Keangnam to sink deeper into trouble

Last week, the judge of a five-day court hearing announced that the developer had to adjust the value of a disputed apartment down by VND700 million (US$33,000) from the contracted price of US$319,394, due to a miscalculation made when calculating the USD/VND exchange rate on the apartment’s sales.

Following the court’s decision, many buyers of the other 900 apartments at the Keangnam Landmark Tower who had signed similar contracts using the miscalculated exchange rate would also be able to claim against the developer to pay back the difference, which could add up to VND630 billion (US$30 million).

Ta Van Thanh signed the contract to buy apartment A710 from Keangnam Vina in December 2009. From then until March 2010 she had paid a total of US$42,087 to the developer. The lawsuit between Keangnam Vina and Thanh started in 2010, when the buyer found  Keangnam Vina’s violation in using foreign currency in her apartment contract. Thanh is the first plaintiff among a group of home-buyers at Keangnam Hanoi Tower to bring the RoK firm to the court.

Since discovering the error, Thanh has refused to pay any additional money to Keangnam Vina, as she sued the developer at the Nam Tu Liem Court on three main counts: Keangnam Vina had calculated the apartment’s payment based on US dollar value which is illegal in Vietnam; Keangnam had sold units with smaller space than declared in the contract, adding reinforced concrete pillars and electrical boxes into the unit’s space; and Keangnam had given misleading information in advertisements by giving an impressive illustration indicating that the project was located next to a park and lake, however, the surrounding areas are in fact construction sites.

The court announced last week that Keangnam had violated the currency management regulation by calculating the unit’s value in US dollars and requested Keangnam adjust the value of the unit from USD to the correlating value of the Vietnamese dong at the time of the contract signing in December of 2009. This means that the sum that Thanh should have paid to Keangnam Vina was VND700 million ($33,000) less than the contracted value.

Lawyer Nguyen Van Son, representing the plaintiff, said that “The result of the hearing court is an initial success for the plaintiff, even though her remaining two petitions were rejected by the court. We will not give up.”

The court also rejected Keangnam Vina’s petition asking Thanh to pay the sum of more than VND1 billion (US$47,600) for delaying her payment for the apartment since 2010.

The Keangnam Hanoi Landmark Tower is located on 4.6 hectares on Pham Hung street in the west of Hanoi.

With the total investment capital of more than US$1 billion, the development consists of a 72-storey tower featuring a 5-star hotel, offices and apartments for lease, and two 48-storey apartment towers and a total of 922 apartments. All of the apartments were sold at an average price of US$3,000 per square metre.

In operation since 2012, the developer has experienced a troublesome existence, from labour accidents occurring during its construction, fierce disputes with apartment owners on management fees, tax scrutiny for transfer pricing and now a conflict over apartment size measurements.

In April 2015, the foreign press reported that Keangnam Enterprises – the mother company of Keangnam Vina - faced bankruptcy and decided to sell the Keangnam Landmark Tower at the quoted price of US$800 million to solve its financial difficulties. Some buyers were initially named, but none have confirmed their involvement with the buy-in yet.