Residents cry foul over service fees

Trouble in paradise: Ciputra residents are up in arms over the high service management fees proposed by the developer

Residents have said they will not pay the monthly management fees of around VND3,816 ($0.24) per square metre (sqm) for low-rise houses, claiming the rate is too high and service quality does not meet expectations.
More than 40 households have signed a letter sent to the Indonesian-backed Citra Westlake City Development Co., claiming they will not pay until the developer and residents can work out an acceptable rate.
Residents claimed that the charges at Ciputra are 10 to 20 times higher than the rates in other residential complexes in Hanoi. Even fees at Phu My Hung new urban area in Ho Chi Minh City — where public facilities and service quality are the best in the country — are still two to three times lower than the level at Ciputra.
Under current charges the owners of a 225sqm house would pay a management fee of VND900,000 ($57) a month, which is tantamount to the monthly salary of a state employee, while most residents are ordinary people selling houses in the downtown areas to purchase homes at Ciputra.
Residents said setting fees based on sqm was not rational and other factors such as the number of people in a house and facilities in each area should be taken into account.
Fees for the high-rise apartments were deemed unfair since a single rate is applied to all units irrespective of the difference between those owning cars and those not, residents said.
Ciputra said the fees are calculated on the basis of monthly expenses for management and the charges will be divided according to the floor space of each home. The developer claimed that the management arm is not operating for profit.
Residents pointed out that services in the complex are poor, lacking children’s playgrounds, public parks, hospitals, kindergartens and tennis courts. In some areas, the houses were handed over long ago but without cable television or telephone lines.
“Even if there are sufficient facilities, we will only pay service charges equalling Phu My Hung’s rates although we know that living in Ho Chi Minh City is more expensive than in Hanoi,” said a resident, who did not wish to be named.
Management fees at Phu My Hung range between VND250,000 ($15.80) to VND500,000 ($31.6) per month and the services are better than in Ciputra, he said.
The problems at Ciputra are sending a warning to both property developers and homebuyers. Nguyen Xuan Dao, managing director of Vietnam Property Consultant Company, said lessons could be drawn from problems emerging in Ciputra.
He said Vietnamese buyers should be aware that paying management fees is imperative to maintaining residences in good conditions and the charges would depend on construction and service quality provided to residents.
Normally, fees for medium quality residences developed by local companies range from $2 to $16 per month for the whole apartment or villa irrespective of floor space.
However, management fees in luxury housing projects are based on square metre and the service charge for each square metre should stay between $0.20 and $0.40 per month to maintain buildings in good conditions.
Charges could be much higher in serviced apartments for lease to expatriates with the figure rising up to $0.80. In Singapore, management fees for a flat could cost more than $200 per month, Dao said.
However, he said, developers should take proper steps in setting management fees since most Vietnamese do not pay much attention to service charges when they purchase a home.
“Vietnamese can spend hundreds of thousands of dollars to purchase a villa but they are very reluctant to pay for management fees of tens of dollars a month,” he said.
Dao suggested that developers could set fees based on an upward approach, meaning that fees would gradually increase when services and facilities improve.
“If developers set high management fees when the projects just begin operation, buyers will feel shocked and protest when services and facilities are not sufficient,” he said.
Ciputra is a $2.1 billion residential and commercial property winning the rights to sell houses to Vietnamese. The project plans to construct 2,000 landed houses and 50 blocks of high-rise apartments as well as hotels, offices and malls.
The project has completed 300 apartments and 400 villas in the first phase. It is building the second phase at the cost of $1.1 billion.