Owners of apartments in an apartment building in Vietnam must set aside 2% of the purchase price for contribution into the apartment building’s maintenance fund (Quỹ bảo trì) and pay monthly contribution into the apartment building’s operation fund (Quỹ vận hành). The management of an apartment buildings including the maintenance fund and the operation fund will be handled by (1) “the meeting of [owners of] the apartment building”(hội nghị nhà chung cư) (building owner meeting) (2) a building management board selected by the building owner meeting, and (3) a management company selected by the meeting of owners of the apartment building.

Vietnamese law provides for a relatively detailed framework on management of an apartment building. However, several important issues, which are discussed below, are still not adequately addressed:

• The residential housing regulations seem to require an apartment building to be managed by a single management company. However, an apartment building usually includes certain commercial components such as office or shopping mall which are managed and operated very differently (e.g., the lifts serving commercial section will be used more extensively that those used for residential section). Accordingly, the combination of management of both residential section and commercial section in one single mechanism could cause conflicts between the apartment owners and the owners of the commercial section.

• The residential housing regulations allow voting at the building owner meeting to be based on the area owned by the relevant owners. However, the law is not clear whether the owners must fulfilled its financial contribution before having the right to vote. Most buyers of residential apartments must pay these contributions in order to own the apartment. However, owners of commercial sections may fail to pay these contribution to the maintenance funds or operation funds and may still claim to have the right to vote at a building owner meeting. Given the potential conflict of interests discussed above, the ability of the owner of commercial section to vote at a building owner meeting could allow the owner of the commercial section to take control of the building owner meeting. This is because the commercial area which could be very large is managed by only one owner while the residential area is divided among hundreds (if not thousands) of apartment owner. For example, the basement area serving residential section will be considered common property and will not be eligible to vote. On the other hand, the basement area serving commercial section will be considered as private property of the owner of the commercial section and will be eligible to vote. In addition, if the owner of the commercial section is the original investor of the residential housing project then it may already be entitled to appoint one board member of the building management board.

• The residential housing regulations provide that the building management board could operate in a manner similar to that of a board of directors of a joint stock company. However, it is not clear how the provisions regulation the board of directors of a joint stock company could apply to the building management board in practice. For example, it is not clear whether when the term of a building management board expires, it can continue to operate until a new building management board is appointed. It is not clear if the members of a building management board will be prohibited from voting on a related party transaction.

This post is written by Nguyen Quang Vu.