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Caveat Emptor (II)

The hilly geography of Hong Kong has provided many buildings with fantastic views, unlike many other cities, which are built on plains. But the flipside is a hillside slope can be dangerous if not properly fortified and maintained.

On Hong Kong Island, upscale residential neighbourhoods, as well as gated communities in the New Territories, are invariably located along slopes. The slopes can be hazardous when not regularly checked or maintained. Hong Kong’s Buildings Department routinely inspects all natural and man-made slopes in developed areas, and issues orders for reinforcement, repairs or retaining works.

If the slope is within the site boundary of a privately owned building, orders by the Buildings Department will be sent to all the owners of the building with a specific scope of work to be carried out at the owners’ expense. The orders will be registered against the property listed under the Land Registry and are public information. Slope works is a huge cost and usually overwhelms the sinking fund of a building’s management fees. Therefore, the expense calls for extra capital from the owners of the building. The amount involved for each unit of the building can be from tens to hundreds of thousands of dollars. This could be a headache for some cash strapped owners.

All owners have legal responsibilities towards complying with the order and they are expected to convene and resolve, with the help of the building manager and relevant experts, on the cost to be shared by each unit. The result will be recorded in the owners’ meetings. Buyers should therefore make full enquiries in this respect and ask the owner or property agent to provide them with the latest record of Land Registry and resolutions passed at the owners’ meetings.

In a sale and purchase transaction, there is no hard and fast rule as to who should bear this cost. It’s a matter of negotiation between the buyer and the seller. In practice, most sellers will shoulder the responsibility if the relevant order already exists at the time of negotiation. But care should be taken that some ancillary works may follow after the first work. The parties involved are advised to cover this in their negotiation.

Apart from slope orders, older buildings may need renovation due to disrepair or obsolescence. While minor works can usually be covered by the management’s sinking fund, major renovations such as an external wall facelift and common area upgrades can be costly. An enquiry with the building manager or an inspection of owners’ meeting records can reveal the true picture. In general, the owner is responsible for what has already been decided at the owners’ meetings. Then again, this is an area of negotiation between both parties. Occasionally the owner has already partially contributed to the cost; the parties should then make it clear who will be responsible for the remainder.

By K.S. Koh