New regulation defuses “useable area” disputes

A hot conflict has cooled with a circular defining “usable space” in property valuations

Circular 03/2014/TT-BXD of the Ministry of Construction, which will come into force on April 8, stated that the value of apartments would be calculated based on the net useable area of an apartment.

This circulation should at a stroke resolve conflicts between apartment buyers and project developers. 

Circular 16 issued in 2010 by the Ministry of Construction said contracts for the purchase of apartments needed to specify the area under common ownership, the area under the private ownership of the apartment owners and apartment floor area either determined by the net floor area measurement or gross internal area measurement.

“This only suggested how to calculate the floor area of an apartment in the purchasing contract without identifying common ownership and private ownership of such space,” said a real estate expert.

In addition it doesn’t explicitly state what to include in the net floor area or gross internal area measurement which again led to arguments, he said.

“We suggested that using a basis of measurement that measures only the usable area of a property will avoid any complications and will ensure fairness. These figures must be explicitly stated in any contracts and must be checked by both parties,” he added.

The previous ways of calculation saw developers take advantage of the vagueness to charge for space that was effectively unable to be used by the apartment buyer.

Investors claimed that space devoted to unmoveable fixtures was an integral part of an apartment’s structure and therefore should be included in contracts. Buyers obviously objected to paying for space that they could not use, particularly in smaller apartments, which were affected disproportionately.

The Circular 3 however also states that buyers who bought their apartment before the application of the circular would not benefit from the new ruling.

In a related move, the National Assembly’s Legal Committee last week questioned the Ministry of Construction for having come up with such badly worded original rulings which had caused innumerable problems to apartment buyers.

However deputy minister of Construction Nguyen Tran Nam refuted the accusation that his ministry had acted in the best interest of property developers and bizarrely claimed the two calculations for the area of an apartment were identical.