Hong Kong: Concealed Risks and Legal Exposures for Unauthorised Building Works and Illegal Structures
Other Author Alvin Yu, Trainee Solicitor
Hong Kong has been struck by typhoons and heavy rainstorms before, but never by both within the space of two short weeks, nor with such severity. The flooded roads, fallen trees, and collapsed cliffsides bring up one concern: how safe are Hong Kong's buildings against these challenges – specifically, those with unauthorized building works (UBWs) and illegal structures?
UBWs and illegal structures have recently been a mainstay of Hong Kong's news headlines. This Legal Update examines the regulations of the Buildings Department (BD) and Lands Department (LandsD), as well as responsibilities and obligations of incorporated owners (IOs) or the building manager acting under Deed of Mutual Covenant (DMC) of a development, in relation to UBWs and illegal structures.
The Buildings Department and Buildings Ordinance (Cap. 123)
Under section 14(1) of the Buildings Ordinance (Cap. 123) (Buildings Ordinance), no building works or street works (both terms as defined) may commence without the Building Authority's written approval of (a) documents submitted in accordance with the relevant regulations, and (b) commencement of building works as shown in the approved plan.
This is subject to exemptions, however.
Building works that do not involve the structure of a building are exempt from the provisions of the Buildings Ordinance, according to section 41(3).1
But the term "structure of the building" is not defined in the Ordinance, so professional advice is clearly needed when an owner intends to rely on such exemption. In addition, certain "minor works" – such as repairing external wall tiles and windows – are also exempt from BD approval, and follow a very different and more simplified regime.2 Again, professional advice is needed to rely on the exemption.
Therefore, under the Buildings Ordinance, building works that are not exempted and fail to comply with section 14(1) are considered UBWs, and any resultant structures may be considered illegal.
From a conveyancing perspective, properties with UBWs and illegal structures are subject to the risk of enforcement proceedings by the BD (and possibly LandsD). This may render their title defective; and owners may have difficulties in the event of a sale or mortgagee transaction.3
A somewhat different (nonetheless common) scenario occurs when a property owner (whether or not building works are involved) effects a "material change" in the use of a property, in contravention of the use permitted in the Occupation Permit.4
If no notice of material change in use was given to the Building Authority one month in advance,5 or the building works continue even after they are prohibited by the Building Authority, the works are considered UBWs – and the change of user will be illegal.
Enforcement action by the Building Authority may take the form of an order requiring the owner of the property with UBWs to reinstate or demolish the unauthorised alterations or structures, under section 24(1) of the Buildings Ordinance. If the owner fails to comply with the order, the Building Authority may carry out the remedial works on their behalf6 and recover the costs incurred from them.7 If the owner still fails to pay these costs, a certificate of costs may be registered against the property in the Land Registry, thus encumbering the property title.8
Failure to comply with sections 14(1), 24(1), or 25(1) of the Buildings Ordinance are offences that carry fines, and even imprisonment.9 Property owners should take care to adhere to the Buildings Ordinance to avoid criminal liability.
LandsD and Government Grants (Government Leases or Conditions)
Apart from the Buildings Ordinance and its subsidiary legislation, owners of properties in Hong Kong must also comply with covenants in the Government Grants. In this context, illegal structures, more likely than not, put the owner in breach of these covenants.
By way of illustration, the most common covenant in Government Grants is that any building erected – or to be erected – on the lot shall in all respects comply with the Buildings Ordinance. UBWs and illegal structures are by definition in breach of the Buildings Ordinance, and by virtue thereof also in breach of the Government Grant.
Land covenants are particularly relevant to the issue of illegal structures because of their ability to bind successors in title.10 Courts have shown a reluctance to regard these covenants as spent upon initial compliance.11 This means that subsequent owners (ie. owners other than the original grantee) making alterations to the property that result in breaches – or even merely inheriting illegal structures from the previous owner – will also be vulnerable to enforcement action by the LandsD for breach of Government Grant.
If a property contravenes the Government Grant, the LandsD may take enforcement action to enforce the terms of the lease. On the less severe end of the spectrum, warning letters or notices may be issued to demand rectification.12 Similar to procedures under the Buildings Ordinance, if the owner fails to comply with the notice, the Government can enter the land to carry out the notice, and recover costs from the owner.13
The most severe consequence occurs when the Government exercises its right of re-entry by registering a memorial of re-entry in the Land Registry, which will forfeit the Government Grant (and therefore extinguishes the owner's title) and re-vest the land in the Government.14 But from experience, the Government exercises this power very cautiously.
Whether a building is in breach of the Government Grant is a highly factual matter that depends on context and construction of the covenants in question.15 Property owners, contractors and consultants should consider the LandsD Practice Notes for guidance on construing restrictive covenants.16
In some instances, illegal structures erected on a property may also extend beyond the boundary of the lot and encroach onto Government land.
In this case, the LandsD may issue a notice demanding removal of the encroaching structures,17 or exercise its discretion to issue a short-term licence or waiver to allow for such continued occupation, in accordance with section 5 of the Land (Miscellaneous Provisions) Ordinance (Cap. 28).18
IO or Building Managers and DMCs
For multi-storeyed buildings with strata-title, the DMC governs the rights and obligations of the unit owners as fellow tenants-in-common. One salient duty imposed on unit owners in a typical DMC is not to make structural alterations to their units or the common parts of the building – nor convert common parts to their own use (encroachment) – without prior approval from their fellow owners and relevant government authority permission.19
If any of these duties are breached, any such structural alterations and conversions will be subject to enforcement by the IO or the building manager. Since any building works that affect the common parts fall within the exclusive jurisdiction of the IO20 (where one is formed) or the building manager of the building, they may require the unit owner to rectify the unauthorised structures or alterations, and sue them for damages arising from the UBWs if necessary. In serious cases, the courts may even grant an injunction to compel the unit owner to take remedial measures.21
Conclusion
The issue of UBWs and illegal structures is not merely one of legality and journalistic sensationalism: it is also one of safety and human lives.
Property owners should seriously consider consulting professionals on regulatory compliance when planning building works to avoid incurring criminal and civil liabilities – and at the same time ensure the safety of the premises' occupiers and their neighbours.
1 See Mariner International Hotels Ltd v. Atlas Ltd (2007) 10 HKCFAR 1, the leading authority on the meaning of "structure of the building" and the requirement that the works must be carried out "in" the building.
2 Section 14AA, Buildings Ordinance (Cap. 123). The Buildings Department divides "minor works" into three classes based on their nature, scale and complexity, and level of risk; See Schedule 1, Building (Minor Works) Regulation (Cap. 123N). The documentary and procedural requirements for each class differ. Please see the Buildings Department website for more information on documentary and procedural requirements: https://www.bd.gov.hk/en/building-works/minor-works/introduction-to-minor-works-control-system/index.html accessed 14 September 2023.
3 A "real risk of enforcement" by the Building Authority needs to be established in order for UBWs and illegal structures to be title defects: see Spark Rich (China) Ltd v. Valrose Ltd (1999) CACV 249/1998. The vendor needs to prove that there is no such risk beyond reasonable doubt: see Chi Kit Co Ltd & Another v. Lucky Health International Enterprise Ltd (2000) 3 HKCFAR 268; the purchaser's solicitor also needs to advise the purchaser that they can "safely disregard" the risk (Spark Rich). Vendors may either: 1) try to satisfy this high bar in front of the purchaser (and their solicitors) or the courts (though rare and highly contextual, some vendors have succeeded: see Jumbo Gold Investment Ltd v. Yuen Cheong Leung & Another [2000] 1 HKLRD 763, Resources Leader Ltd v. Ho Ngo Ying [2023] HKEC 2964); 2) include a clause in the sale and purchase agreement requiring the purchaser to not raise requisitions or object to defective title stemming from UBWs, or 3) remove the UBWs to avoid this issue altogether.
4 Section 25(3), Buildings Ordinance (Cap. 123). Material change in use is deemed if the building works carried out to convert the property's use would: (a) contravene the Buildings Ordinance, or (b) result in the property being incongruent with its neighbouring buildings in terms of height, design, type, or intended use.
5 Section 25(1), Buildings Ordinance (Cap. 123).
6 Section 24(3), Buildings Ordinance (Cap. 123).
7 Sections 24(4)(a) and 33(1), Buildings Ordinance (Cap. 123).
8 According to Section 33(9) of the Buildings Ordinance, the costs (and interest) incurred by the Building Authority will constitute a first charge against the owner's property. This gives the Building Authority the same powers and remedies that a mortgagee would be entitled to.
9 Section 40, Buildings Ordinance (Cap. 123).
10 Sections 41(2) and 41(3), Conveyancing and Property Ordinance (Cap. 219).
11 See Expressluck Development Ltd v. Secretary for Justice (2007) HCMP No 1432/2005 and Gold Shine Investment Ltd v. Secretary for Justice [2010] HKC 212.
12 Section 12(1), Land (Miscellaneous Provisions) Ordinance (Cap. 28).
13 Sections 12(2) and 12(6), Land (Miscellaneous Provisions) Ordinance (Cap. 28).
14 Section 4, Government Rights (Re-entry and Vesting Remedies) Ordinance (Cap. 126).
15 As emphasised by Ma CJ in Fully Profit (Asia) Ltd v. Secretary for Justice [2013] 6 HKC 374, at [15].
16 For a complete list of all Practice Notes issued by the LandsD, please visit the LandsD website: https://www.landsd.gov.hk/en/resources/practice-notes/lao.html accessed 16 September 2023.
17 Failure to comply with the notice is an offence that carries a fine and potentially imprisonment: sections 4 and 4AA, Land (Miscellaneous Provisions) Ordinance (Cap. 28).
18 Legislative Council members have raised concerns that some property owners intentionally encroach onto Government land, and then rely on the licensing/waiver mechanism as a fallback option to regularise the encroachments. See LCQ12: Short-term tenancies and waivers https://www.info.gov.hk/gia/general/201111/16/P201111160252.htm accessed 15 September 2023.
19 Section 34I, Building Management Ordinance (Cap. 344).
20 Section 16, Building Management Ordinance (Cap. 344).
21 One such example is IO of KK Mansion v. Jade Water Group Ltd [2010] 3 HKLRD 195, where a mandatory injunction was granted against the defendant to remove an unauthorised signboard on an external wall.
