Incorporated Owners (“IO”) have duties and powers in relation to the removal of unauthorised building works (“UBW”) in buildings. In The Incorporated Owner of Beaulieu Peninsula v Perfect China International Limited LDBM 96 of 2011, the Lands Tribunal analysed the extent of the duties of the IO in enforcing the Deed of Mutual Covenants (“DMC”).

In this case, the Respondent who is the owner of House 31 of Beaulieu Peninsula (the “Estate”) counter-claimed against the IO for breach of its duties under the DMC in failing to take reasonable action to remove the UBW in his neighbour’s House 30. 

IO’s duty under the law
Under section 18(1)(c) of the Building Management Ordinance (“BMO”), the IO has a duty to do all things reasonably necessary to enforce the obligations contained in the DMC for the control, management and administration of the building. Under the DMC of the Estate, the IO has the powers and duties to do all necessary acts to ensure compliance with the Government Grant by the owners. The IO is empowered by the DMC to remove any UBW in the Estate and to take legal action to remove the UBW. On the other hand, the IO also owes a duty to take necessary steps to enforce the terms of the DMC. 

The UBW
The UBW erected at House 30 include additional structures on the Ground Floor in the garden area, an extension from the First Floor level, a high wall with burglar bars in the garden area between Houses 30 and 31, and concrete structures with retaining walls, platforms and staircases at the south westerly side of the garden that extend onto the slope down to the sea front.

The IO’s actions
The owner of House 31 had been complaining to the IO about the UBW since 2010 by way of telephone calls, meetings and solicitors’ letters to the IO. In response to the complaint by the owner of House 31, the IO took three main types of actions: (1) liaison work between the owners of Houses 30 and 31, (2) request made to the owner of House 30 for entering House 30 for inspection of the UBW and (3) follow up with the Buildings Department (“BD”). The IO decided to only write to the BD to alert it of the UBW instead of taking enforcement action on its own against House 30. The management committee of the IO resolved that the UBW at House 30 were to be followed up by the BD.

The BD’s action
The BD attempted to inspect House 30 but could not gain entry. Because of this, the BD could only issue a removal order against the observable UBW in the front of House 30 on 3 October 2011 (the “Removal Order”). The owner of House 30 appealed against the Removal Order. The Respondent argued that its complaint to the IO covers both the UBW in the front of and at the back of House 30. The Removal Order does not cover the UBW at the back of House 30. As such, the IO’s actions did not discharge the IO’s duty of proper management under the DMC. 

What is the extent of IO’s duty?
When the IO finds that there is a breach of covenant being perpetrated by one of the owners, it is not only their right but their duty to seek to enforce the DMC (The Incorporated Owners of Hoi Luen Industrial Centre & Anor v Ohashi Chemical Industries (Hong Kong) Ltd [1995] 2 HKC 11 at page 13). Such duty is clear and the IO cannot pass resolutions either at the owners’ meetings or the management committee’s meetings to override this duty (Sunbeam Investments Ltd v The Incorporated Owners of Villa Veneto LDBM 175/2009 at paragraph 16). The overall duty of the IO under the DMC is one of “proper” management which entails doing all that is reasonably required of a manager in the circumstances (Lo Yuk Chu v Hang Yick Properties Management Ltd [1996] 4 HKC 278). As long as the IO has acted reasonably in the circumstances to manage the Estate properly, the IO is not in breach of the DMC (李月明 v ç§€ä¼æ¥­æœ‰é™å…¬å¸ LDBM 452/2007 at paragraph 12). 

Has the IO acted reasonably?
The Tribunal readily came to the conclusion that the IO had not done what is reasonably necessary in the circumstances to discharge its duty under the DMC and BMO in relation to the UBW at House 30. The liaison work did not qualify as enforcement action and the requests to inspect House 30 are merely steps to ascertain the merits of the Respondent’s complaint before taking further action. Since the UBW were obvious, failure to gain entry to House 30 for inspection is no excuse to taking no action. 

It is also held to be unreasonable for the IO to leave the enforcement against the UBW to the BD without taking out legal action on its own to remove the UBW. The IO could not rely on the Removal Order and wait for the BD to take action against the UBW, as the scope of the Removal Order does not cover the UBW at the back of House 30. Further, the BD’s decision whether to take action cannot be a valid reason for the IO not to take its own action. The BD acts on different considerations from the IO. For example, the DMC is not something the BD will consider in its decision as to whether to take action. Accordingly, the IO was ordered by the Lands Tribunal to take immediate action (including legal action) against the owner of House 30 for removal of the UBW. 

Conclusion
Understandably, IO often have budget concerns about commencing legal proceedings on UBW in buildings, but the risks of breaching the IO’s duties in ensuring compliance of the terms of the DMC must nevertheless be appreciated. In particular, IO should not sit and wait for government departments to take actions, but must exercise its power under the DMC as necessitated by the circumstances.

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Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.