The ability to sell unfinished construction works is important for real estate developers who do not have sufficient financing to complete the works. Unfortunately, there is no clear legal framework supporting such sale. This is because:
- In general, under the Civil Code 2005, sale of immovable property such as unfinished construction work will likely require a title certificate, unless otherwise provided by law. Therefore, the owner of an unfinished building will only have clear right to sell the building if it can obtain a title certificate for the unfinished building. This may be difficult to achieve in practice, since the regulations on issuance of title certificate for a building seems to assume that the relevant building is finished building. In addition, the authority may prefer to issuing title certificate for buildings which have been completed in accordance with the applicable construction permit;
- The Law on Real Estate Business 2014 provides that “existing construction works” in a real estate project may be sold without a title certificate for the building as long as the seller has obtained title certificate for the underlying land. Therefore, if an unfinished building qualifies as existing construction work then a real estate developer who has obtained title certificate for the underlying land may sell such unfinished building;
- Sale of unfinished building by a real estate developer may be subject to regulations on transfer of real estate project under the Law on Real Estate Business 2014 and transfer of land use right for the underlying land under the Land Law 2013; and
- Under the Land Law 2013, when a construction work built on a land area leased from the State in the form of annual payment, the Land Law 2013 requires such work to be completed in accordance with detailed construction master plan and the approved construction investment project. This provision is not clear as how could be considered as “completed”, i.e. whether the construction work (i) must be fully finished to the extent that it includes all the parts to be put into use; or (ii) it could have parts unfinished but to the extent being constructed, the construction work is in line with the items and the approved construction schedule. While it is not entirely clear under the laws, it is reasonable to take the later view because it is more consistent with the Law on Real Estate Business 2014, which allows transfer unfinished real estate projects and real properties formed in the future.
This post is written with contribution from Nguyen Bich Ngoc, an associate at VILAF.