Know your obligations under the DMC - No excuses!
Vineberg Property Management Ltd v Lee Chun Fai  HKCU 2497
In the recent case of Vineberg Property Management Ltd v Lee Chun Fai  HKCU 2497, the Defendant who failed to pay management fees or contribute to major renovation expenses was sued for breach of the deed of mutual covenant ("DMC") of an estate ("Estate"). The Plaintiff was the manager of the Estate and the Defendant was the registered owner of a unit in the Estate ("Property").
Pursuant to section 2 of the Building Management Ordinance (Cap 344), a DMC is a document which (a) defines the rights, interests and obligations of owners among themselves, and (b) is registered in the Land Registry. The DMC is legally binding on all property owners in a building.
In essence, the Plaintiff's case was that, notwithstanding the fact that it had sent the Defendant numerous demand letters, the Defendant had failed to pay management fees or contribute to the major renovation expenses of the Estate. The Plaintiff also claimed interests and collection charges from the Defendant.
The Plaintiff registered two memoranda of charges against the Property in 2010 and 2015 to secure the relevant indebtedness under the DMC. Subsequently, the Plaintiff applied for an order for the sale of the Property under the DMC to satisfy the indebtedness owed by the Defendant to the Plaintiff.
Whilst it was undisputed that the Defendant was liable to pay the management fees and renovation expenses under the DMC, the Defendant argued that the Plaintiff was not entitled to charge any interest, legal costs, or collection charges. The Defendant claimed that he started to pay the management fees by autopay in about 2000, and had only become aware in 2005 that the autopay had stopped working in 2004, and that had the Plaintiff informed him, he would have had arranged an autopay from another bank account. The Defendant also claimed that he was not aware of the Plaintiff's demands for management fees, and argued that the Plaintiff should have sent its written demands to his other address, or contacted him by telephone.
Having considered the relevant terms of the DMC, the Court decided that the Defendant's challenge was without merit. In particular, the Court found that under the terms of the DMC, the Defendant's obligation to pay the management fees "monthly in advance to the Manager" was not conditional upon any prior notice or demand to be given by the Plaintiff to the Defendant. As such, "…what has been said by the Defendant…cannot be any excuse for the Defendant's failure to pay the management fees on time". Ultimately, the Court allowed the sums claimed by the Plaintiff, and also granted the order for sale sought by the Plaintiff to recover the debts owed by the Defendant.
This case highlights the importance of property owners knowing and complying with their obligations under a DMC. Clearly, ignorance of those obligations is not a legitimate excuse under Hong Kong law. Interested parties are encouraged to seek legal advice on the terms of a DMC where necessary for a proper understanding of their rights and obligations.
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