Provisional Legislative Council

PLC Paper No. CB(1) 693
(These minutes have been
seen by the Administration)

Ref : CB1/PL/HG/1

Panel on Housing

Minutes of meeting held on Monday, 17 November 1997, at 2:30 pm in the Chamber of the Legislative Council Building

Members present :

Hon CHAN Yuen-han (Chairman)
Hon Frederick FUNG Kin-kee (Deputy Chairman)
Hon David CHU Yu-lin
Hon HO Sai-chu, JP
Hon Edward HO Sing-tin, JP
Hon Mrs Selina CHOW, JP
Hon Ronald ARCULLI, JP
Hon CHAN Choi-hi
Hon CHAN Kam-lam
Hon CHENG Kai-nam
Hon Bruce LIU Sing-lee
Hon LAU Kong-wah
Hon CHOY Kan-pui, JP
Dr Hon TANG Siu-tong, JP
Hon Timothy FOK Tsun-ting
Hon TAM Yiu-chung, JP

Members attending :

Hon Henry WU
Hon IP Kwok-him
Dr Hon LAW Cheung-kwok

Members absent :

Hon WONG Siu-yee
Hon CHEUNG Hon-chung
Hon LEUNG Chun-ying, JP
Hon HUI Yin-fat, JP
Hon Andrew WONG Wang-fat, JP
Hon Kennedy WONG Ying-ho
Dr Hon Charles YEUNG Chun-kam

Public officers attending :

For item IV

Housing Bureau

Deputy Secretary for Housing

Ms Sandy CHAN,
Principal Assistant Secretary/2

Housing Department

Mr Raymond Bates, JP,
Business Director/Commercial & Services

Mr Simon LEE,
Assistant Director/Legal Adviser

Mrs Doris MA,
Assistant Director/Development

Ms Loretta YU,
Chief Estate Surveyor (Acting)

Buildings Department

Mr H K NG, JP,
Assistant Director/Structural Engineering

Mr IP Pui-lun,
Chief Structural Engineer

For item V

Housing Bureau

Ms Eva TO,
Principal Assistant Secretary/1

For item VI

Housing Bureau

Ms Sandy CHAN,
Principal Assistant Secretary/2

Ms Eva TO,
Principal Assistant Secretary/1

Attendance by invitation :

For item V

Law Reform Commission

Mr Thomas LEUNG,
Secretary, Sub-committee on Description of Flats on Sale

For item VI

Hong Kong Housing Society

Mr Victor SO, JP,
Executive Director

Mr Francis LAW,
Director/Planning & Development

Clerk in attendance :

Ms LEUNG Siu-kum,
Chief Assistant Secretary (1)2

Staff in attendance :

Miss Becky YU,
Senior Assistant Secretary (1)3

I.Confirmation of minutes of previous meetings
(PLC Papers No. CB(1) 477 and 478)

The minutes of the meetings held on 29 September and 9 October 1997 were confirmed.

II.Date of next meeting and items for discussion

Special meeting on 28 November 1997

2..The Chairman advised that subject to confirmation from the Administration, a special meeting would be held on 28 November 1997 to receive a briefing by the Administration on the White Paper on Long Term Housing Strategy.

(Post-meeting note: The Administration had deferred the announcement of the White Paper until further notice)

Joint meeting with the Panel on Planning, Lands and Works

3..In order not to clash with the aforesaid briefing, the joint meeting on development approval process originally scheduled for 28 November 1997 had been re-scheduled to Tuesday, 2 December 1997, at 10:45 am.

Joint meeting with the Panel on Transport
(PLC Paper No. 492)

4..The Chairman drew members' attention to PLC Paper No. CB(1) 492 on the holding of joint meetings with the Panel on Transport for the purpose of monitoring the development of infrastructure to tie in with the production of residential units at 85,000 per year from 1999 onwards. Members raised no objection to the paper and agreed to hold the first joint meeting on Monday, 15 December 1997, at 2:30 pm preceeding the next Panel meeting at 3:30 pm.

Meeting on 15 December 1997

5..The next regular meeting would be held on Monday, 15 December 1997, immediately after the joint meeting with the Panel on Transport to discuss " Policy on Temporary Housing Areas (THA) and re-housing arrangements for THA residents'.

(Post-meeting note: An additional item on Housing (Amendment) (No.3) Bill 1997 was subsequently included. A special meeting on " Home Starter Loan Scheme " had been scheduled for Tuesday, 2 December 1997, at 12:00 noon.)

III.Information paper issued since last meeting
(PLC Paper No. CB(1) 463)

6..Members took note of the Administration's response to concerns raised at the joint meeting with the Panel on Planning, Lands and Works on 24 July 1997.

IV.Quality of flats under subsidized home ownership schemes and the responsibility of the Housing Authority
(PLC Paper No. CB(1) 491 (01) to (04))

7..As the subject was raised by Mr LAU Kong-wah, the Chairman invited Mr LAU to brief members' on his concerns.

8..Mr LAU presented pictures of the building defects found in three subsidized home ownership scheme estates. These included rusting of lift doors in Yu Ming Court, roof leaking in Carado Garden and site settlement in On Ning Garden. He pointed out that these problems existed shortly after occupation and yet progress of remedial works had not been satisfactory. Mr LAU considered that the Housing Department (HD) should take on the responsibility for repair works on these defects at its own expense. In the event of Private Sector Participation Scheme (PSPS) projects, HD should recover the relevant cost from the developers concerned. He also considered that HD should conduct a comprehensive review on its monitoring mechanism in ensuring the quality and maintenance standard of flats sold under subsidized home ownership schemes. This was particularly important having regard to the large number of impending public housing projects essential to meet the Chief Executive's pledge for annual provision of 85,000 flats.

9..In response to Mr LAU's presentation, the Business Director/Commercial & Services (BD/C&S) explained the difference between Home Ownership Scheme (HOS) and PSPS: the former was undertaken by the Housing Authority (HA), while the latter by private developers in accordance with Conditions of Sale set out by the Government. As the developer of HOS flats, HA had the responsibility to ensure that building contractors had fulfilled their obligations in the one year defects liability period after the completion of the construction works. Under PSPS, private developers instead of HA, should be responsible for rectifying construction defects. BD/C&S stressed that owners bought PSPS flats from private developers. Any dispute on repair works was basically only between the owners and the developer. Nevertheless, HD would act as a mediator with a view to resolving the problem.

10..As regards the role played by HD under PSPS, Mr Frederick FUNG Kin-kee pointed out that before 1993, the Director of Housing was the Chairman of PSPS Committee, the function of which, inter alia, was to scrutinize the list of tendering companies for PSPS projects. Therefore, he considered that HD definitely had the responsibility for the construction defects. Having regard to HD's involvement in the sale of PSPS flats, members, in general, were not convinced that HD should act merely as a mediator. Besides, PSPS developers would not be able to obtain certificates of compliance (CC) without the endorsement of HD. In response, the Assistant Director/Structural Engineering clarified that occupation permits (OP) for PSPS projects were processed in the same way as other private sector developments. Developers were required to appoint an authorized person and a structural engineer to oversee the project design and progress of construction. They were also required to submit plans in accordance with the Buildings Ordinance. The Buildings Department would not issue OP unless confirmation was made by the authorized persons, registered structural engineers and registered contractor concerned that the completed development complied with the approved plans.

11..In view of the large number of problems arising from PSPS, a member asked if the Administration would consider abolishing PSPS as a whole. DS for H considered this inappropriate having regard to the contribution of PSPS in achieving the Government's long-term housing targets. BD/C&S supplemented that steps had been taken to improve the operation of PSPS since 1990. These included tightening up of the technical requirements for all PSPS projects, extension of liability period for certain construction defects and requirement for private developers to engage HA building contractors for construction works.

12..Members then enquired about the latest progress of remedial works in the three subsidized home ownership scheme estates mentioned in paragraph 8.

Yu Ming Court

13..BD/C&S advised that Yu Ming Court was a HOS project, and that HA had checked the lift doors against the specifications and concluded that these complied with the requirements. Mrs Selina CHOW considered the rusting situation at Yu Ming Court unacceptable taking into account that the Court had only been occupied for about one year. She considered that there was a need for HA to raise the construction standard, including the tightening up of the control of material suppliers. She expressed concern that the acceptance of such low standards of HA's projects would lead to a more degraded standard for PSPS. BD/C&S undertook to relay the member's concern to HA.

Carado Garden

14..BD/C&S said that Carado Garden was a PSPS estate and the respective private developer was responsible for necessary maintenance works. Notwithstanding this, HD had liaised with the developer with a view to pressing for prompt remedial actions. The developer had subsequently undertaken to rectify the roof leaks and HD would closely monitor the progress to ensure timely completion.

On Ning Garden

15..DS for H advised that a team of HD in-house professionals had been deployed to investigate the 266 defects reported by the owners. The investigation was completed on 30 October 1997 and the findings showed that 96 of them were caused by site settlement. HD had subsequently issued letter to the developer demanding rectification of these 96 defects within eight weeks i.e. by 28 November 1997. This was in accordance with the provisions in the undertaking furnished by the developer to HD in September 1993, under which the developer was liable to rectify at its own expense any defect caused by site settlement upon notification by the Director of Housing at any time within 10 years from 24 December 1990. In view of the urgency of the issue, the Administration had decided that HD would take on the remedial works on 29 November 1997 should the developer fail to meet the deadline. The cost incurred would be recovered from the developer through legal proceedings.

16..Some members expressed concerns about the remaining 170 defects attributable to thermal, shrinkage or normal wear and tear as well as the latent defects and asked if the Administration would rectify these in the course of remedial work for problems relating to site settlement. BD/C&S assured members that HD would act as an arbitrator between the developer and the owners concerned on these remaining defects under dispute, and that HD would continue to monitor the site settlement problem in On Ning Garden within the guarantee period and would take necessary actions against the developer if required.

Concluding remarks

17..While appreciating the Administration's efforts in resolving the problem in On Ning Garden, members considered that HD should take on the responsibility for construction problems in all subsidized home ownership scheme estates and review its mechanism in ensuring the quality and maintenance standard of flats sold under these schemes. The Principal Secretary for Housing/2 (PAS for H/2) advised that the Administration was committed to improving these schemes. Measures, such as the listing of approved contractors and material suppliers, standardization of building components and introduction of the Performance Assessment Scoring System, had been implemented. In addition, apart from the amount of bids, HD would take into consideration other factors, including recommendations and pledges made by bidders when contracting out HOS and PSPS projects. A weighted scoring system was also adopted to facilitate a more objective and standardized assessment of tenders. As announced in the Chief Executive's Policy Address, a pilot scheme of mixed development inviting private developers to build subsidized home ownership flats as part of a mixed development would be launched, with a view to enhancing the quality of subsidized home ownership flats.

18..As a consolidated view of the Panel, the Chairman moved and members passed the following motion:

" That this Panel urges the Administration to conduct a comprehensive review of its mechanism in monitoring the quality and maintenance of subsidized home ownership flats and shoulder the responsibility for the construction problems of housing estates (including those under the Private Sector Participation Scheme and Home Ownership Scheme) arising from the irresponsibility of contractors in the past by bearing the full cost of related repair and maintenance works. "

V.Sale of overseas uncompleted residential properties
(PLC Paper No. CB(1) 275 and 491(05))

19..The Chairman advised that the subject was raised consequent to public concerns about delayed completion and project failure of overseas residential properties.

20..The Principal Secretary for Housing/1 (PAS for H/1) briefed members on the latest work progress on issues relating to sale of overseas uncompleted residential properties. The Administration was considering two separate pieces of proposed legislation governing the provision of sales descriptions for local and overseas uncompleted residential properties. Drafting of the former was underway and the relevant legislation was expected to be ready for submission to the Legislative Council around late 1998. For the latter, the Administration was consulting relevant parties, including estate agents, property developers, professional bodies and the Consumer Council, on the recommendations of the Law Reform Commission (LRC)'s report on Sales Descriptions of Overseas Uncompleted Residential Properties. The consultation period would end on 1 December 1997 and the Administration would carefully study LRC's recommendations and comments received before taking a final decision on the need for legislation.

21..Noting that the majority of uncompleted properties under dispute were located in the Mainland and the developers were associated with Hong Kong enterprises, Mr CHENG Kai-nam questioned why they were not subject to Hong Kong regulatory system. Mr Thomas LEUNG clarified that most of the problematic property projects in China were in fact undertaken by non-Hong Kong based companies, despite their connections in Hong Kong. He further explained that the LRC's report encompassed a wide range of problems arising from the sale of overseas uncompleted properties and those related to delayed completion or project failure were only part of the concern studied in the report.

22..While agreeing that prospective purchasers should be furnished with some basic sales information, members considered it inappropriate to hold estate agents liable for any acts of overseas developers, such as the provision of false information. Mr LEUNG explained that one of the key recommendations in the report was the requirement for vendors of overseas uncompleted properties to engage licensed estate agents for the sale of their properties in Hong Kong. It was therefore not unreasonable to require estate agents to ensure that the sales information provided to prospective purchasers was accurate. As a matter of fact, this was also one of their statutory duties under the Estate Agents Ordinance. PAS for H/1 said that the requirement for detailed sales information could enhance protection for overseas property purchasers but was not a full-proof solution. The problems associated with overseas uncompleted flats were many folds such as financial problems faced by developers and a lack of control over property development in the host countries. The proposals made by LRC could help to ensure that estate agents would exercise more care in accepting overseas assignments, and that prospective buyers could make their decisions based on the best available information. The long-term solution to problems arising from overseas uncompleted properties would be for the host countries to develop an effective system to regulate the development and sale of uncompleted flats so as to protect the interests of overseas property buyers.

23..PAS for H/1 assured members that the Administration would look into the issue of enforcement against misrepresentation very carefully since a breach to the proposed legislation, as advised by LRC, would carry criminal sanctions. In-depth investigations, such as on-site inspection and gathering of evidence, might be required. The Administration would also consider bringing in the concept of " due diligence " in the proposed legislation so that estate agents who had taken all reasonable steps to obtain and verify the required information would not be unduly penalized. However, PAS for H/1 agreed that enforcement and investigation by the Hong Kong Government would be very difficult as assistance from relevant overseas authorities would have to be sought.

24..On the role of legal practitioners, PAS for H/1 advised that the Law Society of Hong Kong had issued pamphlets drawing purchasers' attention to various points relating to the sales of overseas uncompleted properties. In a recent meeting between the Law Society and some PLC Members, the Law Society agreed with the need to clarify the role of attesting officers. Hon CHENG Kai-nam also said that attesting officers should not represent both the vendor and the purchaser in the sales of overseas properties.

25..As regards the time-table for the proposed legislation, PAS for H/1 explained that it would take the Administration about three to four months to study the LRC's recommendations and comments received during the consultation period. She assured members that estate agent's licences would not be issued until end 1998 and full licences in 2000/01. If the Administration were to introduce any legislation on overseas uncompleted flats, it could tie in with the licensing system.

VI.Errors in flat measurements at Verbena Heights and the responsibility of the Housing Society
(PLC Paper No. CB(1) 491(06) and (07))

26..Mr Frederick FUNG Kin-kee expressed concern about the miscalculation of saleable area at Verbena Heights and asked if an internal monitoring mechanism was in place to prevent similar recurrences. The Executive Director/Housing Society (ED/HS) confirmed the presence of such a mechanism, in particular on quality assurance of flats. Contractors were required to provide 'sample rooms' for inspection and approval before the commencement of construction works to ensure a high level of workmanship for the whole project. However, HS would rely on the professional expertise of Project Architects (PA) in calculating saleable areas. In the case of Verbena Heights, the PA concerned had adopted the guidelines jointly promulgated by the Royal Institution of Chartered Surveyors (Hong Kong Branch) and the Consumer Council in calculating the saleable area, but failed to take into consideration the complicated design of Verbena Heights where the outer face of the structural walls was in step form and hence some of the flats had been miscalculated. ED/HS advised that the adjustments would neither change the size of the internal floor area of the affected flats nor the construction quality of the development. He added that HS had made its best endeavour to assist the affected purchasers following the incident. To avoid the same occurrence, HS would in future appoint independent surveyors to confirm the saleable areas in the event of design-complicate projects.

27..Some members asked if the Administration would consider making it statutory for developers to state the saleable area of flats in the sales brochures. PAS for H/1 advised that the proposed legislation on sales descriptions of local uncompleted residential properties would require developers to include in their sale brochures the gross floor areas, saleable areas and floor plans of flats being sold. A warning would also need to be given to prospective purchasers if the floor area of flats varied from floor to floor due to the thickness of walls. The Administration expected that the legislation would be ready for submission to the Legislative Council in the second half of 1998. Mr Edward S T HO remarked that the Chinese translation of saleable area was often mistaken for usable area, and that the Administration should, in collaboration with the Royal Institution of Chartered Surveyors (Hong Kong Branch) and the Consumer Council, review the term in order to avoid any ambiguity. PAS for H/1 undertook to consult the relevant parties as requested.

28..While appreciating HS's expedient actions in tackling the problem, Mr FUNG considered that there was a need to improve the transparency and accountability of HS. He asked if the Administration would consider appointing members of the three-tier system of assembly to the Executive Committee of HS. PAS for H/2 advised that steps had already been taken to increase the transparency and accountability of HS. In management aspect, arrangements had been made to confine the term of office of members of the Executive Committee to not more than five years and to replace one-quarter of the Committee members at annual election. Other efforts such as issuing regular organizational newsletters, formulation of liaison group with the tenants/owners and accepting to be under the jurisdiction of the Ombudsman had also been made. PAS for H/2 emphasized that there were members of the three-tier system of assembly in the Executive Committee of HS, but they were elected on the merits of their professional knowledge and experience on community service rather than on the capacity as members of the three-tier system assembly.

29..A member asked if affected purchasers who rescinded the purchase would be given the option to buy another unit under the Flats for Sale Scheme (FFSS) at comparable price. ED/HS advised that no FFSS flats would be made available for sale over the next two/three years until the pre-sale of the Kai Tak project, and that the price of flats would be determined taking into account the market situation at that time. As regards the possibility for re-housing affected purchasers back to their public rental housing flats, ED/HS replied that it would be feasible if they had not terminated their tenancies.

VII.Any other business

30..There being no other business, the meeting closed at 4:30 pm.

Provisional Legislative Council Secretariat
23 December 1997