Disputes over the holding, management, and handover of apartment building maintenance funds

The maintenance fund for the common areas of an apartment building is intended to ensure the building’s safety and to maintain its quality. However, in practice, disputes related to the management and handover of maintenance funds in apartment buildings are very common, often prolonged, and adversely affect the rights and interests of residents.

An apartment building may have one or multiple owners, but disputes over the management of maintenance funds mainly arise in apartment buildings with multiple owners. In this article, TNTP will focus solely on analyzing issues related to disputes over the holding, management, and handover of maintenance funds in apartment buildings with multiple owners.

1.Current legal regulations on the management and handover of maintenance funds

• Owners, buyers and rent-to-own purchasers are responsible for contributing maintenance funds for the maintenance of the common areas of the apartment building with multiple owners. Pursuant to Clause 1, Article 155 of the Law on Housing 2023, the maintenance fund may only be used for the maintenance and replacement of items and equipment that fall under the common ownership of the apartment building, in accordance with the maintenance plan approved by the Apartment Building Conference.

Therefore, the apartment building maintenance fund is a sum of money that owners, buyers and rent-to-own purchasers in the apartment building are obligated to contribute in order to maintain the common areas and common ownership portions of the building. The maintenance fund is set at 2% of the value of the apartment or the sold or rent-to-own area, as stipulated in Clause 1, Article 152 of the Law on Housing 2023. This maintenance fund is calculated separately from the sale price or rent-to-own payment and must be clearly specified in the contract.

• The management and handover of maintenance funds of apartment buildings with multiple owners are regulated under Article 153 of the Law on Housing 2023. Accordingly, the management of maintenance funds is divided into the following two stages:
• Prior to the recognition of the Administration Board: Before the conclusion of the housing sale or rent-to-own contract, the developers of housing investment are responsible for opening a payment account at a bank operating in the locality where the apartment building is located in order to receive and manage the maintenance funds, and for reporting the details of such account to the provincial-level housing management authority in accordance with regulations. Upon signing the contract, the buyers or rent-to-own purchasers are obliged to pay the maintenance funds into the payment account specified in the sale or rent-to-own contract that has been opened by the developers of housing investment.

During this stage, the developers of housing investment are not permitted to deduct or use the maintenance funds contributed by the parties for any other purposes prior to the handover of the maintenance funds to the apartment building Administration Board, except in cases where maintenance is required for items or equipment which warranty period has expired in accordance with regulations.

• After the Administration Board has been recognized: After the Administration Board is officially recognized pursuant to a decision of the competent authority, the Administration Board shall open a payment account to manage the maintenance funds. At the same time, the developers of housing investment are required to hand over the full amount of the maintenance funds collected (including any accrued interest, if any) to the Administration Board in accordance with regulations and to close the previous payment account.

Accordingly, under the current legal regulations, the maintenance fund of an apartment building with multiple owners shall be managed by the developers of housing investment prior to the recognition of the Administration Board and shall be fully handed over to the Administration Board for management after the Administration Board is established.

2.Common disputes and causes of disputes 

• Although the holding, management, and handover of maintenance funds have been prescribed in a relatively specific and clear manner by law, disputes still commonly arise in practice. The causes often stem from changes in legal regulations over different periods, specifically as follows:
• Before 2006, specifically before Decree No. 90/2006/ND-CP came into effect, the legal framework governing housing and the management and operation of apartment buildings was lacked specific regulations on the mechanisms for collecting, holding, managing, and using maintenance funds. During this period, maintenance funds were mainly collected and managed directly by the developers of housing investment in accordance with the parties’ agreements. In practice, there were many cases in which the developers of housing investment used the maintenance funds for improper purposes, or even for other financial activities, resulting in their inability to refund such funds. Although in many cases decisions were made to compel the handover of the funds and to impose liability, in reality, residents remained the parties that suffered the greatest losses, as they were unable to recover the maintenance funds that had been misused.
• Prior to the Law on Housing 2014 and its implementing guiding documents, the law did not fully provide for reporting obligations to enable owners and users of apartment buildings to approve and supervise the management and use of maintenance funds by the apartment building Administration Board. As a result, numerous disputes arose in connection with the management and use of apartment building maintenance funds.
• Disputes arising from delayed or non-handover of maintenance funds: Many developers of housing investment, even after the Administration Board has been established, still fail to carry out or deliberately delay the handover of maintenance funds, citing reasons such as the absence of final settlement, discrepancies in figures, or alleged costs that have not yet been deducted. Although the law clearly stipulates the obligation to fully and promptly hand over maintenance funds to the Administration Board, delayed handover or non-handover remains common in practice and constitutes one of the major causes of disputes.
• In addition, a new provision of the Law on Housing 2023 may also give rise to disputes: Pursuant to Clause 4, Article 153 of the Law on Housing 2023, where an apartment building generates revenue from the exploitation of services related to the common ownership areas, such revenue must be paid into the maintenance fund account. This is a new provision compared to the Law on Housing 2014, introduced to supplement funding sources for the apartment building maintenance fund. However, the Law on Housing 2023 and its implementing guiding documents have not yet clearly specified the timing for payment and handover of such amounts, nor clarified the basis for determining such revenue (whether calculated based on gross revenue or profit). This lack of clarity may lead to inconsistent interpretation and application, thereby posing a potential risk of disputes.

It can be seen that disputes that arise stem from various different causes, and each dispute has its own nature and level of complexity.

3.Notes on preventing disputes and handling disputes when they arise

In order to limit disputes in the holding, management, and handover of maintenance funds, as well as to ensure effective resolution once disputes have arisen, the relevant parties should take note of the following matters:

• Clearly understand and identify the rights and obligations of organizations and individuals in the collection, holding, management, and handover of apartment building maintenance funds, particularly the regulations on the conditions and timing for the handover of such funds. The Administration Board should also proactively familiarize themselves with the relevant legal provisions to require the developers of housing investment to fulfill their handover obligations as soon as the conditions are met, thereby avoiding prolonged delays that may give rise to related disputes.
• Ensure transparency, clarity, and strict compliance with regulations in the management and use of apartment building maintenance funds. The use of maintenance funds must be carried out in accordance with the prescribed procedures and processes, and must be fully disclosed and reported so that residents are informed, may review, and approve such use at the apartment building conference in accordance with regulations.
• In cases where there are signs of violations that need to be reported, petitions or complaints should be submitted to the competent state authority in charge of housing management (e.g., the commune-level People’s Committee) for consideration and handling in accordance with regulations, thereby avoiding situations in which the parties take unilateral measures beyond their authority, which may in turn give rise to further violations and disputes.
• Where disputes arise, the parties should prioritize discussions and negotiations on the basis of compliance with legal regulations. If no agreement can be reached, the parties may consider initiating legal proceedings before a competent authority to protect their lawful rights and interests.

Disputes over the holding, management, and handover of apartment building maintenance funds are common and complex, arising from various different causes. Proper understanding and full compliance with legal regulations, together with ensuring transparency in the management and use of maintenance funds, play an important role in minimizing disputes and protecting the lawful rights and interests of the relevant parties.

The above is the article entitled “Disputes over the holding, management, and handover of apartment building maintenance funds” that TNTP respectfully presents to our readers. We hope that this article will be useful to you.

Best regards,