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Management fees to put cat amongst pigeons

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Newly approved management fees are expected to cool down hot disputes between project developers and residents in Hanoi.

Hanoi People’s Committee has recently decided to quadruple the management fees of apartment buildings, which in the past have been flashpoints of conflict with many apartment building residents claiming developers were ripping them off.

Decision 3431/QD-UBND, signed by committee vice chairman Nguyen Huy Tuong, means the maximum fee is VND16,500 ($0.78) per square metre per month, compared to only VND4,000 ($0.2) per square metre per month as previously.

Nguyen Quoc Tuan, deputy director of the Hanoi Construction Department, said the management fees were based on the true calculation of services in any building and its collection would be used to operate the buildings.

The fees, Tuan added, would be collected under the principle of “self collection, self payment”.

Savills Vietnam associate director and head of property management Nguyen Thu Hoai said the new fees were more reasonable.

“This new fees are more closer to reality and flexibility to apply for different apartment buildings,” Hoai said.

The new fees, Hoai said, would not include extra services such as swimming pools as they would be negotiated between developers and tenants.

According to Hoai, the fees also depended on many other issues such as the use of common area and the differentials in service charges between the commercial and residential area.

Disputes has been occurred in majority of projects, especially luxury projects such as Keangnam Palace, Golden Westlake and Sky City, where tenants did not agree with the management and parking fees applied by developers, claiming that fees were higher than those regulated by the Hanoi People’s Committee.

Keangnam Vina – the developer of Vietnam’s highest building Keangnam Landmark 72, even last year had to stop operation of 10 out of 20 lifts in the two 48-storey buildings and provided less security and cleaning services after it had lowered management fees from VND18,843 ($0.89) per square metre per month to only VND4,000 ($0.19) as requested by the residents.

Keangnam Vina chairman Ha Jong Suk said that he was forced to stop some of the services because he did not enough money to operate them with the minimum prices.

“The operator’s principle is “what you give is what you get”, so it is impossible for the residents to get the high-class services without having to pay more,” Suk said.

The case underlined disputes over apartment management fees in Vietnam have not abated as foreign developers and management companies are scratching their heads over how to operate high-class residential buildings.

Nguyen Hong Minh, director of PMC - a management services supplier, said apart from different thought in service charges, differences between culture, living habits and people’s thinking were mostly behind the disputes.

Minh said disputes were also caused by the lack of a synchronous legal system relating to high-rise apartment buildings.

By Bich Ngoc - Vietnam Investment Review