Demystifying Apartment Service Fees Adjustments: When and How?

Understanding Apartment Service Fees

Here's a breakdown of apartment service fees, as defined in Clause 2, Article 3 of Circular 37/2009/TT-BXD:

• Overheads: Costs for energy, materials, and equipment maintenance related to building operations.
• General Management Expenses: Salaries, insurance, and operational costs of the management team.
• Building Owner's Committee Expenses: Reasonable allowances for committee members and operational costs.
• Reasonable Profit Ratio: A small profit margin for the property management company.
• VAT Tax: Value-added tax on the total service fee.

Fees at Work

The service fee, paid in Viet Nam dong per square metre of your apartment's net usable area, funds essential services, amenities, and daily operations. From security and sanitation to waste collection and landscaping, these fees keep your building running smoothly.

Complexity in Control

Savills recognises the intricate nature of apartment service fees, influenced by various factors. We support developers in calculating and balancing fair service fees with project sales goals and sustainable operations. Learn more about Savills consultancy for operational budgets and service fees calculations.
Read more:

• All You Need to Know About Apartment Service Fees
• How to Calculate and Build Property Management Budgets

Understanding how apartment service fees work is crucial for both owners and residents. Let's break down the specifics based on Article 106 of the 2014 Housing Law:

Multi-Owner Buildings

• No Building Owner's Committee: If there's no committee yet, the service fees are defined in your housing sale or lease purchase agreement.
• Established Building Owner's Committee: Once a committee exists, it determines the service fees through owner's committee meetings.

Single-Owner Buildings

Service fees are agreed upon directly between the homeowner and the occupants. Clause 5 of Article 106 sets up a practical tool for service fee management in specific situations:

1. Managing State-Owned Buildings:

• The People's Committee of the province establishes a service fee bracket to ensure consistent and fair charges for state-owned apartment buildings across the region.

2. Facilitating Agreements and Resolving Disputes:

• This bracket serves as a reference point for contracting parties during housing sale/lease purchase negotiations.
• In case of disagreements over service fees between the managing organization and residents, the bracket helps resolve by providing a baseline for negotiation or a default option if an agreement isn't reached.

Organising the first Building Owner’s Committee meeting is essential in establishing the committee and agreeing on expenses that apartment owners and tenants must contribute. The first meeting of a building owner's committee sets the stage for smooth operations and harmonious building life. But navigating legalities, service fees, and resident concerns can be daunting. That's where experienced real estate management agents prove invaluable.

Read more about Savills consultancy package for organising the first building Owner’s Committee meeting here. Our package includes:

• Consulting on organising the first Building Owner’s Committee meeting.
• Consulting on establishing a Building Owner’s Committee. 

Adjusting Apartment Service Fees: Balancing Costs and Quality

In the ever-evolving landscape of building operations, adjusting apartment service fees sometimes becomes necessary to maintain service quality and financial stability. To navigate this sensitive topic effectively, developers and building owner's committees must act with transparency, thoroughness, and respect for resident concerns.

1. Grounds for Adjustment

As per Article 7 of Circular No. 37/2009/TT-BXD, adjustments can be justified based on:

• Economic Factors: Changes in national and local socio-economic conditions, including per-capita income, can necessitate fee adjustments.
• Market Dynamics: Shifts in the supply and demand for apartment services or significant market price fluctuations warrant re-evaluation.
• Policy Changes: Government policy updates exceeding a 10% impact on service fees or operational costs call for adjustments.

2. Meeting Requirements

Before any changes, an irregular owner's committee meeting must be convened, per Point d, Clause 1, Article 14 of Circular 02/2016/TT-BXD. Attendance of at least 50% of apartment representatives is mandatory.

Gaining Approval: The meeting should involve:

• Presenting a detailed budget plan: This plan should transparently link the desired fee level with the intended improvements in service quality.
• Providing clear justifications: Clearly explain the need for adjustment, citing concrete data and objective economic or operational factors.
• Once over 50% of apartment owners express approval, the Management Board can officially request government agency approval for the updated fees.

Building Trust and Understanding: Remember, apartment service fees are a sensitive topic. To ensure resident agreement, developers and committees should:

• Engage in open communication: Address concerns, answer questions honestly, and provide residents with the necessary information to make informed decisions.
• Demonstrate responsible financial management: Showcase a well-defined budget that justifies the revised fees and ensures their efficient utilization for improved services.
• Seek professional guidance: Partner with experienced real estate management agents to navigate legal complexities, assess operational needs accurately, and facilitate smooth communication with residents.

Navigating Change with Confidence: Adjusting apartment service fees might seem daunting, but with a transparent, data-driven approach and a commitment to resident well-being, developers and committees can make necessary changes to ensure operational stability and continuous improvement in service quality. Remember, Savills is here to guide you through every step of the process. Contact us today and let our expertise help you achieve a win-win solution for your building community.

Contact Savills Property Management Department for more information.