ACQUIRING LAND USE RIGHTS THROUGH A BUSINESS COOPERATION CONTRACT IN VIETNAM

In Vietnam, if a real estate investor (Investor) cannot Acquire A Land Area Through Common Options to implement its investment projects, it may consider entering into a business cooperation contract (BCC) with a local land user. Under a BCC structure, the parties do not establish an entity but usually cooperate to use their available resources (including land use rights) to do business. In this case, the party having land use rights (Landlord) retains the title over the land without transferring them to the Investor, but the Investor may obtain certificate(s) which evidence its title over assets attached to the relevant land area (generally, ownership certificate). There is a risk that a BCC contract may be regarded as a land sub-lease contract between the local land user and the Investor.  However, a BCC structure is quite common in practice and there are certain legal basis for such a structure.

The basic steps to “acquire” land use rights through a BCC are as follows:

·        Step 1: Signing BCC. The Investor and Landlord will enter into a BCC, whereby the Landlord agrees to contribute capital in form of land use rights;

·        Step 2: Amendment of land use rights certificate (LURC) by Landlord. To contribute land use rights as capital under the BCC, the Landlord must conduct compulsory procedures with relevant authority to, among others: (a)register capital contribution in form of land use rights; (b) change the land use purpose if the current use purpose of land area does not conform to the land use purpose of investment project; and (c) extend the term of land use rights if the term of land use rights is less than term of the investment project. After completing procedures (i), (ii), and (iii), the competent land authority will issue Landlord with amended LURC and land allocation decision or lease contract.

·        Step 3: Obtaining ownership certificate for assets attached to land. This procedure is not compulsory under the land law. However, since the ownership certificate is the most conclusive document evidencing the rights of Investor to assets attached to land, it is advisable to obtain ownership certificate for such assets after completing construction. The application dossier must include, among others: (a) the BCC or Landlord’s written approval for construction of attached assets, which is notarized or certified in accordance with laws; and (b)copy of amended LURC of Landlord.

The ownership certificates are issued in a standard form as LURC, but mostly contain the key information regarding the assets attached to land such as type of assets, constructional area, form of ownership, and term of ownership. Under the land law, if the investment project comprises various buildings in a piece of land, the Investor may obtain ownership certificate for each building or for each area in a building.

This post is contributed by Nguyen Hoang Duong, a legal trainee at Venture North Law.