Levy Requirement under the Property Management Services Ordinance (Cap. 626)

The Property Management Services Ordinance (Cap. 626) (“Ordinance”) was enacted in October 2016. The Ordinance aims to promote the integrity and standard of property management services, by providing for licensing of companies and individual practitioners who are engaged in property management services. “Property Management Services” are defined in Schedule 1 of the Ordinance to include (1) general property and facility management service and (2) administrative aspects of property management service such as finance and asset management, human resources management and legal services relating to management of a property.

Under the Ordinance, a Property Management Services Authority (“Authority”) will be established. The Authority is empowered to issue property management services licences to licensees, prescribe codes of conduct for the licensees, institute investigations and disciplinary proceedings on complaints filed against the licensees.

The Authority is a self-financing statutory authority. Its income shall be generated from two sources – fixed levy from the general public and the licence fees to be collected from the licensees. It is different from the Estate Agents Authority, which is also a statutory licensing and self-financing body with licence fees as the major source of income (amounting to approximately HK$75 million for the year ended 31 March 2016).

The Ordinance provides a mechanism for collecting the above levy. Under Part 8 of the Ordinance, the Collector of Stamp Revenue will collect a levy on behalf of the Authority on any conveyance on sale or any instrument chargeable with stamp duty under head 1(1) in the First Schedule to the Stamp Duty Ordinance (Cap. 117), when the conveyance on sale is submitted to the Inland Revenue Department for stamping. A transferee under a leviable instrument under s. 54 of the Ordinance is liable to pay the levy within 30 days after the instrument is executed.

If the transferee fails to pay the levy, the Authority may impose a penalty and issue a certificate to be served on the transferee. Pursuant to s. 59 of the Ordinance, the Authority may register the certificate in the Land Registry and on registration of the certificate, the levy and penalty are recoverable from a person who from the Land Registry register appears to be the owner of the property affected and the certificate will constitute a legal charge on the property.

On the collection of levies, the Government intends to seek the co-operation of the solicitors’ firms which act in a conveyancing transaction. The solicitors firms are requested to collect the levy from the purchaser/transferee client and submit the sum to the Stamp Office.

Back to the time when the Ordinance was still a Bill, the Property Committee of the Law Society had protested strongly against the proposal of levy (including the nature, concept and the payment mechanism). It had made a formal submission to the relevant Bills Committee of the Legislative Council in August 2014. Regrettably, those views were not taken by the Legislative Council when it examined the Bill.

In essence, the Property Committee was of the view that:-

  1. Based on the “users pay” principle, the funding of the Authority should come from the licence fees (as in the case of Estate Agents Authority).
  2. Some buildings in Hong Kong (for example, those old Chinese buildings and village type houses) have no building managers. It is unfair for purchasers of those properties to pay the levies when they will not benefit from the licensing regime.
  3. Inequity arises when some purchasers acquire their properties not by conventional conveyancing transactions, but through acquisition of shares of companies which own the landed properties. Transfer of shares in the above circumstances is not subject to levies, and thus those purchasers could, in a legitimate manner, avoid payment of the levies.
  4. Although the Government stressed that the amount will only be a few hundred dollars upon the launch of the scheme, the payment mechanism and the issuance and registration of the non-payment certificate necessarily complicate the title checking process of a property. This is because, apart from checking for other existing encumbrances, solicitors are duty-bound to make enquiries to ensure that the levy has been paid by the current owner and the purchaser of the immediate transaction (if solicitors are acting for the mortgagee bank).

The Property Committee considered that the imposition of levy on conveyancing transaction as part of the funding for the Property Management Services Authority is wrong in principle, as there is no direct linkage between conveyancing transactions and quality of property management. After all, the Ordinance is only one of the many ways to try to address the intricate property management issues in different types of buildings in Hong Kong. In order to improve the standards and levels of building management in Hong Kong, the Government should take up the overall responsibility in supervising the building management professionals, and in the process commit adequate resources, financially and otherwise, to the licensing regime under the Ordinance. 

Jurisdictions: 
Member of the Property Committee, The Law Society of Hong Kong