Strictly speaking: owners’ corporation must communicate with property managers

Johnnie Chan Chi-kau is president of the Hong Kong Institute of Housing (HKIH) and past president of the Hong Kong Association of Property Management Companies. He talks about the relationship between property managers and the owners’ corporation of a building.

What is the relationship between the property manager and the owners’ corporation?

It is a principal/agent contractual relationship between the property owners (principal) and property managers (agent). According to the Building Management Ordinance (BMO), the owners’ corporation may appoint a property management company to carry out the day-to-day management, control and administration of the common parts on behalf of owners. It takes a great deal of project management skills, professional knowledge and technical know-how to meet owners’, regulatory bodies’ and other compliance requirements. One of the key objectives of the Hong Kong Institute of Housing is to advance members’ professionalism through professional development in collaboration with tertiary institutions, such as the University of Hong Kong, City University and related government authorities. Last year, the Property Management Services Ordinance (PMSO) was enacted, setting out a licensing path for practitioners to achieve professional qualifications recognised by the government and professional bodies. To do that, the Property Management Services Authority was established to regulate the provision of property management services by licensing [real estate] management companies and practitioners, to promote integrity, competence and professionalism, and to maintain the status of the profession. Prior to that, registration of professional housing managers was on a voluntarily basis under the Hong Kong Institute of Housing Ordinance and the Housing Managers Registration Ordinance.

How does one ensure that property managers perform their duties properly? What makes a good property manager?

Professional housing managers are required to discharge their professional responsibilities in strict accordance with the Professional Code of Conduct as stipulated by the Housing Managers Registration Ordinance, the Hong Kong Institute of Housing Ordinance and the provisions of the related statutory requirements, such as the Building Management Ordinance. The BMO and the relevant Deed of Mutual Covenant set out the requirements imposed on property managers including financial arrangements, procurement of goods and services, resignation and termination of property managers, obligations after a manager’s appointment ends, and communication among owners. In case the performance of a property manager does not meet the deed requirements and the expectations of property owners, as long as not less than 50 per cent of shares held by owners in total agree to a resolution, the appointment of the manager can be terminated. Effective communication among stakeholders who represent the owners in looking after property management issues, is key to successful supervision of a property manager.

What are the procurement and tendering procedures? How can the property manager help reduce the risk of the bid being rigged?

Reputable property managers should have a pool of reliable contractors and suppliers, who have been screened for their past job references and experiences, requisite capability and resources to provide services or goods. A tendering exercise is required for the purchase of goods or services estimated to cost more than HK$200,000. When it comes to major repairs or improvements, the property manager usually appoints an independent consultant to co-ordinate such work. Tender of a value exceeding 20 per cent of the property’s annual budget has to be procured through open tendering and submitted to a general meeting of the Owners Corporation for resolution. An experienced manager shall do his best to ensure that the consultant engaged is credible, independent and competent to review t bids for the work required. For a high-value project, the management committee might wish to engage an additional independent consultant to audit the work of the primary consultant prior to awarding the contract. While the property manager can give advice on the tendering process and selection of vendors, the property owners are the ultimate decision makers.