New Amendments to Vietnam Construction Law

The National Assembly has passed the Law Amending and Supplementing some Articles of the Construction Law 2014 (Construction Law 2020). The Construction Law 2020 will take effect from 1 January 2021 and contain some notable points as below.

1. Pre-feasibility study

Construction Law 2020 promulgates new projects that are subject to preparing a pre-feasibility study (Pre-FS). In particular, the projects that must prepare a Pre-FS include:

  • Projects of national importance. This requirement is the same under Construction Law 2014. Criteria to determine whether a project is of national importance is regulated under the Law on Public Investment 2019;

  • Group A projects financed by public investment capital (vốn đầu tư công). Construction Law 2014 requires all Group A projects to prepare the Pre-FS. Criteria to determine whether a project falls within the scope of Group A projects is regulated under the Law on Public Investment 2019;

  • PPP projects under regulations governing PPP projects. Construction Law 2014 does not specify the requirement of preparing the Pre-FS of a PPP project; and

  • Projects that are subject to obtaining in-principle approval from the National Assembly or the Prime Minister. Construction Law 2014 does not require these projects to prepare the Pre-FS. Under the Investment Law 2020, the Pre-FS can serve as the proposal for implementing a project.

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Written by Nguyen Quang Vu On In ,

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.

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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.

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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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