A Deed of Mutual Covenant in Hong Kong, usually called a DMC, is the private contract registered against a multi-unit building that governs how the property is owned, paid for, and lived in. It is signed by the developer, the first purchaser, and the appointed manager, and its terms attach to the land itself. That last point is the one that matters most to buyers: once you take an assignment of a flat, you are bound by the DMC automatically, whether or not you ever read it.
Why the DMC Binds You Even If You Never Signed It
The DMC takes effect when the developer sells the first unit and registers the document at the Land Registry. From that point the covenants attach to each undivided share in the lot. A typical clause states that the provisions “are binding on all Owners and their respective successors and assigns” and that “the benefit and burden thereof are annexed to and run with the Land, the Development and the Undivided Shares.” You cannot buy a flat and then opt out of the rules, and you cannot refuse to pay management fees on the basis that you personally never agreed to them.
The DMC also sits below the government lease. The Law Society’s guidelines for solicitors drafting these documents make clear that no provision in a DMC may breach the conditions of the government grant or lease. Where the two conflict, the lease conditions prevail. That hierarchy matters most when a DMC appears to permit a use, such as certain commercial activities in a residential development, that the lease itself does not allow.
Undivided Shares and Management Shares
When you buy a flat in Hong Kong, you do not own a marked-off piece of ground beneath the building. You acquire a number of undivided shares in the whole lot, together with an exclusive right to occupy your specific unit. The share allocation for each flat is set out in the DMC and recorded at the Land Registry.
Under most DMCs, the number of undivided shares you hold controls two separate things: your voting power at owners’ meetings and the proportion of building costs you pay each month. Larger or better-located units usually carry more shares and therefore bear a bigger part of the operating budget. Some DMCs split the calculation by creating a distinct “management share” allocation for fees, weighted by gross floor area, floor level, or orientation. In those buildings a penthouse with harbour views pays more toward common costs than a lower-floor flat of similar size, even though the two might carry the same votes. Read your DMC to see which figure controls which decision. They are not always the same.
The Rules You Have to Live By
The DMC’s covenants function as the building’s internal law. Some are restrictive, prohibiting particular activities, and some are positive, requiring owners to do specific things. The Building Management Ordinance provides a statutory backstop against unreasonable terms, but most everyday disputes turn on what the DMC itself says.
Common restrictions include:
- Pets. Many DMCs ban dogs outright and require the manager’s written consent before keeping any other animal. Some Housing Authority developments prohibit dogs throughout the estate.
- Renovations. Non-structural work such as light fixtures and decorations generally does not need approval, but any structural alteration requires the manager’s prior written permission, and no change may damage common parts or interfere with other residents.
- Metal grilles and gates. Installing a grille at your front door typically requires submitting the design for the manager’s written approval, and it must comply with Fire Services Ordinance requirements and leave common corridors clear.
- Noise. Owners and occupiers are prohibited from making or permitting disturbing noise inside the building.
- Use of the unit. Converting a residential flat into commercial premises, or using it for anything other than private residential occupation, is almost always prohibited unless the DMC expressly allows otherwise.
If an owner breaches these rules, the manager or the Owners’ Corporation can seek an injunction in court, and the owner in breach may be ordered to pay the legal costs of enforcement. Consistency counts. Courts are less sympathetic to selective enforcement, where the same conduct is tolerated from one owner and pursued against another.
Common Parts and Exclusive Use Areas
Areas of the building intended for shared use are classified as common parts: the foundations, external walls, roof, lobbies, staircases, lifts, fire escapes, and shared facilities like pools or gardens. The Ninth Schedule of the Building Management Ordinance provides a default list of what counts as a common part when the DMC is silent or ambiguous. No individual owner may claim exclusive possession of a common area, obstruct it, or damage it, no matter how close it sits to their unit.
Between the shared common parts and the private interior of your flat lies a middle category that catches many owners off guard. Balconies, utility platforms, and rooftop areas are frequently designated in the DMC as common parts allocated for the exclusive use of a specific owner. You have the sole right to use and enjoy the space, but it remains part of the building’s common property. In practice that means you pay to maintain it yourself, but you cannot alter it in ways that affect the building’s structure or external appearance without the manager’s written consent.
Car parking spaces follow the same logic. A space may be sold as a separate unit with its own undivided shares, or it may be a common area held with exclusive use rights. The distinction affects voting and resale, so it is worth confirming how your space is classified before you buy.
What You Pay Each Month, and What Happens If You Don’t
Every owner pays monthly management fees covering the building’s recurring operating costs: electricity for common areas, water for shared gardens, cleaning, security, and the manager’s own fees. Each owner’s share is calculated by reference to their allocation in the DMC, whether that is undivided shares or a separate management-share figure.
On top of monthly fees, the Building Management Ordinance requires a special fund for long-term capital expenditure. This fund covers periodic large projects like lift replacement, external repainting, and waterproofing works. Contributions are set out in the DMC or fixed by the manager’s annual budget. The fund exists because these expenses are too big to levy in one go when they fall due, so a building with a thin reserve fund may be heading for a painful special levy.
An owner who falls behind can be pursued through the courts, and a judgment or charge can be registered against the unit at the Land Registry. A registered charge effectively prevents a sale with clean title until the debt is cleared, which makes it a serious enforcement tool even before matters reach a full hearing.
The Building Manager, and How Owners Push Back
The manager is the executive arm of the building. It collects fees, enforces house rules, hires contractors, arranges repairs, and enters service contracts for utilities and security. The developer appoints the first manager when a new development is completed. The Law Society’s drafting guidelines cap that initial appointment at two years, after which owners take full control of whether to retain, replace, or remove the manager.
Owners who are unhappy can vote to terminate the appointment. The Building Management Ordinance requires a majority vote by reference to undivided shares and the notice period fixed in the DMC. Preparation matters here, particularly securing proxies from owners who cannot attend in person.
A manager who handles other people’s money is expected to act with reasonable care. Managers must prepare annual budgets, keep proper accounts, and make records available for inspection. Steering repair contracts to related companies, overcharging, or neglecting maintenance can expose a manager to legal action.
The most effective way for owners to hold a poor manager accountable is to form an Owners’ Corporation. An OC is a legal entity that can enter contracts, sue and be sued, take over management responsibilities, dismiss the manager, and make decisions about the common parts on behalf of all owners. Formation is not automatic. It runs through a set process under the Building Management Ordinance involving a convenor appointed by owners holding at least 5% of the undivided shares, a properly noticed meeting, a quorum of 10% of owners, and election of a management committee supported by owners holding at least 30% of the undivided shares. The committee then registers the corporation with the Land Registrar within 28 days.
What to Check in the DMC Before You Buy
The DMC is one of the most overlooked documents in a Hong Kong property purchase. It runs to dozens of pages of dense legal text, and buyers often assume their solicitor will flag anything odd. Some provisions you should understand yourself, because they will shape your costs and daily life for as long as you own the flat.
- Undivided shares and management shares. Check whether the allocation to your unit looks proportionate to its size and position. An unusually low allocation weakens your vote; an unusually high one inflates your fees.
- Fee level and reserves. Look at the current budget and monthly fee, and ask whether a special fund exists and how much has built up.
- Use restrictions. If you plan to keep a pet, run a home business, or let the unit on short stays, confirm the DMC allows it. Amending a DMC after the fact is extremely difficult in practice.
- Exclusive use areas. If the unit comes with a rooftop, balcony, or parking space, confirm whether it is a separate unit with its own shares or a common area with exclusive use rights. The answer changes what you can do with the space and who pays for its upkeep.
- Manager’s appointment. Check who the manager is, when the appointment expires, and how termination works. A DMC that locks owners into a long management contract with no realistic exit is a warning sign.
- Government lease. Your solicitor should confirm nothing in the DMC breaches the lease, particularly in mixed-use developments where the permitted uses under the lease may be narrower than the DMC suggests.
Your solicitor can request a copy of the DMC from the Land Registry before you exchange. The registration fee is small compared with the financial surprises a poorly understood DMC can produce after you move in.