All You Need to Know About Apartment Service Fees

LEGAL REGULATIONS ON APARTMENT SERVICE FEES

Apartment service fees are paid by apartment owners monthly or periodically when the building officially comes into operation, to ensure that services in the building are fully provided to meet customers need.

1. Service fees structure:

As stated in Clause 2 and Clause 3 of Article 3 of Circular 37/2009/TT-BXD, expenses constituting apartment service fees include:

1.1. Apartment service expenses, covering:
Overheads:

• Expenses for energy, raw materials, fuel, materials, and other expenses (if any) for the operation of the building
• Labour expenses to control and maintain the operation of the equipment system
• Expenses for services within apartment, such as security, environmental sanitation, garbage collection, flower-garden and tree tending, insect killing and other services (if any), which shall be determined based on the workload to be performed and the package levels agreed in the service contract
• Charges for public lighting electricity and common-use water within the building.
• Expenses for stationery, furniture, working offices, daily-life electricity, water, and other expenses paid to the management section.

General management expenses:

• Salaries, wages and salary allowances, social and health insurance premiums, trade union dues and other contributions from salary funds to management section.
• Fixed asset depreciation expenses of the building-managing and -operating enterprise. The deduction, management and use of fixed asset depreciations comply with the Finance Ministry's regulations.
• Expenses for the building owners’ committee (if any): responsibility allowance expenses for members and other reasonable expenses serving the operations of the building owners’ committee.

1.2. The reasonable profit ratio for the building-managing and -operating enterprise, which must not exceed 10% of building service expenses after subtracting revenues from providing services on the areas under the common ownership of building (exclusive of value-added tax).

1.3. Value-added tax under the State's current regulations.

2. Obligations of related parties in managing service fees

Article 6 of Circular 37/2009/TT-BXD specifies in detail the obligations of the parties about service fees management:

• Developer shall, based on the maximum (ceiling) building service charge rates or brackets set by provincial-level People's Committees, calculate the efficiency upon formulating projects and plans on service charge rates for use as a basis for signing contracts on purchase and sale of building apartments or contracts on provision of building services.
• Building-managing and -operating enterprises shall themselves calculate and determine service fees under the guidance of this Circular and submit them to developers (if any) or building-managing units for obtaining approval of building owners’ committee or households in buildings.
• Building owners’ committee shall monitor and supervise the management and operation under the terms of signed contract; test before take-over, make payment to and liquidate contracts with management agent; and directly collect or authorise them to collect apartment service fees.

Therefore, the developers shall determine the service fees, which will be explicitly mentioned in the sale/lease agreement or reached a consensus with the residents and building owners’ committee during owners’ committee meeting. Owners have responsibility to ensure that all service fees and other fees are paid on time, in accordance with legal requirements and agreements with service providers.

COMMON MISCONCEPTIONS ABOUT APARTMENT SERVICE FEES

Confusion between service fees and maintenance fees

Maintenance fees represents all expenses for maintenance, minor repairs, medium repairs, major repairs, and unexpected repairs to maintain the quality of the building. These costs are not calculated into the monthly service fees paid by the owner.

In case the maintenance budget is not enough to maintain the common area, the apartment owners are responsible for contributing additional funds corresponding to their private area. This decision will be discussed and get opinions from residents during the Owners’ Committee Meeting. 

Payment of service fees for unoccupied residences

When a resident purchases an apartment but has not yet moved in, they may concern about the obligation to pay service fees.

As per the stipulations outlined in Clause 3, Article 4 of Circular 02/2016/TT-BXD concerning the regulation on management and use of apartment buildings, payment of fees for administration and operation of apartment buildings shall be carried out according to negotiations between apartment owners, occupants and managing units on the basis of the Law on Housing. Use of budget for operation and maintenance of shared portion of the apartment building should serve primary purpose, be transparent and in accordance with the Law on housing and this Regulation; contribution of fees and charges during the use of apartment building should be following law provisions.

Apartment service fees are calculated by balancing the project's actual revenues and expenses, then distributing equally among the owner's private area. Despite apartment's utilisation status, this expense will remain unchanged. If the apartments have been handed over but have not yet been occupied, it is still necessary to pay service fees to the management team.

The obligation to pay service fees will be determined follow the terms of the parties' agreement:

• Payment is not obligatory if the apartment purchase agreement clearly states that occupants have not yet moved in after handover.
• Payment is obligatory if the time of the apartment's handover is clearly stated in the apartment purchase agreement.

Service fees increase

In fact, some costs constituting service fees may increase according to the State's policy mechanism, leading service fees to changes to ensure service quality at the project.

For example, according to Decision No. 377/QD-EVN, the average retail electricity price is adjusted to VND 1,920.3732/kWh (excluding VAT) from May 4, 2023 (equivalent to an increase of 3% compared to the previous average retail electricity price). According to Decree 24/2023/ND-CP, the statutory pay rate will be increased to VND 1,800,000/month - equivalent to an increase of 20.8% compared to the old statutory pay rate from July 1, 2023. These adjustments will affect public lighting electricity expenses and salary expenses for management.  

With operational budgeting and calculating service fees consultancy package, Savills will support developers or building owners’ committee in determining reasonable service fees, based on a deep understanding of the market's service costs, project characteristics, influencing factors and development trends in property management.

Consequently, it is essential to modify the service fees to reflect the current circumstances. Nonetheless, this requires modification and agreement via Owners’ Committee Meeting. This meeting plays an important role in determining the expenses that owners must contribute during apartment use. With such importance, developers should consult reputable agents for guidance on organising with detailed plans and scenarios, including increases in service fees (if any). Find out Savills Consultancy package for establishment of building owners’ committee.

OTHER FEES RESIDENTS NEED TO PAY

Maintenance fee

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

Monthly parking feeRegulations on parking fee at apartment buildings is determined by the People's Committee of provinces and centrally run cities for each locality.

• Monthly motorbike parking fee will range from VND 10,000 to VND 150,000/motorcycle/month.
• Car parking fee will range from 1,200,000 VND to 1,600,000 VND /car/month.

Living expenses

The total amount of expenses incurred by a household while residing in an apartment range from approximately VND 3 - 4 million for high-end apartments and approximately VND 1 million for affordable apartments. However, expenses and utilisation level, flat size, and the quantity of vehicles in the household also impact the living expenses.

CONCLUSION

Understanding apartment service fees will help ensure the rights of parties and avoid unnecessary disputes. Service fees can be adjusted and agreed upon through Owners’ Committee Meeting with the participation of owners.

Savills experts will support the developers across all phrases of the project to provide the most appropriate operating plan for the project's attributes through consultancy packages of organising the first Owners’ Committee Meeting and operational budgeting, calculating service fees.

Contact Savills Property Management Team for specific consultancy on appropriate operational solutions.