Common grounds in urban disputes

Leading experts sharing their views on preventing disputes between developers and residents at VIR and Venus Corporation’s seminar last week

Vietnam is one of the countries enjoying the fastest pace of urban development in the world, with urbanisation at the end of 2019 estimated to sit at around 40 per cent. It is projected that in two decades’ time around 50 per cent of the country’s population will live in urban areas.

The fast growth of the property market in the recent past has enabled thousands of apartment units to be launched every year, giving rise to the industry of operation and management of such properties, through hundreds of domestic and international services providers. The fast increase of the property market has, however, also been causing much conflict among related sides such as property developers, residents, and operators which put professional management and operation skills in ever higher demand.

According to the Ministry of Construction (MoC), as of March this year nearly 500 apartment building projects across 43 cities and provinces have been embroiled in disputes, occupying more than 10 per cent of the total number of apartment buildings nationwide. Among those, Hanoi and Ho Chi Minh City are leading the list with more than 1,100 and 1,440 buildings respectively.

Conflicts and disputes between investors and buyers have occurred in many projects regardless of whether they are foreign or domestically-invested ones, from the popular to the high-grade ventures.

Dozens of residents living in an apartment project in Mo Lao Urban Area in Hanoi’s Hadong district, for example, have hung banners in protest at the developer, who they say violated regulations on the management and operation of the project. As a result, the developer refused to allow vehicles in the parking basement, and so residents were forced to park their cars on the road to continue protesting against the developer.

In another case in Hadong, many residents who purchased apartments in a Duong Noi ward initiative visited the head office of the developer, asking to work together to solve issues surrounding the lack of apartment area and other problems. The two sides had a dialogue lasting up to 12 hours, but the issues have yet to be fully solved.

Conflicts and disputes have not only arisen in projects invested by domestic developers, but also in those boasting international investors.

The developer of the Ciputra city in Hanoi – a project invested by Nam Thang Long Urban Development Company, which is a joint-venture between Vietnam’s Urban Infrastructure Development Investment Corporation and Indonesia’s Ciputra Group – wants to build more housing units but the residents have rejected the proposal, citing lack of infrastructure.

Hundreds of Ciputra residents recently sent a petition to the Hanoi People’s Committee protesting the additions proposed by the Indonesian-backed joint venture. The company’s proposal seeks to amend its original plan, which comprised five buildings of five to 47 floors, increasing it to eight buildings ranging from 45 to 68 floors. The developer also proposes conversion of a 55,000 square metre plot meant for a commercial area, a garden, and roads into a location featuring trade space, offices, hotels, and high-rise housing for nearly 3,000 people.

City authorities had approved in principle some of the changes sought by the developer, while emphasising that the developer should first assure that infrastructure would be adequate and receive the consensus of the community.

Long-lasting conflicts have also occured in Keangnam Hanoi Landmark, the highest building in Hanoi. Korean Keangnam Enterprises has been under fire regarding management fees which is now applied at VND17,000 ($0.80) per sq.m per month. However residents refused to pay, claiming that the fees were much higher than those regulated by the Hanoi People’s Committee, at VND4,000 ($0.19) per sq.m only.

Keangnam, meanwhile, claimed the VND4,000 per sq.m management fee applied to normal high-rise buildings, while Keangnam Hanoi Landmark tower had the most modern facilities and advanced technologies and so it followed that the fee had to be higher.

Disputes have also taken place in other foreign-invested projects, such as Golden West Lake, Chelsea Park, as well as Sky City.

Main causes

Vietnam Investment Review (VIR), in its ambition to engage with the property sector and assist in examining and ironing out issues, last week held a seminar themed on finding a common voice across multi-owned properties. The event, co-organised by VIR and Venus Corporation, took place in Ho Chi Minh City.

According to Le Trong Minh, editor-in-chief of VIR, the most widely-used reasons behind these disputes involve land reclamation, land clearance, and other civil matters.

“Conflicts at high-rise apartment buildings have been increasing to a level that solutions must be found to make the market of apartment buildings in Vietnam more stable and favourable for residents,” Minh said.

According to the current regulations, residents – before receiving their apartments – have to shell out 2 per cent of the value as maintenance fee, with the fund under the temporary management of the apartment building’s developers. When the building’s management board is established via a vote by the residents, the investors have to hand over the fund to the board. However, a report by the MoC stated that at many projects, residents have claimed that the investors misappropriated this fund to use for other purposes.

Other reasons for disputes included unclear regulations on management and the use of buildings such as the calculation of the apartment area, balcony area, the technical box, and general and private areas.

Additionally, some unqualified investors deliberately violated regulations on construction investment, housing, real estate business, and fire prevention.

Apartment buyers are also remiss in considering all terms of the signed contracts, particularly those related to the rights and obligations of the parties in the management and use of the home.

Nguyen Ngoc Huong, general director of Venus Corporation, credited that high-rise apartment buildings generally operate in a stable manner in the first three years.

“Disputes, however, usually arise from the fourth year onwards when the infrastructure system begins to reveal the first signs of degradation, especially elevators, fire equipment, fresh water supply, and drainage systems. All of these are important factors impacting the lives of residents, and are pain points that can easily lead to conflict,” Huong said.

Solutions suggested

Huong also explained that residents have not been kept in the loop with updates to their projects. “They residents must be more informed about what their rights and obligations are and obey regulations accordingly,” Huong said.

Operators, on the other hand, must ensure the security and the safety of the project as well as keeping the project running in prime condition, according to Huong. Apart from that, good operation also helps increase the value of the asset, especially after several years of being put into operation.

“Life does not stop, so the legal framework also needs to be revised accordingly to suit the flow of the real life and the development of the real estate market,” Huong added.

Stephen Wyatt, country director of JLL Vietnam, said many Vietnamese are not familiar with the lifestyle in high-rise apartment buildings.

“More and more Vietnamese now live in high-rise buildings and they are still burdened with unfamiliar regulations within those projects,” said Wyatt.

Many of those were too eager to live in prime high-rise apartment buildings with enough amenities and facilities, but many of them remain confused when required to obey common regulations.

“All of those regulations have existed for years in the global market, aiming to maintain the best quality living standards for residents. It can take more time for Vietnamese people to be familiar with a range of regulations,” Wyatt said, adding, “Living in high-rise apartment buildings is living in a commune, therefore it requires high awareness and discipline from residents as well as the professional management team.”

Other real estate experts believe that the lack of professionalism can be considered as one of the reasons leading to disputes between customers and developers.

“The management and operation play important roles in affirming the prestige of an investor. If the investor is repeatedly caught out on this or that issue, then of course the buyer will not trust in any of their future products,” Wyatt concluded.