What You Need to Know about Service Fees for Unused Apartments

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.

CASE STUDIES OF PAYING SERVICE FEES

Service fees are stipulated in the sales contract between the developer (seller) and the apartment owner (buyer) and are clear from the very start. However, many buyers are investors looking to achieve capital gain or rental income from their properties. This could result in concerns about service fees and who is responsible for paying them.

Scenario 1: The apartment has been handed over, but it is not occupied.

There are many cases where customers have signed a contract to buy or rent an apartment and have received the property but do not move in immediately. During this time, owners should carefully check the terms of their contracts to confirm if they must pay service fees or not.

Scenario 2: The buyer wants to sell the apartment on the secondary market

If buyers use apartments as investment properties, they often leave them empty until reselling them. Often, property owners neglect to pay the service fees during this time. However, to avoid any complications, apartment owners should understand the terms of their contracts and the fees required.

Scenario 3: Owners lease their apartments out

According to Clause 7, Article 3 of Decree 69/2021/ND-CP, apartment users are:

• The owner who uses the apartment building.
• Organisations, households, or individuals who legally use apartments or other areas in the apartment building through leasing, borrowing, or staying.

In this case, the buyer is still the owner, and the tenant uses the apartment for the duration of the lease agreement. The question is, who is responsible for paying the service fees?

This often depends on the lease contracts. Some property owners will pay the service fees on behalf of their tenants as a lease incentive. However, this depends on the lease agreement between the owner and the tenants. In many cases, the tenant is responsible for paying this fee in addition to their rent. 

In some cases, however, if the developer has not specified and made the fee terms clear in the sales contract, there could be unnecessary disputes. Learn more about service fees as well as the roles and responsibilities of relevant parties.

Laws on Service Fees

Circular 02/2016/TT-BXD on Regulation on management and use of apartment buildings clearly states:

Clause 3, Article 4 on principles for managing and using 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 based on the Law on Housing. Using the budget for operations and maintenance of the shared portion of the apartment building should serve its primary purpose, be transparent and follow the Housing Law. The contribution of fees should follow law provisions.

Article 31 on service expenditure: Service expenditure shall be paid on a monthly or periodical basis by owners or occupiers so that managing units can performance their duties.

According to Ms Pham Thi Trung Ha, Head of Residential, Property Management, Savills Ha Noi, in cases where the apartments have been handed over, but the owner has not yet lived, paying the service fees in full to the management team is necessary, according to the provisions of law.

What do owners gain from paying service fees, even if they do not occupy the property?

They benefit because service fees are used to ensure operational stability, develop cohesive communities, and maintain the quality and value of the project. Service fees are used as follows:

Upholding hygiene and security:

• Common areas must be cleaned and looked after carefully. This increases physical cleaning but also landscaping and gardening.
• Security must be upheld through security cameras, surveillance, security guards, and other protection and safety measures.

Ensuring stable operations:

• Maintain general administrative work to ensure the building operates stably and according to the proposed plan.
• Control and maintain the operation of the apartment's equipment system.

Read more

• All you need to know about apartment service fees

Even if owners do not live in their apartments, management teams still deploy activities to ensure and maintain safe and maintained apartment buildings with high-quality services, cohesive communities and high-end services. All of these factors support long-term value.

CONCLUSION

Paying service fees in full and per the regulations is an obligation when owning an apartment. Owners must understand what they are liable to pay and when before buying an apartment.

Learn more about Savills Consultancy on building operating budgets and service fees here.