CIRCULAR

GUIDING METHODS OF DETERMINING AND MANAGING CONDOMINIUM SERVICE CHARGES

THE MINISTRY OF CONSTRUCTION

Pursuant to the XI^th National Assembly's Housing Law No. 56/2005/QH11 of November 29, 2005;
Pursuant to the Government's Decree No. 17/ 2008/ND-CP of February 4, 2008. defining the functions, tasks, powers and organizational structure of the Ministry of Construction;
The Ministry of Construction guides the methods of determining and managing condominium service charges as follows:

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation and subjects of application

1. Scope of regulation: This Circular guides the methods of determining and managing service charges for condominiums and multi­story buildings serving mixed use purposes including residence (below collectively referred to as condominiums), excluding condominiums built under the Prime Minister's April 24, 2009 Decisions No. 65/2009/QD-TTg on a number of mechanisms and policies to build houses for lease to students of universities, colleges, professional secondary schools and vocational schools; No. 66/2009/QD-TTg on a number of mechanisms and policies to build houses for industrial park workers; and No. 67/2009/QD-TTg, on a number of mechanisms and policies to build houses for low-income earners in urban areas.

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Article 2. Principles of determining condominium service charges

1. Condominium service charges shall be determined on the principle of accurately and fully covering expenses, generating a reasonable profit for the management and operation of condominiums under normal conditions and taking into account practical socio-economic conditions of each locality and people's incomes in each period. These charges shall be approved by more than half of members of the condominium management board by a show of hands or casting secret ballots. For condominiums without a management board, condominium service charges shall be approved by more than half of households in the condominiums by a show of hands or casting secret ballots. If condominium service charges have been agreed in apartment purchase and sale contracts, the agreed charges apply.

2. Condominium service expenses included in condominium service charges shall be collected and paid on the principles of self-collection, self-financing and publicity to ensure the normal operation of condominiums.

3. Expenses for fuel, electricity, water, telephone, Internet and other services for each apartment shall not be included in condominium service charges but be paid by apartment users directly to service providers (if separate use contracts are available) or to condominium-managing and -operating enterprises (if such contracts are unavailable), based on the actually used volume added with a wastage (if any).

4. Maintenance expenses include all expenses for the renovation, maintenance, minor repair, medium repair, overhaul and extraordinary repair aiming to maintain the quality of condominiums. These expenses shall not be included in condominium service charges.

5. Revenues from other services on the areas under common ownership of condominiums (if any) shall be accounted under the Finance Ministry's financial regulations and used to offset condominium service expenses for reducing condominium service charges.

6. For projects on condominiums using high-class services not under common ownership (such as sauna, swimming pool, tennis courts or other high-class services), users of these services shall reach agreement with condominium-managing and -operating enterprises on the service charges, which shall not be included in condominium service charges.

Chapter II

METHODS OF DETERMINING CONDOMINIUM SERVICE CHARGES

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1. Condominium services include operation and maintenance of equipment systems under common ownership or common use of condominiums; security, sanitation, garbage collection, flower-garden and tree tending, insect killing and other services, aiming to ensure the normal operation of condominiums.

2. Condominium service charges include:

2.1. Condominium service expenses (covering overheads, general management expenses of the condominium-managing and -operating enterprise, and expenses paid to the management board, if any);

2.2. Reasonable profit ratio;

2.3. Value-added tax.

3. Expenses constituting condominium service charges include:

3.1. Condominium service expenses, covering:

3.1.1. Overheads:

a/ Expenses for energy, raw materials, fuel and materials and other expenses (if any) for the operation of the condominium (such as lifts, water pumps, power backup, technical infrastructure facilities and other equipment);

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c/ Expenses for services within the condominium, such as security, environmental sanitation, garbage collection, flower-garden and tree tending, insect killing and other services (if any), which shall be determined on the basis of the workload to be performed and the package levels agreed in the service contract;

d/ Charges for public lighting electricity and common-use water within the condominium;

e/ Expenses for stationery, furniture, working offices, daily-life electricity and water and other expenses paid to the condominium management section.

3.1.2. General management expenses paid to the condominium-managing and -operating enterprise, which shall be included in condominium service charges, covering:

a/ Salaries, wages and salary allowances, social and health insurance premiums, trade union dues and other contributions from salary funds to the enterprise's management section:

- The salary expense shall be determined based on the prescribed payroll as well as levels of salaries, salary allowances and other contributions from salary funds under the State's current regulations;

- The wage expense shall be determined based on labor contracts or the collective labor agreement between the condominium-managing and -operating enterprise and employees;

- Social and health insurance premiums and trade union dues payable by officials and employees under the State's current regulations.

b/ Fixed asset depreciation expenses of the condominium-managing and -operating enterprise. The deduction, management and use of fixed asset depreciations comply with the Finance Ministry's regulations.

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3.2. Reasonable profit ratio for the condominium-managing and -operating enterprise, which must not exceed 10% of condominium service expenses after subtracting revenues from providing services on the areas under the common ownership of condominiums (exclusive of value-added tax).

3.3. Value-added tax under the State's current regulations.

Article 4. Determination of condominium service charges

Formula:

Of which:

G_dv is the condominium service charge for 1 m² of the used floor area under private ownership of the apartment owner or the used floor area under other private ownership (VND/m2/month) (inclusive of value-added tax);

Q is the total annual condominium service expenses (VND/year) (exclusive of value-added tax);

T_dv is the annual revenue from services provided on the areas under the common ownership of a condominium (if any) (VND/year);

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12 is the total number of months in a year used for calculating service charges;

P is the reasonable profit ratio (%);

K₁ is the coefficient of service charge reduction applied by the condominium-managing and -operating enterprise (if any);

K₂ is the coefficient of distribution of condominium service charges (for the floor areas used for purposes other than residence, such as working offices, commercial activities, etc.), stipulated by the condominium management board (if any);

T is the value-added tax rate.

Article 5. Determination of service charges of condominiums without a managing and operating enterprise

For condominiums without a managing and operating enterprise, condominium service expenses exclude general management expenses paid to the condominium-managing and -operating enterprise under Clause 3.1.2, Article 3 of this Circular.

Chapter III

MANAGEMENT OF CONDOMINIUM SERVICE CHARGES

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1. Condominium project investors shall, based on the maximum (ceiling) condominium service charge rates or brackets set by provincial-level People's Committees, calculate the efficiency upon formulating projects and plans on service charge rates for use as a basis for signing contracts on purchase and sale of condominium apartments or contracts on provision of condominium services.

2. Condominium-managing and -operating enterprises shall themselves calculate and determine condominium service charges under the guidance of this Circular and submit them to investors (if any) or condominium-managing units for obtaining approval of condominium management boards or households in condominiums.

3. Condominium management boards shall monitor and supervise the management and operation of condominiums under the terms of signed contracts; test before take-over, make payment to and liquidate contracts with condominium-managing and -operating enterprises; and directly collect or authorize condominium-managing and -operating enterprises to collect condominium service charges.

Article 7. Bases for adjustment of condominium service charges

1. National and local socio-economic development conditions and per-capita average income in each period;

2. Supply-demand for the quantity and quality of condominium services;

3. Market price fluctuations or changes in the State's mechanisms and policies, resulting in an increase (decrease) by 10% of condominium service expenses and reasonable profits of condominium-managing and -operating enterprises.

Chapter IV

ORGANIZATION OF IMPLEMENTATION

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1. The Ministry of Construction shall assume the prime responsibility for, and coordinate with ministries, branches and provincial-level People's Committees in, guiding and regularly inspecting and supervising the implementation of this Circular.

2. Provincial-level People's Committees shall:

2.1. Set maximum (ceiling) condominium service charge rates or brackets suitable to each grade and class of condominiums and service quality for application in their localities, based on local practical conditions and reasonable expenses of condominium services; and concurrently report them to the Ministry of Construction for monitoring and inspection.

2.2. Consider and decide to provide partial supports for condominium service charges, based on the local budget capacity and actual incomes of people in their localities in each period, and with a view to encouraging people to live in condominiums for saving land funds.

2.3. Decide or authorize provincial-level Construction Departments or district-level People's Committees to approve condominium service charges in case of disputes related to condominium service charges in their localities.

2.4. Consider, review and adjust maximum condominium service charge rates or brackets to suit practical conditions.

2.5. Organize, direct, supervise and inspect the implementation of this Circular in their localities.

Article 9. Responsibilities of organizations and individuals involved in the determination and management of condominium service charges

1. Condominium-managing and -operating enterprises shall:

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b/ Collect, pay and account condominium service charges as well as other revenues and expenditures in a public and transparent manner under the State's regulations.

2. Condominium management boards shall:

a/ Supervise the performance of contracts by condominium-managing and -operating enterprises; and annually or extraordinarily report to provincial- and district-level People's Committees on revenues and expenditures related to condominium service charges upon request. At the same time, publicize the collection and payment of condominium service charges for people's information on an annual basis or extraordinarily report thereon upon request of more than half of households in condominiums.

b/ Examine financial statements on revenues and expenditures related to the management and operation of condominiums, made by condominium-managing and -operating enterprises under signed contracts, and report thereon to condominium conferences under regulations.

3. In case condominium service charges, accurately and fully determined under Article 2, are higher than condominium service charge rates or brackets promulgated by provincial-level People's Committees, which are approved by more than half of households in the condominium or more than half of members of the condominium management board, the charge rates and service quality agreed between the condominium-managing and -operating enterprise and households will be applied and reported to provincial-level People's Committees and the Ministry of Construction for monitoring and inspection.

4. In case there is a dispute over condominium service charges, the condominium-managing and -operating enterprise may temporarily collect these charges at the ceiling rate or a rate within the condominium service charge bracket promulgated by the provincial-level People's Committee until the dispute is completely settled.

5. Other organizations and individuals are encouraged to determine and manage condominium service charges in accordance with this Circular.

Article 10. Implementation provisions

1. This Circular takes effect 45 days from the date of its signing.

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FOR THE MINISTER OF CONSTRUCTION
DEPUTY MINISTER




Tran Van Son