In Vietnam, leasing land directly from the State is a common option to acquire land use right (LUR). That means one, as master “land user” (người sử dụng đất), needs to sign a land lease agreement (LLA) with State, by which it is obligated to pay land rental. Depending on the choice of the land user, the land rental could be paid in lump sum for the whole term or annual basis. Regarding the former case, the land law allows the land user (Assignor) to assign its LUR to another entity (Assignee) via, among others, sale of or capital contribution in form of LUR (generally, assignment). Meanwhile, the law does not make it clear on whether the Assignee should sign a new LLA with State as a result of the LUR assignment. In particular,

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.

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.