By Alex Liu

Hong Kong, 1 March 2024: Stricter regulation of the home renovation sector appears likely following a damning Consumer Council report that unveils widespread malpractice, such as aggressive sales tactics, lack of transparency over costs and shoddy workmanship. The watchdog has recommended improved safeguards, including an accreditation system for firms and standard quotation form for intended works.

The hard-hitting study, Home Renovation Industry – Better Governance for Creating Comfortable Homes, acknowledges that such works can be “stressful” for many consumers, often involving complex procedures, a high level of personal involvement and multiple interactions with traders. It points out that the average consumer lacks construction knowledge and often ends up “having no choice” but to rely on the trader’s expertise.

Yet the sector is plagued by varying levels of quality due to low entry barriers, says the report. As well, the industry “has long been fragmented”, without representative associations to mobilise stakeholders. Further, because Hong Kong lacks a specific regulatory regime, homeowners have to rely on general consumer protection laws in the event of any disputes.

Consumer Council researchers spent almost two years compiling the study. Their activities included examining complaint and litigation cases, discussions with aggrieved consumers, interviews with traders and a review of renovation advertisements. Crucially, the watchdog conducted dozens of undercover operations where its staff posed as buyers.

The report states that many consumers encounter problems from the outset: they find it hard to compare quotations that are given in different formats; there are too many choices of companies with varying levels of quality; there is a lack of transparency over pricing and schedule; and exaggerated promotions and untrue offers in advertisements are commonplace.

The study highlights that around one in five consumers have disputes with the companies they appoint, with the top three complaints being delay in completion, poor workmanship and failure to rectify defects. Frequently, consumers and traders are at odds over the standard of workmanship.

There are also safety issues to consider, as illustrated by a highly publicised incident last year at a flat in Tseung Kwan O where workmen illegally removed a load-bearing wall. The study states that, despite the wide media coverage of that episode, three-quarters of the contractors approached by undercover researchers insisted wall removal could be carried out simply by looking at the floor plan, without making further inquiries into the nature of the wall.

According to Consumer Council statistics, a total of 1,205 complaints relating to home renovation services were recorded from 2017 to 2023. The value of these exceeded HK$270 million, with the average amount per complaint almost HK$230,000.

The report makes four recommendations to be considered by the government and industry stakeholders:

Introduce a standard quotation form: This would cover, among other things, price, scope of work, project period and payment schedule; health and safety compliance; warranties, rights and remedies; and insurance.

Establish an accreditation scheme: Criteria should cover both objective and subjective core competencies, with a tiered system catering for firms of different sizes and specialities. As well, professional associations should be the accrediting bodies, thus ensuring compliance from member firms.

Adopt an alternative dispute resolution mechanism: Help unhappy parties avoid costly and time-consuming litigation by setting up a “mediation first” system underpinned by qualified professionals serving on panels.

Intensify consumer education: Relevant government departments and industry organisations should consider providing online “info-kits”, seminars and information booths around different residential estates which would allow citizens to empower themselves.

In conclusion, the Consumer Council’s report can be viewed as a welcome call to action for the government and industry bodies to improve what is a largely unregulated sector. With the number of domestic households in Hong Kong on the rise, together with an increasing number of ageing residential buildings, it is clear that a positive and timely response is desirable.

Alex Liu is Managing Partner of BC&C. He was Chairman of the Appeal Tribunal Panel (Buildings Ordinance) for nine years until 2018 and a frequent legal advisor on the TVB documentary series A Property a Day. His key areas of practice include commercial and corporate litigation, investigations by governmental bodies, and insolvency and debt restructuring. He can be contacted at alex@boasecohencollins.com.