Schedule 7: Mandatory Terms In Deeds of Mutual Covenant

SCHEDULE 7 [sections 34D, 34E, 34J, 40D & 42] (Amended 69 of 2000 s. 25; 5 of 2007 s. 32)
1. Determination of total amount of management expenses
(1) Subject to subparagraphs (3), (5), (6) and (8), the total amount of management of a expenses payable by the owners during any period of 12 months adopted by the manager of a building as the financial year in respect of the management of that building shall be the total proposed expenditure during that year as specified by the manager in accordance with subparagraph (2).
(2) In respect of each financial year, the manager shall-
(a) prepare a draft budget setting out the proposed expenditure during the financial year;
(b) send a copy of the draft budget to the owners’ committee or, where there is no owners’ committee, display a copy of the draft budget in a prominent place in the building, and cause it to remain so displayed for at least 7 consecutive days; (Amended 5 of 2007 s. 32)
(c) send or display, as the case may be, with the copy of the draft budget a notice inviting each owner to send his comments on the draft budget to the manager within a period of 14 days from the date the draft budget was sent or first displayed;
(d) after the end of that period, prepare a budget specifying the total proposed expenditure during the financial year;
(e) send a copy of the budget to the owners’ committee or, where there is no owners’ committee, display a copy of the budget in a prominent place in the building, and cause it to remain so displayed for at least 7 consecutive days. (Amended 5 of 2007 s. 32)
(3) Where, in respect of a financial year, the manager has not complied with subparagraph (2) before the start of that financial year, the total amount of the management expenses for that year shall-
(a) until he has so complied, be deemed to be the same as the total amount of management expenses (if any) for the previous financial year;
(b) when he has so complied, be the total proposed expenditure specified in the budget for that financial year, and the amount that the owners shall contribute towards the management expenses shall be calculated and adjusted accordingly.
(4) Where a budget has been sent or displayed in accordance with subparagraph (2)(e) and the manager wishes to revise it, he shall follow the same procedures in respect of the revised budget as apply to the draft budget and budget by virtue of subparagraph (2).
(5) Where a revised budget is sent or displayed in accordance with subparagraph (4), the total amount of the management expenses for that financial year shall be the total expenditure or proposed expenditure specified in the revised budget and the amount that owners shall contribute towards the management expenses shall be calculated and adjusted accordingly.
(6) If there is a corporation and, within a period of 1 month from the date that a budget or revised budget for a financial year is sent or first displayed in accordance with subparagraph (2) or (4), the corporation decides, by a resolution of the owners, to reject the budget or revised budget, as the case may be, the total amount of management expenses for the financial year shall, until another budget or revised budget is sent or displayed in accordance with subparagraph (2) or (4) and is not so rejected under this subparagraph, be deemed to be the same as the total amount of management expenses (if any) for the previous financial year, together with an amount not exceeding 10% of that total amount as the manager may determine.
(7) If any owner requests in writing the manager to supply him with a copy of any draft budget, budget or revised budget, the manager shall, on payment of a reasonable copying charge, supply a copy to that person.
(8) For the purposes of this paragraph, “expenditure” (開支) includes all costs, charges and expenses to be borne by the owners, including the remuneration of the manager.
2. Keeping of accounts
(1) The manager shall maintain proper books or records of account and other financial records and shall keep all bills, invoices, vouchers, receipts and other documents referred to in those books and records for at least 6 years.
(2) Within 1 month after each consecutive period of 3 months, or such shorter period as the manager may select, the manager shall prepare a summary of income and expenditure and a balance sheet in respect of that period, display a copy of the summary and balance sheet in a prominent place in the building, and cause it to remain so displayed for at least 7 consecutive days. (Amended 5 of 2007 s. 32)
(3) Within 2 months after the end of each financial year, the manager shall prepare an income and expenditure account and balance sheet for that year, display a copy of the income and expenditure account and balance sheet in a prominent place in the building, and cause it to remain so displayed for at least 7 consecutive days. (Amended 5 of 2007 s. 32)
(4) Each income and expenditure account and balance sheet shall include details of the special fund required by paragraph 4 and an estimate of the time when there will be a need to draw on that fund, and the amount of money that will be then needed.
(5) The manager shall-
(a) permit any owner, at any reasonable time, to inspect the books or records of account and any income and expenditure account or balance sheet; and
(b) on payment of a reasonable copying charge, supply any owner with a copy of any record or document requested by him.
(6) If there is a corporation and the corporation decides, by a resolution of the owners, that any income and expenditure account and balance sheet should be audited by an accountant of by some other independent auditor as may be specified in that resolution, the manager shall without delay arrange for such an audit to be carried out by that person and- (Amended 5 of 2007 s. 32)
(a) permit any owner, at any reasonable time, to inspect the audited income and expenditure account and balance sheet and the report made by the accountant or auditor in respect of the income and expenditure account and balance sheet; and
(b) on payment of a reasonable copying charge, supply any owner with a copy of the audited income and expenditure account and balance sheet, or the report made by the accountant or auditor in respect of the income and expenditure account and balance sheet, or both, as requested by the owner. (Amended 5 of 2007 s. 32)
(7) The financial year may not be changed more than once in every 5 years, unless that change is previously approved by a resolution of the owners’ committee (if any).
3. Manager to open and maintain bank account (Amended 5 of 2007 s. 32)
(1) The manager shall open and maintain an interest-bearing account and shall use that account exclusively in respect of the management of the building. (Amended 5 of 2007 s. 32)
(1A) Without prejudice to the generality of subparagraph (1), if there is a corporation, the manager shall open and maintain one or more segregated interest-bearing accounts, each of which shall be designated as a trust account or client account, for holding money received by him from or on behalf of the corporation in respect of the management of the building. (Added 5 of 2007 s. 32)
(1B) The manager shall display a document showing evidence of any account opened and maintained under subparagraph (1) or (1A) in a prominent place in the building. (Added 5 of 2007 s. 32)
(2) Subject to subparagraphs (3) and (4), the manager shall without delay pay all money received by him in respect of the management of the building into the account opened and maintained under subparagraph (1) or, if there is a corporation, the account or accounts opened and maintained under subparagraph (1A). (Amended 5 of 2007 s. 32)
(3) Subject to subparagraph (4), the manager may, out of money received by him in respect of the management of the building, retain or pay into a current account a reasonable amount to cover expenditure of a minor nature, but that amount shall not exceed such figure as is determined from time to time by a resolution of the owners’ committee (if any).
(4) The retention of a reasonable amount of money under subparagraph (3) or the payment of that amount into a current account in accordance with that subparagraph and any other arrangement for dealing with money received by the manager shall be subject to such conditions as may be approved by a resolution of the owners’ committee (if any).
(5) Any reference in this paragraph to an account is a reference to an account opened with a bank within the meaning of section 2 of the Banking Ordinance (Cap 155), the title of which refers to the management of the building. (Amended 49 of 1995 s. 53)
4. Special fund
(1) The manager shall establish and maintain a special fund to provide for expenditure of a kind not expected by him to be incurred annually.
(2) If there is a corporation, the corporation shall determine, by a resolution of the owners, the amount to be contributed to the special fund by the owners in any financial year, and the time when those contributions shall be payable.
(3) The manager shall open and maintain at a bank within the meaning of section 2 of the Banking Ordinance (Cap 155) an interest-bearing account, the title of which shall refer to the special fund for the building, and shall use that account exclusively for the purpose referred to in subparagraph (1). (Amended 49 of 1995 s. 53; 5 of 2007 s. 32)
(3A) Without prejudice to the generality of subparagraph (3), if there is a corporation, the manager shall open and maintain one or more segregated interest-bearing accounts, each of which shall be designated as a trust account or client account, for holding money received by him from or on behalf of the corporation in respect of the special fund. (Added 5 of 2007 s. 32)
(3B) The manager shall display a document showing evidence of any account opened and maintained under subparagraph (3) or (3A) in a prominent place in the building. (Added 5 of 2007 s. 32)
(4) The manager shall without delay pay all money received by him in respect of the special fund into the account opened and maintained under subparagraph (3) or, if there is a corporation, the account or accounts opened and maintained under subparagraph (3A). (Amended 5 of 2007 s. 32)
(5) Except in a situation considered by the manager to be an emergency, no money shall be paid out of the special fund unless it is for a purpose approved by a resolution of the owners’ committee (if any).
5. Contracts entered into by manager
(1) Subject to subparagraphs (2) and (3), the manager shall not enter into any contract for the procurement of any supplies, goods or services the value of which exceeds or is likely to exceed the sum of $200000 or such other sum in substitution therefor as the Authority may specify by notice in the Gazette unless-
(a) the supplies, goods or services are procured by invitation to tender; and
(b) the procurement complies with the Code of Practice referred to in section 20A(1).
(2) Subject to subparagraph (3), the manager shall not enter into any contract for the procurement of any supplies, goods or services the value of which exceeds or is likely to exceed a sum which is equivalent to 20% of the annual budget or such other percentage in substitution therefor as the Authority may specify by notice in the Gazette unless-
(a) if there is a corporation-
(i) the supplies, goods or services are procured by invitation to tender;
(ii) the procurement complies with the Code of Practice referred to in section 20A(1); and
(iii) whether a tender submitted for the purpose is accepted or not is decided by a resolution of the owners passed at a general meeting of the corporation, and the contract is entered into with the successful tenderer; or
(b) if there is no corporation-
(i) the supplies, goods or services are procured by invitation to tender;
(ii) the procurement complies with the Code of Practice referred to in section 20A(1); and
(iii) whether a tender submitted for the purpose is accepted or not is decided by a resolution of the owners passed at a meeting of owners convened and conducted in accordance with the deed of mutual covenant, and the contract is entered into with the successful tenderer.
(3) Subparagraphs (1) and (2) do not apply to any supplies, goods or services which but for this subparagraph would be required to be procured by invitation to tender (referred to in this subparagraph as “relevant supplies, goods or services”)-
(a) where there is a corporation, if-
(i) the relevant supplies, goods or services are of the same type as any supplies, goods or services which are for the time being supplied to the corporation by a supplier; and
(ii) the corporation decides by a resolution of the owners passed at a general meeting of the corporation that the relevant supplies, goods or services shall be procured from that supplier on such terms and conditions as specified in the resolution, instead of by invitation to tender; or
(b) where there is no corporation, if-
(i) the relevant supplies, goods or services are of the same type as any supplies, goods or services which are for the time being supplied to the owners by a supplier; and
(ii) the owners decide by a resolution of the owners passed at a meeting of owners convened and conducted in accordance with the deed of mutual covenant that the relevant supplies, goods or services shall be procured from that supplier on such terms and conditions as specified in the resolution, instead of by invitation to tender. (Replaced 5 of 2007 s. 32)
6. Resignation of manager
(1) No resignation of the manager shall take effect unless he has previously given not less than 3 months’ notice in writing of his intention to resign-
(a) by sending such a notice to the owners’ committee; or
(b) where there is no owners’ committee, by giving such a notice to each of the owners and by displaying such a notice in a prominent place in the building.
(2) The notice referred to in subparagraph (1)(b) may be given- (Amended 5 of 2007 s. 32)
(a) by delivering it personally to the owner; or
(b) by sending it by post to the owner at his last known address; or
(c) by leaving it at the owner’s flat or depositing it in the letter box for that flat. (Amended 12 of 1998 s. 9) (Amended 5 of 2007 s. 32)
7. Termination of manager’s appointment by owners’ corporation
(1) Subject to subparagraph (5A), at a general meeting convened for the purpose, a corporation may, by a resolution-
(a) passed by a majority of the votes of the owners voting either personally or by proxy; and
(b) supported by the owners of not less than 50% of the shares in aggregate, terminate by notice the DMC manager’s appointment without compensation. (Replaced 5 of 2007 s. 32)
(2) A resolution under subparagraph (1) shall have effect only if-
(a) the notice of termination of appointment is in writing;
(b) provision is made in the resolution for a period of not less than 3 months notice or, in lieu of notice, provision is made for an agreement to be made with the DMC manager for the payment to him of a sum equal to the amount of remuneration which would have accrued to him during that period; (Replaced 69 of 2000 s. 25)
(c) the notice is accompanied by a copy of the resolution terminating the DMC manager’s appointment; and
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