On 25 November 2019, the Ministry of Justice (MOJ) issued Circular 7 guiding some contents of mortgage of land use right and asset attached to land (Circular 7/2019). Circular 7/2019 will take effect from 10 January 2020 and replace Joint Circular 9 of the MOJ and Ministry of Natural Resources and Environment (MONRE) dated 23 June 2016 (Joint Circular 9/2016) on the same subject matter. In general, Circular 7/2019 only provides some guiding and supplementing provisions for Decree 102 of the Government dated 1 September 2017 (Decree 102/2017) rather than providing detailed guidance as Joint Circular 9/2016.

Registration that must be completed before the registration of mortgage of land use right and construction works

Circular 7/2019 regulates that following kinds of registration of change to land and/or asset attached to land or confirmation of change must be completed before a person can register a mortgage of land use right and construction works:

(i) the information relating to land parcel or land parcel area is inconsistent with the information on the Certificate due to land consolidation, measurement or re-determination of land area/size; and

(ii) the information relating to asset attached to land certified on the Certificate (including kind of house, name of building, number of floors, building area, use area) is inconsistent with the information on the new Certificate due to measurement or re-determination of area, construction, or repair.

In the past, if there is change in (i) above, such change can be registered at the same time with the mortgage registration.

On the other hand, if these kinds of changes (together with other kinds of changes under the land regulations, including but not limited to land use period extension and land use purpose change) occurred after the real-estate mortgage has been registered, the land office cannot require the de-registration of such mortgage before implementing the procedures of registration of changes to land.

Registration that can be completed at the same time with the registration of mortgage of land use right and construction works

Following changes can be registered at the same time with the mortgage registration:

(i) change to information of the mortgagor on the Certificate; and

(ii) change to information of the administrative unit or other information related to mortgaged property due to a decision or document of a competent authority in accordance with law.

Changes that do not require change to the registered mortgage

Following change will only require the change to the Certificate rather than to the registered mortgage:

(i) change to information of the mortgagor;

(ii) change to information of the mortgaged land lot due to land consolidation, measurement or re-determination of land area/size; and

(iii) change to the status of the asset attached to land which is different to the information on the Certificate.

Removal of enforced mortgaged asset

Article 16.7 of Circular 7/2019 is controversial. It reads if the mortgagee does not enforce all the mortgaged assets then the parties will conduct the amendment registration to remove these assets from the scope of the mortgaged asset. It is not clear regarding:

(i) whether such provision is compulsory obligations of the parties or it is the right that the parties can choose to exercise or not; and

(ii) if it is a compulsory obligation, how often should such amendment registration be conducted. The parties must register the amendment after the enforcement of any asset, or the parties may do so after the enforcement of several assets.

We are of the view that such provision should only be the right granted to the parties rather than an obligation.

No de-registration required for forwarding of registration

In practice, in order to notarize residential house mortgage contract, some public notaries request the parties to de-register the mortgage of rights arising from the same residential house purchase contract (Rights Mortgage). Such act will prevent the parties from forwarding the registration of the mortgage of residential house (House Mortgage) from the Rights Mortgage. To address such issue, Circular 7/2019 clearly states that the competent authority is not allowed to request the relevant parties to conduct the de-registration of the Rights Mortgage before conducting the notarization or certification of the residential house mortgage contract.

Article 19 of Circular 7/2019 provides the additional documents that must be submitted to de-register a registered mortgage:

(i) if the enforcement of all the assets is completed, the release document (văn bản giải chấp in Vietnamese, such term is not clarified in both Decree 102/2017 and Circular 7/2019), the liquidation document of the mortgage agreement, the auction asset sale contract approved by the competent authority or other evidence document;

(ii) if the asset is destroyed, totally damaged or demolished or confiscated under effective decision of competent authority, the evidence of such situation; or

(iii) if the mortgage is cancelled or the mortgage contract is declared void by the effective judgment or decision of the court or the decision of the arbitrator, such judgment or decision.

Article 19 of Circular 7/2019 can be used as an example for the bad drafting since it failed to clearly divide which kind of document is required for which kind of situation while mentioning a provision as if it were applied to the case while it is not (Article 47.2(b) of Decree 102/2017).

This post is written by Nguyen Hoang Duy. Part 1 is here.

Vietnam Business Law