Strata Management Agreement (Hong Kong)

A Strata Management Agreement in Hong Kong records the terms the parties accept and the commitments each makes to the other.

Hong Kong's high-density built environment — over 7 million people occupying predominantly high-rise buildings — makes professional strata management essential for the maintenance of building value, safety, and habitability. Buildings managed under a properly structured strata management agreement tend to maintain higher property values, better building condition, and more harmonious owner communities than buildings without professional management. The Home Affairs Department administers Cap. 344 and provides mediation services for building management disputes.

The Building Management Ordinance (Cap. 344), administered by the Home Affairs Department, provides the statutory framework for Owners Corporations in Hong Kong. An OC is incorporated at a meeting of owners under Section 3 of Cap. 344, creating a body corporate with perpetual succession and the power to sue and be sued in its own name. Under Section 20 of Cap. 344, the OC's management committee may appoint a property management agent by ordinary resolution passed at a general meeting of owners. The OC's management committee is elected annually by owners and has authority to appoint a management company, approve budgets, levy management fees, and enforce the Deed of Mutual Covenant (DMC) against individual owners. Under Section 18 of Cap. 344, the management committee may take legal proceedings in the name of the OC to recover unpaid management fees or enforce DMC obligations.

The Property Management Services Ordinance (Cap. 626), administered by the Property Management Services Authority (PMSA), requires all companies providing property management services in Hong Kong to hold a valid licence from the PMSA under Section 8 of Cap. 626. Full licensing took effect on 1 August 2022. The PMSA maintains a public register of licensed companies and individual practitioners (Tier 1 and Tier 2 licences). A management company engaged under a strata management agreement must be licensed by the PMSA throughout the term of the agreement — loss of the PMSA licence under Cap. 626 is a ground for immediate termination of the strata management agreement.

The Deed of Mutual Covenant (DMC) is the foundational document of every multi-unit building in Hong Kong, registered at the Land Registry under the Land Registration Ordinance (Cap. 128). The DMC allocates management shares among units, defines the common areas, establishes the rights and obligations of all owners, and typically appoints a first manager (usually the developer's related company) for an initial period. The strata management agreement operates within the parameters established by the DMC and cannot override DMC provisions — any conflict between the strata management agreement and the DMC is resolved in favour of the DMC.

Management fees collected from owners under a strata management agreement are held in two funds required by Section 20B of Cap. 344: the management fund, covering day-to-day operating expenses (security, cleaning, utilities, routine maintenance), and the capital works fund, which must hold a minimum of 10% of the annual budget and is reserved for major repairs and improvement works. The management company is typically the collecting agent for these funds, with fiduciary obligations to the OC in relation to their custody and disbursement. Forms-legal.com provides this Strata Management Agreement Hong Kong template covering all requirements under Cap. 344 and Cap. 626.

A Strata Management Agreement in Hong Kong is needed whenever an Owners Corporation or group of building owners wishes to engage a professional property management company to manage their building's common areas and facilities. The agreement formally documents the management relationship and protects the interests of the OC, individual owners, and the management company.

Newly formed Owners Corporations require a strata management agreement when transitioning from developer-appointed management to an independently selected management company. Under Cap. 344, the OC has the power to terminate the developer's initial management arrangement and appoint its own manager. A written strata management agreement documents the terms of the new appointment and protects the OC against service deficiencies.

Buildings with expiring management contracts need a new strata management agreement when an existing management contract comes up for renewal or the OC decides to change management companies. A competitive tender process typically precedes appointment of a new manager, with the strata management agreement formalising the selected manager's appointment.

Mixed-use developments — buildings containing residential, retail, commercial, and carpark components — require tailored strata management agreements that address the different needs and fee structures for each component. Retail tenants, office occupiers, and residential owners all have different expectations of building management standards.

Age-related building maintenance requirements make a strong strata management agreement particularly important for older Hong Kong buildings. Buildings subject to the Mandatory Building Inspection Scheme (MBIS) under the Buildings Ordinance (Cap. 123) must undergo periodic inspections and repairs. The management company should be responsible for coordinating MBIS inspections and coordinating approved inspectors and contractors.

Residential estates managed by property management companies in Hong Kong's private housing market — including major estate managers such as those managing large housing estates across Hong Kong — all operate under strata management agreements. The agreement should address the full range of facilities provided in the estate: swimming pools, clubhouses, tennis courts, shuttle bus services, and 24-hour security.

Related documents that typically accompany a strata management agreement include the Deed of Mutual Covenant (the building's constitutional document), the OC's by-laws made under Cap. 344, the management company's PMSA licence certificate, and any service level agreements for specialist services such as lift maintenance contracts with licensed lift contractors under the Lifts and Escalators Ordinance (Cap. 618).

A thorough Strata Management Agreement in Hong Kong must include specific provisions required by the Building Management Ordinance (Cap. 344), the Property Management Services Ordinance (Cap. 626), and professional property management practice in Hong Kong. Each element protects the interests of the Owners Corporation and individual owners.

Parties and recitals identify the Owners Corporation (with its registration number under Section 3 of Cap. 344 and the building address), the licensed management company (with its PMSA licence number under Section 8 of Cap. 626 and Companies Registry number under the Companies Ordinance (Cap. 622)), and the building to be managed (address, lot number under the Land Registration Ordinance (Cap. 128), DMC reference, and number of units). The recitals should confirm the OC's authority to appoint the manager under Section 20 of Cap. 344 and the manager's current licensing status under Cap. 626.

Scope of management services defines precisely what services the manager will provide. Core services typically include: building security (24-hour security guards licensed under the Security and Guarding Services Ordinance (Cap. 460), CCTV monitoring, access control); cleaning of common areas, lifts, and carparks; maintenance and repair of building services (lifts and escalators under the Lifts and Escalators Ordinance (Cap. 618), fire services installations inspected under the Fire Services Ordinance (Cap. 95), HVAC systems, electrical installations); landscaping and pest control; emergency response and typhoon preparedness; and resident liaison. Optional enhanced services may include clubhouse management, shuttle bus coordination, and concierge services.

Management fee specifies the monthly management fee payable to the management company in HKD, the basis of the fee (fixed monthly amount, percentage of management budget collected, or per-unit fee), annual fee review provisions, and the consequences of delayed payment. Transparency in management fees is required by the PMSA's Code of Conduct issued under Section 28 of Cap. 626.

Financial management obligations require the manager to: collect management fees and government rent from owners; maintain the management fund and capital works fund in separate designated bank accounts as required by Section 20B of Cap. 344; issue monthly financial statements to the management committee; prepare an annual budget for OC approval; and arrange an annual audit of the management fund accounts by a Certified Public Accountant registered under the Professional Accountants Ordinance (Cap. 50).

Staffing provisions specify the minimum staffing levels for building staff (security guards, cleaners, building assistants) deployed at the building, the qualifications required for key staff (e.g. licensed security personnel under Section 10 of the Security and Guarding Services Ordinance (Cap. 460)), and the procedure for approval of key personnel changes by the management committee.

Insurance obligations require the manager to maintain building insurance, third-party liability insurance (typically HK$20–50 million per occurrence), and Employees' Compensation Insurance required under Section 4 of the Employees' Compensation Ordinance (Cap. 282) for all building staff, naming the OC as an additional insured party on all policies.

Mandatory Building Inspection Scheme compliance: the agreement should address the manager's obligations to coordinate Mandatory Building Inspection Scheme (MBIS) inspections required under Section 30B of the Buildings Ordinance (Cap. 123) for buildings aged 30 years or more, including engaging Registered Inspectors and coordinating repair works identified in inspection reports.

Reporting and transparency require the manager to provide the management committee with monthly management reports covering: financial statements, maintenance works completed, incidents, complaints, and upcoming works. Annual reports and attendance at the OC's annual general meeting under Cap. 344 are standard obligations.

Term and termination specifies the contract duration (typically 2–3 years), the process for renewal, the notice period for termination for convenience (typically 3 months), and immediate termination rights for material breach, loss of PMSA licence under Cap. 626, or insolvency. Forms-legal.com provides this Hong Kong Strata Management Agreement template for Owners Corporations and management companies.

Dispute resolution specifies the mechanism for resolving disputes — mediation through the Home Affairs Department under Cap. 344, followed by the Lands Tribunal (which has specific statutory jurisdiction over building management disputes under Schedule 1 of Cap. 344) or HKIAC arbitration for unresolved disputes. The Lands Tribunal is the appropriate forum for most owner-OC and OC-manager disputes in Hong Kong.