Apartment Fees Explained: Service Fees vs Maintenance Fees

Understanding your apartment expenses is crucial, and two key terms often pop up: service fees and maintenance fees. While related to your living space, they play distinct roles and shouldn't be confused.

FIXED COSTS AT APARTMENT BUILDINGS

1. Maintenance fees: These fees are used to maintain the common systems and infrastructure of the building. Maintenance fees are equivalent to 2% of the apartment’s value and are calculated directly into the house sale price that the buyer must pay upon handover, as stipulated in the contract. Regulations on paying apartment maintenance fees have also been clearly stated in Article 108 of the 2014 Housing Law.

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• Are maintenance fees included in the operating budget?

2. Service fees: Monthly fees paid by the owner for services in the apartment building, including security, environmental sanitation, waste collection, landscaping, pest control, electricity costs for public lighting, water used in public spaces, cleaning of public areas, and management costs.

3. Apartment parking fees (if any): According to the provisions of Clause 2, Article 106 of the 2014 Housing Law, apartment parking fees are excluded from service fees.

4. Electricity, water, Internet, and television costs: Monthly living expenses that residents and tenants must pay.

Among the above fees, owners often misunderstand that maintenance fees are included in apartment service fees. This is also the source of frequent disputes between residents, tenants, management team and developers.

According to the law, for apartment buildings, service fees and maintenance fees are two different fees, used for different categories of expenses in operating the building.

Find out more about Savills consultancy package that helps developers calculate accurate service fees here.

DISTINGUISHING APARTMENT SERVICE FEES AND MAINTENANCE FEES

1. Legal basis

1.1. Service fees: Circular 37/2009/TT-BXD

1.2. Maintenance fees: 

• Circular 02/2016/TT-BXD.
• 2014 Housing Law.

2. Uses

2.1. Service fees:

Overheads

• Expenses for services within apartment developments, such as security, environmental sanitation, garbage collection, landscaping, pest control, and other services (if any).
• 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.
• 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 required for management.

General management expenses

• Salaries, wages and salary allowances, social and health insurance premiums, trade union dues and other contributions from salary funds for the management team.
• Fixed asset depreciation expenses of the building and operating enterprises.
• Expenses for the Building Owners’ Committee (BOC) (if any)
• Other expenses related to operations.

2.2. Maintenance fees:

• Maintaining the system of equipment under common ownership of the apartment building, including elevators, generators, water pumps, ventilation systems, lighting power supply systems, domestic electricity, and other electrical appliances general, water supply and drainage systems, gas supply systems, central heating, broadcasting, television, communications, fire prevention and fighting, lightning rods and other equipment commonly used in apartment buildings.
• Outside infrastructure connected to apartment buildings and public works.
• Handling wastewater and septic tank emptying.
• Other work for the shared portions of apartment buildings as agreed in the purchase and lease contracts or according to the Law on Housing.

3. Fees to be paid

3.1. Service fees

Calculated according to the size of an apartment (sq m).

Service fees are normally collected according to the regulations in the sales contract between the developer and customer or between the BOC and the property manager.

3.2. Maintenance fees

• 2% of apartment value.
• Maintenance fees are calculated before tax paying. The State does not collect tax on this fee.

4. Payment time

4.1. Service fees

• Paid periodically (monthly, quarterly, yearly) based on accurate cost calculations and a portion of profits with reasonable norms to manage and operate the apartment building.
• Closing time will be determined by the property manager who will notify residents. Usually, service fees are collected monthly.

4.2. Maintenance fee

The payment of maintenance fees is specified by the developer when the owner signs the apartment sales contract.

Normally, the buyer will close before the developer hands over the apartment.

5. Fee adjustment

5.1. Service fees

• Some costs that constitute service fees may increase according to the State's policies. These changes are necessary to ensure that service quality is upheld.
• The adjustment (increase or decrease) should be agreed upon through the BOC.

5.2. Maintenance fees

• In case of an insufficient maintenance budget for the common area of the apartment building, the apartment owners are responsible for contributing additional funds corresponding to their owned area.
• The additional fee should be discussed with residents during the BOC meeting.

CONCLUSION

By understanding the differences between service and maintenance fees, residents can avoid confusion or uncertainty in their financial obligations. However, developers must establish reasonable service fees and optimise the apartment maintenance funds to deliver the best experiences for their residents. They can achieve this by working with a professional management agent.

See Savills Property Management and Consultancy Services here.

Read more

• When can developers adjust apartment service fees?
• How to Calculate and Build Property Management Budgets?
• How to Optimise Maintenance Funds in Apartment Buildings