Circular 16, issued by the Ministry of Construction of Vietnam, has numerous implications for the Vietnamese real estate market. The most outstanding is emerging conflicts between home buyers and investors. As buyers of hundreds of thousands of apartments have paid for shared areas (load-bearing columns and technical boxes), investors bagged hundreds of trillions of Vietnamese dong from buyers.
At a recent meeting on housing law held by the National Assembly’s Legal Commission in Hanoi, many delegates questioned the Ministry of Construction for solutions to such disputes.
Circular 16 is unreasonable and unlawful
Speaking at the explanatory meeting, Deputy Construction Minister Nguyen Tran Nam said that the method of calculating apartment floor area specified in Circular 16/2010/TT-BXD is not contrary to the Housing Law 2005 and the Government's Decree 71/2010/ND-CP. He said the method of calculating apartment floor area, either from the centre of the walls and from edge to edge of walls, does not affect the determination of the area of shared ownership and the area of private ownership because the area of shared ownership like columns and partitioning walls are defined by the Housing Law and the Decree 71/2010/ND-CP and clearly specified in buy/sale contracts.
Arguments in favour of the Circular 16 by the Ministry of Construction were rejected by Dr Le Hong Son, Director of Legal Document Inspection Department under the Ministry of Justice as the Ministry of Construction’s calculation of floor area measured from the centre of the shared wall of the two apartments and the entire externally sheathed wall of the apartment (not excluding the area of shared ownership) at Circular 16 and the Official Document 124 of the Ministry of Construction is not compliant with the Article 70 of the Housing Law and Article 49 of Decree 71 of the Government. In this circular, the area of shared ownership that cannot be divided is divided and recognised as private ownership. This is inconsistent with the provisions of the Civil Code.
“If the floor area of apartment is calculated from the centre of the wall, there will be an unfair fact that with the same area recorded in the house purchase contract and the same price unit, the usable areas are different. Apartments with columns and technical boxes have these columns and technical boxes added to the total area of the apartment and buyers have to pay for these items but they are not allowed to use. Their real usable areas are smaller than those without columns and technical boxes. Hence, there exists unfairness among apartment owners. Besides, owners have to pay fees for the area recorded in the contracts,” he pointed out.
Agreeing with Dr Son, Mr Do Van Duong, Standing Member of the National Assembly’s Justice Commission, said Article 21 of Circular 16 of the Ministry of Construction is completely unreasonable and unlawful. The ministry must be responsible for remedying the consequences caused by Circular 16. Even, if the case has gone far and caused instability and loss of public trust, the persons in charge of issuing this document must be responsible to the law.
He said the responsibility of State management agencies is to protect the interests of the people. But, in this respect, the Ministry of Construction has not done well.
With a more severe response, Mr Ngo Van Minh, Standing Member of the National Assembly’s Legal Commission, said if the Ministry of Construction affirmed that Circular 16 was not wrong, why was it fixed? Why did it need to issue the Circular 03 to amend the Circular 16? Indeed, the ministry should confess its mistakes with the Circular 16, given the issue of the Circular 03 to amend it. Therefore, it is necessary to stop the enforcement of Article 21 of Circular 16 and count apartments using such wrongful calculation. It also needs to compute damages to the public.
Mr. Nguyen Si Cuong, Standing Member of the National Assembly’s Legal Commission, pointed out that the Ministry of Construction’s two calculation methods are free of problems if they do not place all risks to the hands of buyers. If the Ministry of Construction’s representatives said that, with two existing calculation methods, investors and buyers can discuss and agree on the most reasonable one, it is theoretically true, but in fact, buyers hardly have any opportunity to have deals with investors. This impossibly happens.
Investors bag unfair money
Standing for residents, Ms Trinh Thuy Mai, a member of the Keang Nam Apartment Administration Board, said, apart from paying a huge amount for the area of untouchable shared ownership inside the apartments, buyers have to pay monthly/annual fees for maintenance, servicing and land rents for the areas they do not possess. She gave an example, “The apartment of Ms Bui Bao Quyen has an area of 206.95 square metres in the contract but the area of shared ownership in her apartment is 30.21 square metres. With a unit price of US$2,500 per square metre, she paid US$75,525 (about VND1.56 billion) for this shared area.
The settlement of the consequences caused by Circular 16 drew great interest and care of participants.
According to Article 3 of Circular 03 of the Ministry of Construction, where the parties signed apartment purchase contracts before the enforcement of this circular, the area of apartment was determined as signed.
This provision however was not supported by many participants.
Ms Tran Thi Quoc Khanh, Standing Member of the Committee for Science, Technology and Environment, a mistaken circular must certainly be corrected. However, we need to consider thoroughly the damage of the people. Maybe, investors should return the money they took from the shared area to buyers. Then, we will regain the trust of the public in the real estate market.
Mr Phan Trung Ly, Member of the National Assembly Standing Committee and Director of the Legal Commission, concluded that Circular 16 added contents not defined in decrees of the Government and Housing Law passed by the National Assembly.
While investors only calculate the floor area from the centre of the wall, buyers purchase apartments with really usable area smaller than that recorded in the contract. This has sparked disputes and litigations and distorted the real estate market. The National Assembly’s Legal Commission asked the Ministry of Construction and the Ministry of Natural Resources and Environment to study and review regulations to ensure the rights and interests of home buyers. It also told the Government, the Ministry of Construction and the Ministry of Justice to review and settle all contents of the Circular 16 as well as seek solutions to address subsequence to protect legitimate rights and interests of the citizens.
Luong Tuan
Vietnamese
