The ugly side of property ownership

My biggest asset class is Hong Kong residential property. For the last six years it has been a good place to invest - the recovery from the Asian crisis and SARS, abundant liquidity, negative real interest rates, tight supply, rising demand and high confidence levels have resulted in reasonable growth in rental incomes and stronger growth in capital values. All good for the investor.

The down side is events like this which has happened to one of my properties:

• the tenant complained about a leak. On investigation, the leak was coming from a water pipe belonging to the the unit immediately above mine
• the owners of the leaking pipe denied that it was anything to do with them and refused to act
• the building manager said that they had no power to intervene
• the buildings department eventually inspected the premises and confirmed that the leak was coming from a poorly maintained pipe that belonged to the upstairs unit (fortunately it is fresh water)
• the upstairs unit owners refused to do anything until several rounds of legal demands and threats had been exchanged
• they claimed to have fixed the leak before Christmas. It is still leaking but they deny that the leak has anything to do with them
• legally, I cannot touch their pipe to do the repair myself without committing a criminal offence

The current position is that I expect the tenant to walk. I also expect that the accumulated water damage will require a significant part of the kitchen fit out to be replaced (but this cannot be done until the leak is fixed). I have told the owners of the upstairs unit that I will sue to recover every cent (and I will do so). I have also pointed out that, as a lawyer, it does not cost me very much to commence proceedings.

This is only the second time in 16 years of property ownership that I have had to deal with a significant problem. In that sense, I suppose I have been lucky.