SOME INADEQUACIES IN THE IMPLEMENTATION OF LAWS ON MANAGEMENT AND USE OF APARTMENT BUILDINGS

SOME INADEQUACIES IN THE IMPLEMENTATION OF LAWS ON MANAGEMENT AND USE OF APARTMENT BUILDINGS

SOME INADEQUACIES IN THE IMPLEMENTATION OF LAWS ON MANAGEMENT AND USE OF APARTMENT BUILDINGS

SOME INADEQUACIES IN THE IMPLEMENTATION OF LAWS ON MANAGEMENT AND USE OF APARTMENT BUILDINGS

Luyện Đức Anh

MSc, Lecturer at the Faculty of Law – University of Saigon

ABSTRACT

Apartment buildings play an important role in the development of modern, densely populated cities like Thành phố Hồ Chí Minh. Therefore, the construction of apartment buildings is very necessary, helping the city save land resources, reduce construction costs, and create housing opportunities for many people from different social classes. However, the rapid development of apartment buildings also gives rise to many issues that legal provisions have not yet tightly or promptly adjusted, leading to prolonged disputes and complaints between apartment residents and investors and other related parties. Therefore, there is a need for strict legal provisions to help the state management of apartment buildings achieve high effectiveness in practice.

Keywords: apartment buildings, maintenance fees for apartment buildings, investors, apartment buyers, apartment building management board

I. INTRODUCTION

The draft housing development program of Thành phố Hồ Chí Minh for the period 2021-2030 by the city’s Department of Construction has set a goal of building an additional 107.5 million square meters of housing, meeting the housing needs of more than 11.29 million city residents, with a total required capital of about 1.52 million billion đồng. This includes promoting the development of apartment buildings, increasing the land use coefficient around metro stations to take advantage of infrastructure, and increasing the proportion of rental housing to meet the needs of low-income groups (VnEconomy, June 21st 2022).

It is evident that the demand to increase the housing area, especially apartment buildings, in major cities of our country is genuinely urgent. Therefore, to create a legal corridor more suited to the current and future periods, at the 6th session, the 15th National Assembly passed the 2024 Law on Housing (amended and supplemented) and the 2024 Law on Real Estate Business (amended and supplemented). These two laws took effect on August 1st 2024. To quickly implement the 2023 Law on Housing and the 2023 Law on Real Estate Business in practice, the Government needs to soon issue legal documents to guide the implementation of these laws.

II. PRACTICAL IMPLEMENTATION OF LAWS ON MANAGEMENT AND USE OF APARTMENT BUILDINGS

In practice, the management and use of apartment buildings have encountered several inadequacies in the current legal regulations, leading to disputes, causing harm to apartment buyers and users, and posing difficulties for state management in this activity. Some of the conflicts and disputes related to the use of apartment buildings are as follows:

  1. Regarding maintenance fees for apartment buildings

The maintenance fee is the amount contributed by apartment owners to perform maintenance work on the common ownership areas of the apartment building. According to the 2023 Law on Housing, Article 152 stipulates that for apartment buildings with multiple owners, for the apartments and other areas within the apartment building that the investor of the housing construction project sells or leases, the buyer or lessee must pay a maintenance fee of 2% of the apartment’s value and the leased area.

Initially, this amount is collected and managed by the investor, but after residents move into the project, organize the apartment building meeting, and elect the management board, the maintenance fee will be handed over to the management board. In reality, many disputes and complaints in recent times at apartment buildings have been largely related to the maintenance fees. If the regulation that apartment buyers must pay a 2% maintenance fee when purchasing remains, disputes will continue to arise.

Apartment buildings have an average lifespan of about 50 years. In the first 5 years of use, the maintenance and repair costs are not significant. However, over time, maintenance and repair costs increase. Therefore, it is not necessary to pay the 2% maintenance fee upfront; instead, it can be paid annually, quarterly, or when issues requiring costs arise, residents will contribute.

When maintaining the building, the law should stipulate that the management board must hire consulting and supervision units, bidding advisory units, and quality supervision units. (The source of funds for hiring these consulting and supervision units is extracted from the apartment building maintenance fund and is clearly recorded in books for the management board to report during the apartment building meeting).

This is because the management board is only a representative organization for apartment residents and not a professional organization in the maintenance of apartment buildings. Therefore, they do not have the capacity or experience to inspect, supervise, and accept the maintenance and repair of the building. The law should have regulations to ensure that the use of maintenance funds is public and transparent, increasing residents’ supervision. The management board must report and explain all expenses and use of the maintenance fund in detail and collect residents’ opinions.

  1. Regarding the management board of apartment buildings

The management board of an apartment building is an organization representing residents living in the apartment building to perform activities related to the management and operation of the apartment building on their behalf. However, in practice, several disputes have arisen between residents living in the apartment building and the management board because the management board has not performed its duties and powers according to legal regulations.

A typical example is the incident at The Central Garden apartment building, Thành phố Hồ Chí Minh. At The Central Garden apartment building (328 Võ Văn Kiệt Street, Cô Giang Ward, District 1), many conflicts have occurred between residents and the current management board, along with many issues related to the former investor.

The conflicts revolve around two main issues: the abuse of power by the management board and the lack of financial transparency. Specifically, the management board, which has not been operating for long, has already experienced serious internal divisions and disunity.

The internal factions of the management board are divided into two groups: one group protecting the residents’ interests and another group protecting the former investor’s interests (referred to as the interest group). The interest group colluded with the investor and was supported by this entity, thus abusing power.

Since its establishment on August 30th 2018, the management board has never organized the annual apartment building meeting according to regulations, nor has it ever engaged in dialogue with residents despite continuous requests. The management board has drafted a replacement operational regulation for the management board, stipulating that participants must deposit money with the management board before attending.

During the meeting, residents could only listen, and if they expressed opinions contrary to the management board, they would be fined, with the amount deducted from the deposit (Thanh Niên, 2021).

Currently, according to Circular No. 02/2016/TT-BXD dated February 15th 2016 of the Minister of Construction promulgating the Regulation on Management and Use of Apartment Buildings (amended and supplemented by: Circular No. 22/2016/TT-BXD dated July 1st 2016 of the Minister of Construction; Circular No. 28/2016/TT-BXD dated December 15th 2016 of the Minister of Construction; Circular No. 06/2019/TT-BXD dated October 31st 2019 of the Minister of Construction; Circular No. 07/2021/TT-BXD dated June 30th 2021 of the Minister of Construction), Article 18: Model of the apartment building management board:

The management board of an apartment building or an apartment complex with multiple owners is established and operates according to the model of the Board of Directors of a cooperative or a joint-stock company. The apartment building meeting decides the operating model of the apartment building management board to suit the reality of each building or apartment complex.

If the management board is established and operates according to the model of the Board of Directors of a cooperative, the convening and organization of the management board’s meeting is carried out according to the provisions of cooperative law. If the management board is established and operates according to the model of the Board of Directors of a joint-stock company, the convening and organization of the management board’s meeting is carried out according to the provisions of enterprise law. The management board of an apartment building or an apartment complex with a single owner is established and operates according to a self-management model; the management board members agree on the assignment of implementing the stipulated rights and responsibilities.

In reality, there are currently three models of apartment building management boards in operation:

First, the management board is a civil organization representing residents to sign a contract with the apartment building management company. The management company then provides all building operation management services according to the estimated budget and bidding price. The management board supervises the activities of the management companies.

Second, the management board independently manages and operates, directly signing contracts to purchase various services, from cleaning and security to maintenance and repair of the apartment building.

Third, a mixed model in which half of the operations are outsourced to the management company, while the other half is independently managed and operated by the management board.

For large apartment building projects with high service costs, significant revenue, and considerable surplus, the management board often wants to directly manage the revenue and expenditure. This leads to negative issues and a high risk of fund deficit. The reason is that when the management board independently manages revenue and expenditure, a supervision mechanism, according to the enterprise law, is required, such as a supervisory board or controllers in a joint-stock company.

Consequently, financial, accounting, auditing, tax, and invoice activities need to be extremely transparent. However, the legal framework for the management board is currently unclear. Therefore, specific regulations on the management and financial activities of the management board are necessary. A separate circular should be issued, regulating the financial management, accounting, and bookkeeping of the maintenance fund in apartment buildings and the financial supervision mechanisms of the fund, to ensure the management board’s financial activities are tightly controlled and avoid risks.

Regarding the mechanism for handling violations of the apartment building management board, Decree No. 16/2022/NĐ-CP has imposed rather strict sanctions for violations related to the management and use of apartment buildings by the management board (Article 69, Decree No. 16/2022/NĐ-CP). However, the legal management and supervision mechanism is not strict. In many apartment buildings, violations by the management board are only discovered when residents report them. The management of apartment buildings is not thoroughly addressed by the authorities to promptly prevent the embezzlement of the maintenance fund.

Usually, when residents report violations of the management board to local authorities, the authorities consider them civil disputes and refer the case back to the Ward People’s Committee, leaving the issue to be resolved internally within the apartment building. To prevent violations by the apartment building management board and the situation where residents choose to fight for their rights by hanging banners, slogans, and reporting violations on social media, causing security and order issues, the law should stipulate that when residents of apartment buildings report, local state management agencies need to intervene, supervise, detect, and promptly handle the hotspots of apartment building violations, preventing adverse consequences, and ensuring security, order, and social welfare for residents.

  1. Regarding parking spaces in apartment buildings

On December 9th 2020, the People’s Court of District 5, Thành phố Hồ Chí Minh issued a notice of acceptance for the case of “disputes over other rights related to assets” occurring at The EverRich Infinity apartment building (290 An Dương Vương Street, Ward 4, District 5). This is an apartment building developed by Phát Đạt Real Estate Development Joint Stock Company (Phát Đạt Real Estate Company).

The plaintiff, Mr. N.V.N (born in 1969, residing in Tân Tạo Ward, Bình Tân District), requested the People’s Court of District 5 to compel Phát Đạt Real Estate Company not to sell the car parking spaces and to hand over one car parking space, an area for two motorbikes, and one bicycle in the basement of The EverRich Infinity apartment building (Vietnamnet, 2020).

According to the 2023 Law on Housing, the determination of ownership and usage rights for parking spaces is regulated as follows: For bicycle, two-wheeled motor vehicle, three-wheeled motor vehicle, and disabled vehicle parking spaces for apartment owners and users, they belong to the common ownership and common usage rights of apartment owners. For car parking spaces for apartment owners, the buyer or lessee of the apartment or other area within the apartment building decides to buy or lease; if not purchased or leased, the car parking spaces are managed by the housing construction project investor.

The housing construction project investor is not allowed to include the construction cost of car parking spaces in the apartment sale or lease price. The housing construction project investor is responsible for publicly disclosing the construction costs of car parking spaces. The arrangement of car parking spaces in apartment buildings must ensure the principle of prioritizing apartment owners first, then providing spaces for public parking. The purchase or lease of car parking spaces stipulated in this clause is recorded in the apartment purchase or lease contract or a separate contract.

Therefore, the guiding documents for the 2023 Law on Housing need to provide clear regulations for managing parking spaces in apartment buildings to avoid disputes and ensure residents have parking spaces, such as:

– Regulations on the business activities of parking spaces by the investor: How the investor conducts the business of parking spaces and the area designated for business purposes. According to regulations, the arrangement of car parking spaces in apartment buildings must ensure the principle of prioritizing apartment owners first, then providing spaces for public parking. Therefore, there might be cases where apartment buyers do not need car parking spaces when purchasing the apartment.

However, after some time, if they require a parking space, they have the right to contact the investor to buy or lease a parking space, and the investor must facilitate the purchase or lease of parking spaces for apartment owners. This prevents the situation where the investor increases the price to lease to office or commercial customers while residents cannot buy or lease car parking spaces.

– Since the business of car parking spaces affects the environment and the quality of life of apartment residents, specific regulations on the conditions for operating car parking spaces are needed, such as ensuring fire prevention and fighting measures, environmental pollution control, noise, traffic, security, and order; the density of vehicle traffic in the business area to avoid overload, and having regulations on parking lease contracts.

– It is necessary to publicly disclose the total area of sold parking spaces in the apartment purchase contract to determine whether the investor has allocated enough parking spaces for residents and how much area the investor retains to calculate the usable area of the apartment building. According to the law, the investor is not allowed to include the construction cost of car parking spaces in the apartment sale price. However, it is difficult for apartment buyers to know whether the investor has included the construction cost of car parking spaces in the apartment sale price when signing the apartment purchase contract.

The inability to determine which part of the car parking space ownership belongs to is the cause of disputes between the investor and residents. Essentially, car parking spaces in apartment buildings are part of the common ownership. Therefore, the law needs to specify this issue clearly, indicating that car parking spaces are part of the common ownership of the apartment building, and from the time of handover, the investor will terminate their ownership. When car parking spaces belong to the common ownership of the apartment building, those who need parking spaces must pay monthly fees, which will be added to the maintenance fund of the apartment building.

  1. Regarding disputes between investors and apartment buyers in contracts for future housing

On the morning of August 10th 2023, the People’s Court of Hà Nội held a first-instance criminal trial for the defendant Lê Thanh Thản (Chairman of Mường Thanh Group, General Director of Bemes Company) for defrauding customers in the sale of CT6 Kiến Hưng apartment building (Hà Đông District, Hà Nội). According to the indictment of the Hà Nội People’s Procuracy, the defendant Lê Thanh Thản is the Chairman of the Board of Directors and General Director of Bemes Company. This company was permitted by the Hà Nội People’s Committee to change the land use purpose, but the defendant Thản directed construction activities that seriously violated construction planning.

The defendant Thản arbitrarily changed the land use purpose and carried out construction activities that severely violated the approved planning. For high-rise buildings, the defendant Thản directed the increase of construction area, building height, and changes in the functional use. Bemes Company also increased the number of apartments and built an additional CT6C building that was not in the approved plan. For low-rise areas, Bemes Company increased the construction land area and the number of low-rise houses, violating the red-line boundary.

Since March 2011, the defendant Thản directed subordinates to falsely advertise the legal status of the project to sell unlawfully constructed apartments. In the project’s contracts, the defendant Thản, in his capacity as General Director, directly signed with customers, committing terms to make them trust and pay for apartments according to the construction progress.

Accordingly, the defendant Thản sold 488 apartments without being recognized for land use rights, earning illicit profits of over 480 billion đồng. The investigating agency determined that the violations were also due to the negligence of the former officials of Kiến Hưng Ward and Hà Đông District construction inspectors. Throughout the construction of the CT6 Kiến Hưng project, the group of defendants in this case did not conduct inspections or checks to prevent violations (Công an nhân dân, 2023).

Currently, the sale of future housing is very common in most projects on the market in Vietnam. Future housing and construction works are those that are under construction or have not yet been accepted for use according to the law on construction (Clause 5, Article 3, the 2023 Law on Real Estate Business).

“The sale of future apartment buildings is a commercial activity in which the seller (investor) enters into a sales contract for unaccepted apartments with the buyer (customer) at the present time, and the delivery of the apartment will be carried out in the future. The buyer is obligated to pay for the apartment according to the terms agreed upon in the sales contract” (Chế Văn Trung, 2020).

The development of an apartment building from construction to operation and management is a very long process involving the participation of various specialized parties, such as design consultants, project supervisors, building equipment suppliers, and construction quality managers. When a homebuyer decides to purchase an apartment and signs the sales contract, almost all projects are not yet formed, or in other words, the purchase of future housing, leading to the actual quality of the project not meeting the buyer’s expectations when completed. This causes disputes between residents and investors.

Currently, most projects have not been accepted but have been put into operation, putting residents in a situation of fait accompli, leading to explosive conflicts in apartment buildings. Meanwhile, housing is a special product, and when receiving their homes, residents often find themselves in a weak position because they lack the capacity and expertise to assess the project’s quality.

To limit apartment conflicts between residents and investors, the law needs strict regulations requiring projects to be accepted by an acceptance council and agencies such as the Department of Natural Resources and Environment, the Fire Prevention and Fighting Agency, and other relevant agencies before being handed over to customers and put into operation. The law needs clear regulations on the mandatory participation of the district and provincial People’s Committees in assisting residents in disputes related to violations of agreements in the approved projects of the apartment building investors (Phan Thị Thanh Thủy, 2018, p.109).

The transparency and disclosure of legal information about the project for residents to understand before signing apartment purchase contracts should also be specifically stipulated in the law on housing, the law on real estate business, and guiding documents. This will prevent investors from falsely advertising the legal status of the project to sign contracts with customers for profit. Legal information about the project should be publicly posted at the headquarters of the Ward People’s Committee, where the apartments are located. Stricter sanctions are needed, especially increased criminal sanctions for cases of state officials neglecting their duties in inspecting and supervising real estate investment and construction activities, land, and facilitating the investor’s violations.

III. CONCLUSION

In building modern and civilized cities, overall urban planning, in general, and the development of apartment buildings and high-rises, in particular, are goals that major cities in our country should aim for in the future. Building new apartment complexes and high-rises is an important task that authorities need to focus on to address population explosion issues, especially in major cities. Therefore, legal provisions need to be further improved to promote the sustainable development of apartment buildings, aiming to protect the lawful rights and interests of apartment buyers in practice.

REFERENCES

  1. Ministry of Construction. (2016). Circular No. 02/2016/TT-BXD dated February 15th 2016 of the Minister of Construction promulgating the Regulation on Management and Use of Apartment Buildings (amended and supplemented by: Circular No. 22/2016/TT-BXD dated July 1st 2016 of the Minister of Construction; Circular No. 28/2016/TT-BXD dated December 15th 2016 of the Minister of Construction; Circular No. 06/2019/TT-BXD dated October 31st 2019 of the Minister of Construction; Circular No. 07/2021/TT-BXD dated June 30th 2021 of the Minister of Construction). Hà Nội.
  2. Government. (2022). Decree 16/2022/NĐ-CP stipulating administrative penalties for construction violations. Hà Nội.
  3. Công an nhân dân. (2023). The trial of Mường Thanh Group Chairman Lê Thanh Thản begins. Retrieved on July 22nd 2024, from: http://cand.com.vn/Ban-tin-113/bat-dau-xet-xu-chu-tich-tap-doan-muong-thanh-le-thanh-than-i703321/
  4. National Assembly. (2023). the 2023 Law on Housing. Hà Nội.
  5. National Assembly. (2023). the 2023 Law on Real Estate Business. Hà Nội.
  6. Phan Thị Thanh Thủy. (2018). Resolving apartment purchase contract disputes in Vietnam from the perspective of consumer protection. Journal of Science, Vietnam National University: Law, Vol. 34, No. 4 (2018) 103-112.
  7. Thanh Niên. (2021). Central Garden apartment residents cry: ‘When buying a house, they were beloved customers; when living there, they were bullied’. Retrieved on July 21st 2024, from: https://thanhnien.vn/cu-dan-chung-cu-central-garden-bat-khoc-khi-mua-nha-la-nhung-khach-hang-duoc-yeu-quy-khi-den-o-thi-bi-bat-nat-1851044986.html
  8. Chế Văn Trung. (2020). Law on buying and selling future apartment buildings: Some inadequacies and solutions for improvement – Tạp chí Công thương. Retrieved on July 21st 2024, from: https://tapchicongthuong.vn/phap-luat-ve-hoat-dong-mua-ban-nha-o-chung-cu-hinh-thanh-trong-tuong-lai–mot-so-bat-cap-va-giai-phap-hoan-thien-73393.html
  9. Vietnamnet. (2020). The court accepts the case of The EverRich Infinity residents suing Phát Đạt Real Estate Company. Retrieved on July 22nd 2024, from: https://vietnamnet.vn/toa-an-thu-ly-vu-cu-dan-the-everrich-infinity-kien-cong-ty-bds-phat-dat-697683.html
  10. VnEconomy. (2022). By 2025, Thành phố Hồ Chí Minh will develop an additional 367,000 houses. Retrieved on July 22nd 2024, from: https://vneconomy.vn/den-nam-2025-tp-hcm-se-phat-trien-them-367-000-can-nha.htm

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