Guidance On Issuance Of Title Certificate For Condotel In Vietnam

In February 2020, the Ministry of Natural Resources and Environment (MONRE) issued a long-waited guideline regarding issuance Certificate of Land Use Rights, Ownership of Residential Houses and Assets attached to land (LURCs) for some new real estate products including condotel and resort villas. In particular, the MONRE confirms three important points below:

Condotel (condo-hotel) and resort villas are regarded as tourism residences (such as tourism appartment and tourism villas) under the Law on Tourism. Accordingly, the land used for the development of these facilities for service provision purposes is categorized as “commercial and services land”. The confirmation by MONRE is consistent with our earlier as discussed here.

STRUCTURE FOR “SELLING” OFF-PLAN APARTMENTS AT PRE-FOUNDATION STAGE IN VIETNAM

Under Vietnamese law, a housing developer (Developer) is not allowed to sell apartments formed in the future (off-plan apartment) (căn hộ hình thành trong tương lai) before completing construction of foundation of the apartment building where such off-plan apartment located (Pre-Foundation Stage) (Article 55 of Law on Real Estate Business 2014). However, in practice, by engaging an independent entity to act as an agency/broker (Agency), it seems that many Developers have “overcome” this limitation. While there are certain legal risks (as discussed below), the transaction structure involving an Agency at the Pre-Foundation Stage may facilitate capital arrangements and customer acquisition of Developers for housing projects (Project).

This diagram and table (click here to download) demonstrate transaction structure currently employed by some Developers to “sell” off-plan apartments at Pre-Foundation Stage and discuss relevant pros and cons. This post is written by Nguyen Hoang Duong.

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.

Vietnam Business Law