976 and registered under Memorial No. 1314707 at the Land Office, defines the rights and obligations of the owners and shops inter se.

2. Clause 4(f) of the DMC provides that the owners are to bear the management and repair charges of all the common areas and common facilities inside the building (including all the repairs, renovation and maintenance charges in respect of all the common areas and common facilities).  Under Clause 4(g) of the DMC, the aforesaid management and repair charges are to be apportioned in accordance with the Third Schedule to the DMC.

3. The Third Schedule to the DMC provides that different flats are to pay different amounts of management and repair charges, the basic unit of which is $15 per share.  According to the Schedule, some of the owners have to pay only one share of management charges whereas others have to pay two to four shares of such charges.  There are 99 shares of management charges in total.

4. It must be mentioned at this juncture that, although the management charges of the building are apportioned in accordance with the Third Schedule, the shares of the owners in the building are, under the First Schedule to the DMC, divided into 118 shares.  The manner of apportionment of the shares are, therefore, different from that of the management charges under the Third Schedule.

5. The Respondent was established pursuant to the Building Management Ordinance and is therefore also the manager within the meaning of the Ordinance.  Section 20 of the Ordinance requires the Respondent, being a corporation, to establish and maintain a general fund to defray the cost of the exercise of its powers and the performance of its duties under the DMC and the Ordinance; and to pay Government rent, premiums, taxes or other outgoings (including any outgoings in relation to any maintenance or repair work) which are payable in respect of the building as a whole.  Section 20 further allows a corporation to establish and maintain a contingency fund in order to provide for any expenditure of an unexpected or urgent nature and to meet any payments which the general fund is insufficient to meet.

6. Section 21 of the Ordinance provides that the Respondent’s management committee shall determine the amount to be contributed by the owners to the aforesaid funds within a specified period.  Schedule 5 to the Ordinance requires the management committee to determine the aforesaid amount on the basis of a budget prepared by the management committee for the specified period.

7. In other words, the committee must first prepare a budget for the annual management and repair expenses of the building in accordance with Schedule 5, and then determine, in accordance with Section 21, the total charges payable by all the owners per month (or for another specified period), and finally determine, in accordance with Section 22, the amount payable by each owner on the specified date of each month (or another specified date).  Section 22 provides that such amount shall be fixed by the management committee in accordance with the deed of mutual covenant (if any) and shall be payable at such times and in such manner as the committee may determine.

8. At present, the owner of each residential unit of this building has to pay management charges in the sum of $350 per month, and less than half of this amount is payable by each shop on the ground floor.  Such practice is not in accordance with the requirements under the Third Schedule to the DMC.  There appears to be a history behind this practice — in the past, when the management committee determined the amount of management charges payable by the owners, it did not refer to the DMC but merely acted on the views expressed by the majority at the owners’ meeting.   It is only that no owner has ever disputed this practice.  This fact may reflect on the reasonableness of the manner in which the matter is being dealt with.

9. However, the Building Authority has recently ordered the Respondent to repair the common areas of the building.  As there are altogether 83 flats in the building, the management committee proposed to the owners that the repair charges be divided into 83 shares with each flat to bear one share.  I am told that this proposal has been accepted by the vast majority of the owners.  However, having referred to the DMC, the Applicant in the present case takes issue with the Respondent on the proposed manner of apportionment.  He is therefore applying to this Tribunal for a declaration that the aforesaid repair charges are to be apportioned in accordance with the DMC.

10. In light of my aforesaid analysis of the DMC and the relevant provisions of the Building Management Ordinance, the charges for the management of Wai Yip House and for the repair of the common areas and common facilities of the building as required by the Building Authority, i.e. the management charges regularly paid by the owners and the repair charges on this occasion, should be apportioned in accordance with the Third Schedule to the DMC.

11. As this is the first time that the Respondent knows about the meaning and effect of the relevant clauses of the DMC and the relevant provisions of the Ordinance, I do not intend to make any order at this stage.  I am willing to remit this matter back to the management committee for further negotiations and to have it dealt with according to the law.  I therefore adjourn this case sine die with liberty to restore.  Costs are to be reserved.