Owners of apartments in an apartment building in Vietnam must set aside 2% of the purchase price for contribution into the apartment building’s maintenance fund (Quỹ bảo trì) and pay monthly contribution into the apartment building’s operation fund (Quỹ vận hành). The management of an apartment buildings including the maintenance fund and the operation fund will be handled by (1) “the meeting of [owners of] the apartment building”(hội nghị nhà chung cư) (building owner meeting) (2) a building management board selected by the building owner meeting, and (3) a management company selected by the meeting of owners of the apartment building.

Vietnamese law provides for a relatively detailed framework on management of an apartment building. However, several important issues, which are discussed below, are still not adequately addressed:

• The residential housing regulations seem to require an apartment building to be managed by a single management company. However, an apartment building usually includes certain commercial components such as office or shopping mall which are managed and operated very differently (e.g., the lifts serving commercial section will be used more extensively that those used for residential section). Accordingly, the combination of management of both residential section and commercial section in one single mechanism could cause conflicts between the apartment owners and the owners of the commercial section.

The State Securities Commission (SSC) seems to take the view that public companies involving real estate business are subject to a 50% foreign ownership limit. However, we think that the SSC’s view is not consistent with the law and the foreign ownership limit in a public company involving real estate business should be 100% not 50%.

• Under various international treaty (CPTPP or AFAS), Vietnam does not undertake to impose any foreign ownership limit to real estate business. Vietnam only limits the scope of operation of foreign-invested companies involving in real estate business (e.g. limitation on the ability to purchase houses for lease). This means that under these treaties, the foreign ownership limit in real estate business in general is 100%.

• Article 139.1(a) of Decree 155/2020 provides that In the case of a public company operating in a business investment industry or trade for which an international treaty of which Vietnam is a member regulates foreign ownership, the provisions of such treaty apply. Accordingly, the foreign ownership limit in a public company involving in real estate business is 100%.

• Similarly, since the Law on Real Estate Business 2014 imposes no foreign ownership limit to foreign invested enterprises, under the Law on Real Estate Business 2014, the foreign ownership limit in real estate busienss is 100%. Article 139.1(b) of Decree 155/2020  provides that in the case of a public company operating in a business investment industry or trade for which the relevant law regulates foreign ownership, then the provisions of such law apply. Accordingly, the foreign ownership limit in a public company involving in real estate business is 100%.

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In this post, we continue to discuss the Draft on Law on Real Estate Business, which was recently published for public comments. Part 1 of our discussion can be found Here.

This post is written by Nguyen Hoang Duong and Nguyen Quang Vu.

The Ministry of Natural Resource and Environment (MONRE) recently published a draft new land law (Draft) for collection of public comments before submitting the Draft to the National Assembly. Among other notable changes introduced by the Draft, the change to regulations on land rental payment method may attract attention. While this issue has been briefly covered by our comment of draft Land Law, below are our in-depth comments on the proposed change:

• Under the Draft, the land users, who lease land from the Government, may select to pay land rental on either annual basis or lump-sum basis for the whole term if their lands are (i) lands for implementing projects of agricultural manufacturing, forestry, aquaculture, salt production, or (ii) lands for industrial zone, industrial cluster, export-processing zone, or hi-tech zone. With respect to other types of land, the only option available to the land user is payment of land rental on an annual basis. This regulation appears to be an unwelcome change given that under the current Land Law 2013, the land users are free to choose a suitable land rental payment method regardless of their types of land. In addition, this gives rise to several issues as discussed below.