Refund guarantees for residential house buyers in a real estate project in Vietnam

To protect buyers in a residential house project, the Law on Real Estate Business 2014 requires the developer to provide a buyer with a bank refund guarantee. If the developer fails to deliver the house within the agreed schedule, the buyer could get back its advance payment from the refund guarantee. However, there are several ways which a developer may use to water down the protection provided by law. For example,

· A developer may encourage a buyer to “waive” the right to be issued with a bank refund guarantee (e.g., by offering a discount on the sale price);

· A developer may only procure a refund guarantee for the obligations to return the advance payment made by the buyer but not the obligations to pay the penalty or interests accrued on such amount;

· For buyers of villas, the developer may only procure a refund guarantee for the value of the construction part of the villas (but not the value of the land); and

· A developer may put onerous documentary conditions for the buyer to be able to claim a repayment from the bank refund guarantee. This is because the law does not make clear whether the refund guarantee should be a demand guarantee.

This post is written by Nguyen Quang Vu.

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New guidance on registration of mortgage of land use right and construction works - Part 1

New guidance on registration of mortgage of land use right and construction works - Part 1

On 25 November 2019, the Ministry of Justice (MOJ) issued Circular 7 guiding some contents of mortgage of land use right and asset attached to land (Circular 7/2019). Circular 7/2019 will take effect from 10 January 2020 and replace Joint Circular 9 of the MOJ and Ministry of Natural Resources and Environment (MONRE) dated 23 June 2016 (Joint Circular 9/2016) on the same subject matter. In general, Circular 7/2019 only provides some guiding and supplementing provisions for Decree 102 of the Government dated 1 September 2017 (Decree 102/2017) rather than providing detailed guidance as Joint Circular 9/2016.

Competent authority managing the registration of mortgage

Previously, the document detailing the registration of mortgage over land use right and asset attached to land is usually a joint circular of the MOJ and MONRE. However, since joint circular is no longer legislative document (văn bản quy phạm pháp luật) under Law on Laws 2015. Accordingly, the unified authority to manage the security interest registration is vested in MOJ. Under Decree 102/2017, the MOJ now has the authority to issue or to submit for the Government to issue legislative documents on the registration of security interest, which includes Circular 7/2019.

Are Land Use Rights Considered As Immovable Properties Under Vietnamese Law?

Under the current law of Vietnam, it is possible that “land use rights” (quyền sử dụng đất) are considered “immovable properties”. The following arguments support the view that land use rights are immovable properties under Vietnamese law:

Land use rights (LUR) are property rights (quyền tài sản), which is a property (tài sản). Properties are divided into movable properties (động sản) and immovable properties (bất động sản). Immovable properties are defined to include: (i) Land; (ii) House and construction work attached to land; (iii) Other properties attached to land, house or construction works; and (iv) other properties as stipulated by law.
Regarding item (iv) above, LURs are stipulated under Article 5.4 of the Law on Real Estate Business 2014 as types of “immovable properties made available for trading” (bất động sản đưa vào kinh doanh). This view is also adopted by Dr. Do Van Dai in his book on Civil Code 2015.
Regarding item (iii), Dr. Nguyen Minh Tuan considers LURs being immovable properties because they are “properties attached to land”.

Environmental license and permit for industrial parks in Vietnam

The following is a non-exhaustive list of licenses, permits and requirements on environment which an industrial park in Vietnam need to comply with.

1. Environment impact assessment report (EIAR – Báo cáo đánh giá tác động môi trường) or environment protection plan (EPP – Kế hoạch bảo vệ môi trường).

2. Confirmation on completion of the environmental protection works (Xác nhận hoàn thành công trình bảo vệ môi trường).

Vietnam Business Law