By Claire Chow and Gabriel Brettell

Hong Kong, 8 July 2026: In a landmark judgment, the Court of Final Appeal has affirmed the power of an owners’ corporation to waive or acquiesce in disputes involving a breach of the deed of mutual covenant (DMC). The ruling provides clarity in what had been a legal grey area and offers welcome guidance on the rights and obligations of owners’ bodies.

For the uninitiated, a DMC is a contract that defines the rights, responsibilities and rules for owners in a multi-unit property. It establishes management protocols, regulates common areas and is automatically passed on to future owners. The CFA case – Centre Chase Investment Limited v The Incorporated Owners of Castle Peak Road International Industrial Building and Another [2026] HKCFA 26 – arose as a result of modifications made to an industrial complex in Cheung Sha Wan which, it was claimed, breached the DMC.

The appellant, owner of a unit in the building, objected to another owner installing several mock window frames on the external wall. There were no openings at the frames, which were for feng shui purposes only, and a certificate of compliance under the Building (Minor Works) Regulation (Cap. 123N) was secured, thus there was no question of illegality. There were also other structures, such as supporting frames for air conditioning units, erected by other owners throughout the years.

After the appellant complained that the window frames breached the DMC, the incorporated owners (IO) passed a resolution approving the installation pending renovation of the external wall. The appellant commenced proceedings against the IO, seeking an order compelling it to enforce the DMC. This was dismissed by both the Lands Tribunal and the Court of Appeal which held that, by passing the resolution, the IO had duly waived or acquiesced in any breaches of the DMC.

The CFA upheld that ruling and dismissed the appeal. Taking into account the statutory context and purpose of the Building Management Ordinance (Cap. 344), specifically section 18, it held that common parts of a building should be managed by an IO through majority decisions and that it should have flexibility in enforcing a DMC, given that this necessarily involves competing interests and priorities.

Thus, an IO’s management committee should have full discretion in choosing the best way to tackle a breach, including but not limited to the right to waive or acquiesce. That said, the committee must still consider a complaint of a breach conscientiously and reasonably.

The CFA also took the opportunity to address the legal uncertainties arising from previous judgments. It declared that the reasoning in the earlier cases of Hoi Luen Industrial Centre and Chungking Mansions could not be sustained and should not be followed.

The judgment should be welcomed by IOs. It gives management committees greater clarity, confirms they have no obligation to prosecute every alleged DMC breach and offers them wide discretion in dealing with matters on a case by case basis while taking into account a range of factors.

Managing a building, whether residential or industrial, on behalf of multiple owners is a complex task. It involves myriad matters, including refuse clearing, security, maintenance and engaging property management firms. In the event of disputes, parties are strongly advised to seek professional advice. Here at BC&C we have considerable experience in property ownership and building management issues and are ready to help.

Claire Chow is a Senior Associate with BC&C, having joined the firm in 2019. She covers a broad range of practice areas including civil and commercial litigation, and judicial review. She can be contacted at Claire@boasecohencollins.com.

Gabriel Brettell is an Associate with BC&C. He maintains a mixed practice in both criminal and civil litigation and also has experience in family law, insurance and personal injury, arbitration, company and commercial, employment and immigration matters. He can be contacted at gabriel@boasecohencollins.com.