URA Submits Joint Property Management Trial Report to Government: Recommendations to Address Implementation Challenges
The Urban Renewal Authority (URA) and the Hong Kong Institute of Housing (HKIH) jointly trialed the "Joint Property Management" (JPM) initiative in 2022 in the “Lung Shing” area of Kowloon City. By coordinating single-block aged buildings to co-appoint a property management company, participating buildings can enjoy professional management service at more affordable costs without compromising maintenance standards. As a result, the service has enhanced management efficiency, facilitated repair work, and helped maintain the buildings in good condition, thereby alleviating pressure for redevelopment.
Last year, two of the buildings participating in the JPM Trial Programme successfully co-appointed a property management company, with services commencing in November 2024 and January 2025 respectively. Owners of these buildings expressed their satisfaction with the company's performance, highlighting significant improvements in management conditions.
The URA has summarised its JPM experience in the “Lung Shing” area into a report, which was shared with relevant Government Departments and the property management industry. The report is organised into four sections: the phenomenon of lack of management in single-block aged buildings, the objectives of the URA trailing the JPM, the phases of implementation, and the challenges encountered, along with proposed solutions and recommendations.
The Report highlighted that among the 23,000 residential and composite buildings in Hong Kong, more than half have not appointed property management companies. Additionally, over 30% of these buildings are classified as “three-nil buildings,” which refers to buildings that neither have an owners' corporation (OCs) nor any form of residents' organization, nor do they employ a property management company to manage the buildings. The absence of building management over an extended period has resulted in various hygiene and fire safety issues in some of these buildings.
In the 2024 Policy Address, the Government proposed to implement a pilot scheme on JPM in selected areas, elevating the URA's JPM initiative to a policy level. Subsequently, Alice Mak, the Secretary for Home and Youth Affairs, announced that a one-year pilot scheme would commence as early as June in the Yau Tsim Mong, Sham Shui Po, Kowloon City and Tsuen Wan districts. I support this initiative, as it addresses the pressing issue of inadequate building management. I hope that the URA's experience and recommendations will facilitate its implementation and enhance owners' awareness of the importance of property management and building maintenance.
Leading Owners to Implement JPM Gradually
In the “Lung Shing” area, many single-block aged buildings have a smaller number of units, resulting in high management fees per household for security and cleaning services which have minimum fixed cost. This has caused owners to hesitate in engaging property management companies, which negatively impacts proper building maintenance and accelerates deterioration.
To address this issue, the URA collaborated with the HKIH to initiate the JPM model under the "District-based Rehabilitation Pilot Scheme" in Kowloon City. As a result, four single-block buildings participated in the JPM pilot scheme. Given that two of the participating buildings are 'three-nil buildings,' the team provided assistance to the owners in helping them form an OC. Furthermore, the team offered comprehensive guidance to all four participating buildings through the entire tender process. This included developing the service scope and tender documents, inviting tenders and providing professional advice on the received proposals.
The tender attracted 15 property management companies to submit bids for the service contract, demonstrating strong support from the industry on JPM. In August last year, a joint owners’ meeting was held where the owners of two participating buildings, namely Dragon Mansion and Kwok Ping House, reached a consensus to co-appoint a property management company at a competitive "basic services" fee of just over HKD 100 per unit per month. The remaining buildings decided to drop out of the programme due to the inability to garner support from over half of the total undivided shares, or they chose to continue the property management service with the existing service provider.
Challenges Encountered During JPM Trial
In the report to the Government, the team summarised three major challenges encountered during the trial of JPM:
(1) Difficulty in Contacting Owners of Aged Buildings
Many of the "three-nil buildings" or unmanaged buildings in old districts are owned by elderly or retired individuals, many of whom are not keen to participate in building management. In addition, most of the units in these buildings are rented out or the owners have moved overseas, making it challenging to form OCs and engage in JPM.
(2) Lack Of Support from Shop Owners
According to the current statutory requirements, management fees must be apportioned based on undivided or management shares specified in their deed of mutual covenant. Many shop owners in composite buildings located in old districts have refused to participate or oppose the appointment of a management company as they did not believe they would benefit from property management services. If shop owners hold more than half of the total undivided shares, their refusal can effectively prevent residential owners from appointing a property management company. Even if residential owners agree to excuse shop owners from sharing the expenses, amending the terms of the deed of mutual covenant requires unanimous agreement from all owners, which is extremely challenging. The exact situation occurred in one of the participating buildings in the JPM programme, where shop owners, holding more than half of the total undivided shares, ultimately vetoed the residential owners' decision to appoint a management company.
(3) Diverse Management Needs Among Buildings
Although the aim of JPM is to enable multiple buildings to co-appoint the same property management company to reduce management costs, the needs for property management services vary from building to building. This diversity makes it difficult for the current property management model and contract terms to accommodate all requirements. For instance, some buildings have already hired cleaning staff, while others are managed by residents themselves. This inconsistency prevents the use of a standard tender and contract, complicating the hiring of property management companies.
Addressing Regulatory and Technical Limitations
In implementing various aspects of JPM, the team must overcome challenges posed by existing regulations as well as technical infrastructure and constraints, including:
(1) Traditional Property Management Service Tendering Mechanism Hinders Consensus Among Participating Owners
The traditional tendering mechanism requires property management companies to submit independent quotes for each building, and then calculate the cost that each unit must pay. However, JPM involves multiple buildings and the number of units in each building varies. Using the traditional tendering mechanism may lead to price discrepancies for each building. In this situation, if the owners select property management companies based on the lowest price, owners of different buildings will only choose the property management company that offers the lowest price for their particular building. Despite multiple rounds of discussions, they may not be able to reach a consensus on selecting the same property management company, making it impossible to implement the JPM.
(2) Legal Issues Arising from OCs of Different Buildings Signing the Same Management Contract Under the Scheme
Joint tendering approach was utilised for acquiring JPM service in the “Lung Shing” area, with the same tender terms to co-appoint property management companies for the participating buildings. However, each building's OC is an independent legal entity. Signing the same contract through joint tendering could lead to complex contractual and legal issues. For instance, if one building is dissatisfied with the performance of the property management company during the contract period and decides to terminate the contract, it could affect the ability of another building to continue enforcing the property management service agreement.
(3) Lack of Fibre-Optic Networks for Some Aged Single-Block Buildings
To effectively implement JPM, leverage of technology such as installing and equipping buildings with communication networks and CCTV systems is essential, along with connections to cloud platforms for remote management. However, there are limitations in the infrastructure of old districts. The team has noticed that many single-block aged buildings, even in areas where fibre optic networks are installed on the streets, face challenges. The high installation costs for a limited number of units have caused service providers to refuse to extend these networks to the upper floor units. Additionally, many owners or residents in these aged buildings are elderly retirees who may be unfamiliar with technology and mobile applications, creating a barrier to making property management technologically advanced and widely adopted.
Developing a Standard Tender Template for JPM
To address the challenges and limitations outlined, the team has consulted with the property management industry, professional teams, and legal experts, to research suitable solutions. Recognising the diverse needs of building owners, the team developed a standard tender template for JPM, categorising property management services into two major types: "basic services" and "optional services".
"Basic services" encompass responsibilities mandated by the Building Management Ordinance, such as preparing financial budgets, purchasing third-party insurance, and convening regular owners' meetings. On the other hand, "optional services" allow OC to request additional fee-based services according to the building’s needs, such as hiring cleaners for garbage disposal or arranging technicians for emergency repairs. This approach enables owners to receive services tailored to their actual needs, adhering to the user-pays principle. As a result, the monthly fee for "basic services" will be lower compared to traditional bundled contracts, providing greater flexibility in implementation.
Property Management Companies Adopt a “Uniform Pricing” Method for Tendering
Considering the difficulties in achieving consensus among owners through the traditional property management service tendering mechanism for JPM, the team required JPM bidders to provide a "uniform price per unit" for the four participating buildings. This means that the "basic service" fee per unit per month must be the same, allowing all owners to easily evaluate bids from different property management companies based on a standardised pricing model.
To address the legal issues associated with joint tendering, the team adopted the "joint tendering, independent contracts" approach. This enables each building participating in JPM to tender and sign service contracts under their respective OCs. In the event that a building encounters management issues or disputes with the property management company, it will not affect the services of other buildings participating in JPM nor require them to share contractual obligations.
The success of the JPM pilot scheme in the “Lung Shing” area relies on the unity and cooperation of the owners. It is grateful that, throughout the entire process, the owners were willing to collaborate with the URA to overcome challenges related to preparation, execution, legal matters, contracts, and technical issues, successfully implementing the scheme and setting a good example for owners in other old districts.
Transforming “Three-Nil Buildings” into “Three-Have Buildings”
Recently, Mr. Fong, an owner of Kwok Ping House, remarked that the building’s management situation has significantly improved since the property management company was engaged about four months ago. The owners were pleasantly surprised to discover that the property management company assisted the OC in securing third-party liability insurance at an annual premium of just a few thousand dollars, resulting in a 60% reduction in costs compared to acquiring the third-party liability insurance by their own and greatly easing their financial burden. The savings were sufficient to cover half of the annual management fee.
He noted that since participating in the Scheme, Kwok Ping House has transformed from a "Three-Nil Building" into a "Three-Have Building," now equipped with an OC, third-party insurance, and suitable property management services—a transformation that has alleviated the owners' concerns. Furthermore, the building is about to begin rehabilitation works, and he is confident in the property management company’s ability to raise funds and oversee the quality of work.
Summarising JPM Experience and Making Recommendations
With the URA having completed the experience report on the JPM pilot scheme and sharing it with Government departments and the property management industry, our work on the JPM has come to an end. I believe that the success of implementing JPM depends not only on the active participation of building owners but also on the collaboration and promotion by stakeholders, such as the Government, professional associations, local organisations, and District Council Members. Their cooperation and support will be crucial for the smooth implementation of JPM and for addressing the long-term management challenges faced by aged buildings in urban areas.
In addition to strengthening education for owners and promoting JPM, the team recommends that the Government leverages community networks established by district organisations, District Council Members, or Care Teams leaders to proactively reach out to owners and OCs in old districts that may need assistance, encouraging their participation. Establishing OCs is essential for promoting JPM, as only buildings with an OC can sign contracts with property management companies. The Government may also consider including JPM in the Building Management Professional Advisory Service Scheme (BMPASS) to enhance the management efficiency of such buildings.
Regarding regulations, since many commercial tenants in composite buildings hold a larger undivided share, the team suggests that the Government to relax the requirement for unanimous agreement from all owners to amend the terms of the deed of mutual covenant. Allowing amendments to service charge allocation clauses with the approval of a majority of owners would encourage more buildings to participate in JPM.
Additionally, large property management companies could use their resources to connect buildings from different areas, overcoming geographic limitations and offering JPM services. The business sector can also assume social responsibility by encouraging internet service providers to offer financial support or free broadband installation to aged buildings, enabling residents in these areas to benefit from quality property management services. Through the collective efforts of all sectors of society, we can improve building safety and livability while slowing the process of building decay.