How to Optimise Maintenance Funds in Apartment Buildings

According to the Ministry of Construction, 36% of disputes in apartment buildings are over maintenance costs, second only to disputes over private and common areas. How maintenance funds are used directly impacts the reputation of the developer and building owners’ committees, the interests of residents and customers, and the building's quality. Developers and building owners’ committees must work closely with the management board, understand the facilities, technical systems, operations and maintenance required, and know the relevant legislation.

Is the Maintenance Fund Included in the Operating Budget?

Maintenance funds and operating budgets are typically managed separately.

Apartment building management encompasses several responsibilities:

a) Controlling, operating, and regularly maintaining the elevator system, water pump, generator, automatic fire alarm system, firefighting equipment, backup systems, and other communal property.

b) Providing security, cleaning, waste disposal, gardening, insect control, and other services to ensure the building's stable operation.

Apartment maintenance includes inspecting, monitoring, ensuring quality, performing minor repairs, periodic maintenance, and major repairs to constructed parts. It also involves inspecting and maintaining the firefighting system and replacing components or equipment for communal use.

Article 109 of the 2014 Housing Law specifies that maintenance funds may only be used for maintaining common areas, not for operations or other purposes. Therefore, the maintenance fund is separate from the operating budget.

Key Legal Regulations Regarding Apartment Building Maintenance Funds

Who Pays for Maintenance Fees?

Article 107, Clause 1 of the 2014 Housing Law states that apartment building maintenance encompasses both private and common areas. Owners are responsible for maintaining their private spaces and contributing funds for the maintenance of common area.

Owners or tenants are responsible for paying maintenance fees, which amount to 2% of the apartment’s value, as stipulated in the contract.

For apartments or areas in buildings owned by developers or not yet sold or leased at the time that a building is put into operation, developers must contribute 2% of the value of the remaining apartments or areas. This value is determined based on the highest selling prices of apartments in the building.

Who Manages the Maintenance Fees?

During the initial period, the developer manages the maintenance fund. Within seven days of collecting the maintenance fees, the developer must deposit them into a savings account at a Vietnamese credit institution and must notify the local housing authority.

After the Building Owner's Committee is established, the committee takes over management responsibilities. Twelve months after the building's handover and when over 50% of the apartments have been handed over, the developer must hold an Owners' Committee Meeting to elect the Building Owner's Committee.

Within seven working days of its formation, the Building Owner's Committee must request the transfer of the maintenance fund. The developer is responsible for transferring the collected fees from residents, along with its own contribution for unsold or unleased areas, to an account managed by the Building Owner's Committee. This account must be opened at a Vietnamese credit institution and is held in the name(s) of one or more Building Owner's Committee members.

What Happens if the Maintenance Fund Runs Out?

If the fund is insufficient, owners must provide additional funds proportionate to their private areas. This allocation is discussed during the Owners' Committee Meeting.

Creating a maintenance plan to preserve project quality and optimise the fund is fundamental to property management. Savills helps Building Owner's Committees in residential projects such as Sky Oasis, The Matrix One, Imperia Smart Imperia, Sky Park Residence, and Imperia Sky Garden to ensure property budgeting and fund management.

To prevent disputes stemming from a lack of transparency, developers and property management agents must establish detailed annual maintenance plans, with the fund allocation confirmed by the Building Owner's Committee and approved in the Owners' Committee Meeting.

How to Use Maintenance Funds Efficiently

• Detailed Planning: Review and approve the maintenance budget for common areas, endorsing maintenance plans at Owners' Committee Meetings.
• System Evaluation: Assess system conditions and performance to ensure optimal fund utilisation. Establish specific maintenance objectives to enhance efficiency.
• Resource Optimisation: Allocate the budget carefully, seeking cost-saving maintenance methods, adopting new technologies, and outlining long-term plans to prevent sudden breakdowns and higher maintenance costs.
• Maintenance Supervision: Continuously monitor and assess fund use, track maintenance tasks, measure effectiveness, and evaluate outcomes to identify areas for improvement in future maintenance processes.

Developers must accurately calculate maintenance expenses and present them clearly in financial reports to minimise conflicts with residents regarding maintenance fee payments. In urgent cases concerning residents' safety, property management teams can consider using surplus funds, subject to Building Owner's Committee approval.

To create a rational and effective maintenance budget plan, developers should seek support from professional Property Consultancy and Management experts with extensive experience in managing various property types.

Read further:

• Creating an Efficient Maintenance Plan for Apartment Buildings
• The Vital Role of the Technical Team in Building Operations
• Backup Power & Uninterrupted Building Operations