Professional articles

Overview of the organization and operation of the apartment building management board

Apartment buildings are an increasingly popular type of housing in Vietnam and therefore Vietnam’s laws on real estate and housing business have also been developed and improved to more specifically regulate the rights and obligations of real estate project investors (“Investor”) as well as owners and users of apartment buildings (“Owner”). Housing Law 2023 and Circular 05/2024/TT-BXD detailing a number of articles of the Housing Law (“Circular 05”) recently issued has a number of updated regulations on the organization and operation of the Apartment Building Management Board (“BQT”). In this article, we will summarize important contents about the Management Board and give notes to Investors during the operation of housing projects:

Request to establish Board of Directors

Establishing a Management Board is a mandatory requirement for apartment buildings with 20 apartments or more.[1]According to Circular 05, the Investor is responsible for organizing the apartment building conference (“Conference”) for the first time within 12 months from the date the apartment building is handed over for use and at least 50% of the apartments have been handed over to buyers and rent-purchasers.[2] to elect members of the Board of Directors and establish the Board of Directors. In case the Investor fails to organize within this time limit, the People’s Committee (People’s Committee”) the ward level where the apartment building is located will organize if there is a request from the apartment owner representative. During the Conference, the participating members will agree on the principles, including approving the service price, the plan for using maintenance funds in the management and operation of the apartment building and electing a Management Board. The minimum number of Management Board members is 03 people for buildings with only 01 block and a minimum of 01 person/block for buildings with many blocks.[3]. The Board of Management consists of 01 head, 01 to 02 vice heads and other members living in the apartment building. The Investor who still owns the area in the apartment building has the right to appoint a representative to be the head or vice head of the Board of Management. In case the Investor does not appoint a representative to participate in the Board of Management, the Conference will elect one of the owners of the apartment building to be the vice head of the Board of Management instead.[4]

According to Circular 05, the participants in the first Conference to elect the Board of Directors as well as in subsequent Conferences must include representatives of the Ward People’s Committee.[5] to monitor and witness the entire voting process and approve the establishment of the Board of Management. Within 10 days from the date of the minutes of the election of the Board of Management, the Board of Management must submit 01 set of documents requesting recognition of the Board of Management to the District People’s Committee. The District People’s Committee is responsible for checking and issuing a decision to recognize the Board of Management or authorizing the Ward People’s Committee to check the documents and issue a decision to recognize the Board of Management. After the recognition decision is issued, the Board of Management is responsible for setting up an operating account to manage the maintenance fund for the common property of the apartment building (on the basis of receiving the transfer from the Investor), registering the seal in the case of an apartment building with many Owners and starting to operate. The Board of Management is allowed to operate under a self-management model if the apartment building has one owner; in the case of an apartment building with many owners, it is organized according to the board of management model of a joint stock company or the board of management model of a cooperative.[6]. The 2023 Housing Law does not recognize the legal status of the Management Board but allows the Management Board to have a seal and bank account to ensure the Management Board’s initiative in operations and the management and use of maintenance funds.

Operating regulations and financial revenue and expenditure regulations of the Board of Directors

The term of office of the Board of Directors is 03 years.[7]During that time, the Management Board has the following tasks: managing maintenance funds according to the revenue and expenditure regulations decided by the Conference and reporting this at the Annual Conference; representing to sign contracts for providing management and operation services for apartment buildings; urging and reminding Owners to comply with the regulations and rules on management and use of apartment buildings; being responsible before the law and the Owner when violations occur…[8] and other responsibilities. The rights and responsibilities of the Board of Directors will be unified under two main regulations according to Circular 05 including:

1) The operating regulations include the main contents of:

  • Operating model of the Board of Directors;
  • Principles of organizing Board of Directors meetings;
  • Rights and responsibilities of the Board of Directors and Board of Directors members;
  • Receiving information, reporting, responding and handling violations;
  • Dismissal, removal;
  • Operating expenses.[9]

2) The financial revenue and expenditure regulations include the main contents of:

  • Revenue managed by the Board of Directors, accounts and account management;
  • Remuneration for the Board of Directors;
  • Collect funds, approve payments and payment documents;
  • Regulations on withdrawal, withdrawal amount in each case;
  • Bookkeeping and management;
  • Handling of violations.[10]

Regarding maintenance costs, inheriting the Housing Law 2014, the Housing Law 2023 continues to stipulate that the initial maintenance cost that the Owner needs to pay is 02% of the apartment value, paid at the time of purchase or lease-purchase of the apartment, calculated separately from the sale or lease-purchase price and clearly stated in the apartment purchase or lease-purchase contract.[11]. This fund will be opened in an account by the Investor for management and will be handed over to the Management Board within 30 days from the date of the Management Board’s written request.[12]In case the Investor fails to hand over the maintenance fund within the prescribed time limit, the Management Board of the apartment building may request the District People’s Committee to enforce. At that time, the District People’s Committee will issue a written request and carry out enforcement if the Investor continues to fail to comply.[13].

These regulations will be agreed upon by the Owners at the first Meeting. Annually, the Annual Meeting will be held and the Board of Directors will report on its performance as well as revenues and expenditures during the year. In case the Board of Directors proposes to change the content of the regulations, it must receive at least 50% approval from the Board of Directors members.[14].

[1] Article 146 of the 2023 Housing Law

[2] Article 15 Regulations on management and use of apartment buildings attached to Circular 05/2024/TT-BXD

[3] Article 21.1 Regulations on management and use of apartment buildings attached to Circular 05/2024/TT-BXD

[4] Article 21.2 Regulations on management and use of apartment buildings attached to Circular 05/2024/TT-BXD

[5] Article 18 Regulations on management and use of apartment buildings attached to Circular 05/2024/TT-BXD

[6] Article 24.2.a Regulations on management and use of apartment buildings attached to Circular 05/2024/TT-BXD

[7] Article 19 Regulations on management and use of apartment buildings attached to Circular 05/2024/TT-BXD

[8] Article 148.1 of the 2023 Housing Law

[9] Article 24.2 Regulations on management and use of apartment buildings attached to Circular 05/2024/TT-BXD

[10] Article 24.3 Regulations on management and use of apartment buildings attached to Circular 05/2024/TT-BXD

[11] Article 152 of the 2023 Housing Law

[12] Article 153.2 of Housing Law 2023

[13] Article 154 of the 2023 Housing Law

[14] Article 25 Regulations on management and use of apartment buildings attached to Circular 05/2024/TT-NXD