Apartment Management Board: Gatekeeper or Profiteer?

Recently, disputes in apartment buildings have become more complicated. Incidents involving management boards, investors and operating management units have continuously caused public uproar, reflecting the inadequacies in the current apartment building management mechanism.

Maintenance fund exploitation

Most recently, the case of two members of the Golden Mansion apartment building's management board (Phu Nhuan district, Ho Chi Minh City) being prosecuted and temporarily detained for investigation of "property embezzlement" has caused panic among residents. The investigation agency determined that these two individuals had embezzled more than 22 billion VND from the apartment building's maintenance fund, although they had partially remedied the problem.

Not long before, also in Ho Chi Minh City, the former head and deputy head of the Mieu Noi apartment building (Binh Thanh district) were proposed to be prosecuted for the crimes of "Embezzlement of property" and "Abuse of position and power while performing official duties", with the total amount of money embezzled and damage up to more than 3 billion VND. These cases are no longer isolated, but show that the apartment building management system has many loopholes in both capacity and management ethics.

Not stopping at internal management issues, recently, a new development has attracted special attention when the Management Board of Conic Southeast Asia Apartment (Binh Chanh District) was administratively fined by the tax authority up to 119 billion VND for not issuing VAT invoices for more than 7,000 transactions collecting money from residents. The incident not only made residents angry but also made many other Management Boards "startled" because for a long time, revenue and expenditure activities were mainly in informal forms, without issuing invoices, without specific instructions.

Immediately after the incident, the Management Board of The Sun Avenue apartment building (Thu Duc City) proactively sent a dispatch to the tax authority, requesting a comprehensive inspection of financial activities at the building. According to the Management Board's reflection, the management and operation unit, Savills Vietnam Co., Ltd., collected management fees and other service fees but did not issue VAT invoices to residents for many months.

For their part, in an interview with a reporter from Nguoi Lao Dong Newspaper, a representative of Savills said that they complied with legal regulations, following the "collection - payment" mechanism, so they did not need to issue invoices to residents but to the Management Board. However, residents raised the issue that they were the ones paying, so why were invoices not issued to them? This raises questions about the transparency and legal responsibility of the parties involved in the operation of the apartment building. "Every month, Savills collects fees and VAT from us. And we are the ones who need invoices, not the Management Board that needs invoices to issue them" - a resident of The Sun Avenue apartment building raised the issue.

Lawyer Tran Quoc Bao, Ho Chi Minh City Bar Association, said that the problem with the above cases lies in the lack of transparency and effective monitoring mechanism. According to Mr. Bao, when the Management Board had not been established, disputes often arose between residents and investors, mainly related to the maintenance fund of 2% of the total value of the apartment.

Once the Board of Directors is in place, if the elected people do not represent the common interest but rather their own personal interests, the risk of profiteering is very high. "The unclear revenue and expenditure, along with the weakness of the management and operation unit, causes conflicts to increasingly accumulate and erupt into accusations and lawsuits," said this lawyer.

The management board and residents of The Sun Avenue apartment complex accuse the operating unit of collecting fees but not issuing invoices for many months.

Need stricter regulations

According to Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association (HoREA), a series of cases in which apartment building management boards were prosecuted and detained for embezzlement is a warning bell for the current management of apartment buildings. According to him, it is necessary to quickly close the "loopholes" in the law, while strengthening the supervisory role of ward police and local authorities.

These are forces that are close to the people, understand the people, and are able to grasp the security and order situation and unusual activities in apartment buildings, including short-term rentals.

He said that in Ho Chi Minh City, 20-25 storey apartment buildings have maintenance funds of up to VND20 billion, 10 times the charter capital of a small enterprise. Some large apartment buildings even have maintenance funds of up to VND500 billion, becoming a "fat bait", causing many individuals to seek to "infiltrate" the management board to profit.

Meanwhile, a worrying reality is the indifference of the residents themselves. Some even send their servants to meetings instead, or do not attend or comment. When an incident occurs, they are "shocked" because they do not clearly understand the rights, obligations and financial activities of the Management Board. There are even many cases of buying small apartments and then being authorized to create a majority of votes, occupying positions in the Management Board for personal gain. Therefore, Mr. Chau proposed to amend and supplement Circular 05/2024/TT-BXD of the Ministry of Construction to strengthen the authority of apartment building conferences, limiting the exploitation of loopholes to manipulate management activities.

In addition, he also proposed allowing investors to retain the apartment maintenance fund but must open a separate account under the supervision of the Management Board, instead of handing it over to the Management Board for management. "If the Management Board is transparent and uses the fund reasonably, even just dividing it into small amounts to deposit in the bank will bring great benefits to residents," Mr. Chau emphasized.

Regarding the information that the Management Board of Conic Southeast Asia Apartment was fined more than VND 119 billion for not issuing 7,260 invoices when collecting fees from apartment building management activities, Mr. Nguyen Tien Dung, General Director of Savista Holdings (a unit specializing in consulting, managing and exploiting real estate), said that the Housing Law 2023 and Circular 05/2024/TT-BXD stipulate that the Management Board is an organization representing residents, has a seal and bank account but does not have legal status, does not have business functions and is not allowed to issue invoices like a business.

Therefore, requiring the Management Board to issue VAT invoices does not have a clear legal basis, because if this is done, it will lead to residents having to pay taxes twice.

According to him, the incident shows the need for consistency between housing law and tax law. If the roles and functions of each entity are clearly defined and the law is properly applied, controversial penalties will be avoided. Authorities need to carefully review the Housing Law and Circular 05 to have appropriate handling directions, avoiding affecting a series of apartment buildings across the country.

Proposal to establish a housing management association

Recently, a management and operation enterprise, on behalf of a group of 6 founding enterprises, sent a document to the Ho Chi Minh City People's Committee requesting recognition of the Steering Committee for the establishment of the Ho Chi Minh City Housing Management and Operation Association (HMO). This unit believes that building management and operation is a highly specialized job, requiring maintenance and repair of technical systems, exploitation of apartment utilities, provision of cleaning, security, environmental services, etc. Therefore, it is necessary to have the participation of experienced, professional units that comply with clear standards.

Source: https://nld.com.vn/roi-ren-quan-ly-van-hanh-nha-chung-cu-19625051921351725.htm