land and real estate in vietnam

Lawyer in Vietnam Oliver Massmann Land and Real Estate in Vietnam

The Licensing Process

Last year, a new Land Law which consolidated many of the different developments related to

land use over the years was passed. On 26 November 2014, we have also seen the passing of the

revised Law on Residential Housing and Law on Real Estate Business with provisions which

address some of the inequalities between foreign and domestic individuals and corporations.

These changes are critical to ensure that Vietnam continues to keep up with trends in the region

and to continue to attract foreign investment.

With the passing of the above laws, this article focuses on the licensing process faced by

domestic and foreign investors seeking to undertake real estate development projects.

1. PRE -REQUISITES FOR INVESTMENT CERTIFICATE It is a requirement under the Law on Investment that investors have to obtain an Investment

Certificate with the business line in real estate development/investment to implement a real

estate project. However, prior to obtaining an Investment Certificate, investors are also required

to obtain the following:

(i) Decision on the appointment of investor - A decision issued by the People’s Committee

upon verification on the capability and experience of the investor as well as feasibility and

effectiveness to implement the project. The application file for such decision includes documents

proving the legal status, expert capacity, experience and financial capacity of the investors;

explanatory statement and preliminary plan on eco-technical solutions; capacity; and other

advantages of the investor if assigned to act as the developer (if any).

(ii) Basic design - A document comprising the description and basic drawings of a project.

The application file includes the explanation on basic design and basic design drawings.

(iii) 1/500 Masterplan Approval- A detailed plan of the project which includes criteria of the

project, all parameters required for land, construction and technical infrastructure, supply

sources, and environmental protection measures. The application file includes explanation about

contents of the plan, including miniature colour drawings; colour drawings of prescribed scale;

and information on construction planning issued by Department of Planning and Architecture;

and

(iv) Investment Approval- A document which sets out project scale, requirement on technical

infrastructure, implementation schedule of the project, basic rights and obligations of the

investor, and the plan on product sale. The application file includes project explanation, basic

design, decision on appointment of the investor and 1/500 Masterplan Approval.

The documents set out above are in relation to the implementation of a real estate project and are

required before an investor even knows if it is permitted to undertake a real estate project.

Investors have to incur a lot of time and costs for the purpose of preparing applications for and

obtaining such documents. It can take up to 160 days to obtain these documents not including

preparation time. These requirements cause unnecessary delays and difficulties to investors

seeking to undertake real estate development projects. Further, notwithstanding that the above

documents have been issued, an investor may still fail to obtain an investment certificate

subsequently to undertake a real estate development project.

Recommendation: Remove the requirements in items (i) to (iv) above to obtain the Investment

Certificate. The only pre-requisite necessary at the early stage is confirmation oh the parameters

for the project to be developed on the site. All other approvals can be finalised at a later stage.

An investor should only have to go through a one-step procedure in order to obtain the

Investment Certificate.

2. FIRST TIME FOREIGN INVESTORS According to Article 34- of the current Law on Residential Housing, foreign investors seeking to

undertake development of commercial residential housing for the first time are required to have

an Investment Certificate in accordance with the Law of Investment.

Similarly, according to Article 8 of the Law on Real Estate Business, investors (both foreign and

domestic) seeking to receive assignment of a project are required to establish an enterprise

registered for real estate business. Hence, a foreign investor is also required to possess such

Investment Certificate for the purpose of receiving assignment of a project.

However, pursuant to the Article 50 of the Law on Investment, a foreign investor who

undertakes investment in Vietnam for the first time must have acquired or been assigned an

investment project in order to obtain an Investment Certificate to undertake a real estate project.

In short, an Investment Certificate is required for the purpose of an investor acquiring or being

assigned an investment project whilst an investor must have acquired or been assigned an

investment project to obtain an Investment Certificate.

Such contradicting and overlapping requirement between the abovementioned laws has made it

impossible for the first time foreign investors to undertake any real estate project. It is unclear

why the Law on Residential Housing and the Law on Real Estate Business require an investor to

secure an investment project prior to obtaining an Investment Certificate when the licensing

authorities would have examined the capability of an investor when evaluating the investor’s

application for an Investment Certificate. The licensing authorities would be provided with the

necessary information on the financial capability, experience and expertise of the investor during

the application procedure for the Investment Certificate.

This requirement merely adds unnecessary procedures which hinder real estate developers and

adds to the confusion of the licence issuing authorities.

Recommendation: We suggest that the requirement for an investor to possess an investment

certificate prior to being permitted to conduct a commercial residential housing project and to

receive assignment of a project be removed.

3. LAND USE RIGHTS CERTIFICATE (LURC) FOR PART OF CONSTRUCTION

WORKS Pursuant to Article 32of Decree 43/20U/ND-CP making detailed provisions for implementation

of a number of articles of the Law on Land, the investors shall be issued an LURC upon the

completion of sate and purchase of residential property and the whole of construction works. It is

not clear whether an LURC will be issued for parts of the construction works ,e.g. part of a floor

or an entire floor and not the entire construction works, except in the case of individual

apartments in a high rise apartment building. The law does not however prohibit the sale of part

of construction works. There appears to be some confusion on the part of the authorities as to

whether an LURC can be issued in such circumstances leading to uncertainty and inconsistent

application.

Recommendation: We recommend that an instruction be given to all provincial authorities

confirming that LURCs can be issued for part of an entire construction works which is to be

implemented according to the request of the rightful parties.

4. SUBSEQUENT PROJECT LICENSING

According to the Law on Investments, an investor is required to obtain an Investment Certificate

for each project that an investor undertakes. For foreign invested companies, they are required to

amend their existing investment certificate to take into consideration the new project. This is

complicated as it involves combining the capital requirements, investment timelines and other

investment requirements of multiple projects. This makes it very difficult for investors to have

clear and specific requirements for a new project which do not affect other projects of an

investor. It also creates complications where a developer wishes to transfer one or more but not

all the projects that it is licensed to undertake under its Investment Certificate.

Recommendation: Provide the option to investors to receive separate investment certificates for

each project it undertakes. An investor can then choose the most efficient method of managing

the licensing requirements of multiple projects.

We have set out above some of the main licensing issues encountered by investors seeking to

undertake real estate development projects in Vietnam. Notwithstanding the recent changes in

the new laws, the issues set out above continue to limit the growth of the real estate sector in

Vietnam in general. As the issues identified are administrative in nature, we would respectfully

request that due consideration be given as to whether they are necessary.

LAND PROGRESS REPORT Prepared by Land Sub-Group

Scoring to be rated as followings:

In progress report:

0 = issue remains; 1 = partially somewhat resolved; 2 = issue has been solved.

Priority (1 -10: highest).

Score = (Progress) x (Priority)

No. Age Issues Suggested/Agreed

Action Progress 0 1 2 Priority Score

No Age Issues Suggested/Agreed


Part I. Law on Land

1 Old

I

Foreign investors are

disadvantaged in

securing property

because of arduous,

discriminatory

procedures. A lease

must be negotiated

with the State and an

investment certificate

must be obtained

before a foreign

investor may

compensate the land

user.

These procedures

disadvantage foreign

investors relative to

Do away with the

requirement that leases

must be negotiated

with the State. Allow

land use rights

certificate to be issued

to foreign investors

before issuance of

investment certificate.

Not addressed. X 8 16

local developers.

Obtaining an

investment certificate

is a lengthy process,

and land users will

be unlikely to wait

for its issuance

before compensation.

2 Old

Decree 84, art. 32,

allows foreign

developers to secure

70-year lease terms

for residential leases,

indefinitely

extendable without

additional rent.

However,

"residential" is not a

defined term and it

remains unclear as to

what will be

considered a

"residential" project

in the

At a minimum, clarify

that the extendable 70-

year term is available

to any project with a

residential component.

Additionally, it would

be beneficial to provide

the same lease terms to

any project regardless

of its “residential"

nature.

Decree

71/2010/ND-CP

("Decree 71")

defines

developments to

include mixed use

developments with

residential

component. It is

not clear if the 70

year lease terms

apply to such

mixed use

developments or

not. This should

x 5 0

Important Note: This "Progress Matrix" was prepared based on the voluntary submissions of the

various Investor Groups Forum from 2011 - 2014. In terms of both the feedback and the

rankings/progress evaluations, it is not intended to be either complete or scientific. It does

nevertheless reflect many issues of concern that have come up in the various Investor Groups,

and their constructive proposals for solutions. It is hoped that it will provide a useful reference to

track and guide progress as the Government and the business community continue their

collaboration to improve the business environment though the channel of the Investor Group.

Among other things, it should be noted that many issues already fully resolved have been

dropped from this Progress Matrix to limit the size of the document, and almost all of the issues

noted are those that still need more work.



context of mixed-use

development. This

uncertainty

disincentivizes highly

beneficial mixed-use

projects.

be clarified.

Article 126 of the Law

on Land 2013

("NewLand Law")

provides that the lease

term shall be 50 years

for all projects and it

may be extended by

the State. The land

user shall pay the land

use fee for the

extended term.

3 Old

The Land Law

interpretation of

"economic

organization" refers

only to local

enterprises, is

inconsistent with the

definition provided in

art. 103 of the Civil

Code.

Amend the Land Law

to clearly provide that

the term "economic

organization" refers to

"local enterprise."

This is a fundamental

legal inconsistency

that requries technical

correction to

harmonise the laws on

land development.

The New Land Law

provides definition of

"Foreign invested

enterprises'T’FIE")

and "Economic

organisations".

Accordingly, FIE

includes joint venture

enterprise, enterprise

with wholly or partly

owned by the foreign

company. Economic

organisations refer to

local enterprises only.

X 10 20

4 Old

Investment approval

for real estate projects

is impossible to

obtain under current

circular, multi-step

procedures.

Investment Law, art.

29.1 (el, requires an

Investment

Certificate in before

implementation of a

project. Decree

108/2006/ND-CP,

arts. 11.2, 46-47,

conditions the

certificate on the

presentation of

various documents,

including (under

Decree 71/2010/ND-

CP, art 7.) an

Investment Approval.

Such approval is

itself conditioned on

a Certificate of

Recognition of

Amend arts. 7, 12 of

Decree 71 as to

simplify the approval

procedure and remove

circularity. Approval

should, ideally, be a

one-step procedure.

There should be

specific procedure for

land clearance and

land compensation

process without

involvement of State.

Also, this should be

treated the same as

projects involving the

State.

VCCI's proposal to

reduce procedures for

land development

projects from five

days to three days

should be supported.

The head of the

Property Market and

Management

Administration, MOC,

points out that Decree

71 applies only to

residential projects.

Nonetheless,

circularity appears to

persist.

The New Land Law

does not adequately

address this and still

does not separate

investment and land

approval procedures.

Also New Land Law

only provides for

procedures for land

clearance and land

compensation

involving the state,

but is silent for

procedures where

investor undertakes

compensation process.

X 9 0

Investor (see Circular

16/2010/TT-BXD,

art. 6.1), which,

circularly, is

conditioned on an

Investment

Certificate (see

Decree 71, art. 12).

Article 58.3of the

New Land Law

requires that investors

must prove their

financial capacity and

make

No Age Issues

Suggested/Agreed

Action Progress 0 1 2 Priority Score I

deposit in order to

be allocated land

or leased land by

the State for

investment

projects. Details

for such

requirements are

however not clear

under the New

Land Law. Such

conditions are

investment

requirements and

should be

separated from

land related

procedures.

5 Old

Land Compensation is

unavailable following

the recovery of leased

land, whether or not the

lease is paid in advance

as a lump sum. See Land

Law, art. 43.1 (dd).

This is at odds with the

treatment of land

allocated from the State

under art. 43.1(d), where

compensation is

available. This

distinction is unfair and

cuts against foreign

investors.

According to Article

83.5 of the Draft land

law, Land Compensation

is not applied for the

recovery of leased land,

which the lease is paid

annually, or as a lump

sum for the whole term

of lease and being

entitled to lease

exemption.

Amend the law to

provide for

compensation to all

lessees regardless of

where payment is

made annually, lump

sum or with rental

exemption.

The New Land

Lawprovides

compensation for

lump sum payment

only and not

annual payment or

rental exemption.

X 8 8

6 Old

Land Law, art. 90.4,

seems to altow

subsequent investors in

industrial zones

the choice between lease

and allocation from the

State, but art. 90.3 and

Circular 01/2005/TT-

BTNMT make it clear

that subsequent

investors may only

receive their

assignments/leases

directly from the

original developer.

Amend art. 90.4 to

remove any reference

to lease/allocation

directly from the state

in the case of

subsequent investors.

According to

Articles 149.2 and

149.3 of the New

Land Law, it is

clear that the

subsequent

investors can only

sub-lease land

from the original

developer.

X 4 8

No Age Issues Suggested/Agreed Progress 0 1 2 Priority Score

Action

7 Old

Land disputes (under

Land Law, Arts. 136)'

must undergo

conciliation before a

local People’s

Committee before

referral to a court or

provincial/district

People's Committee for

final resolution. The

minutes from

conciliation must be

signed by both parties

before referral.

This process may be

abused by an

uncooperative party. A

refusal to attend

conciliation prevents the

creation of the minutes

necessary for a referral.

The law does not

currently address such a

situation.

Amend the law to

provide for the refusal

of a party to attend

conciliation, perhaps

by treating an absence

as an unsuccessful

conciliation capable of

referral.

Article 88.1 of

Decree

43/2014/ND- CP

dated 15 May

2014 ("Decree

43") provides that

if one of the

parties to the

dispute is absent

for the second

time, the

conciliation is

deemed

unsuccessful and

shall be resolved

by either the

People's

Committee and

People's Court.

X 8 16

8 Old

Land law, art. 93.3

prohibits foreign

investors from

leasing/subleasing from

individuals or households

for business/production.

No. such restriction

applies to Vietnamese

economic organizations.

Amend the land law to

allow foreign leasing

from individuals • and

households.

Not addressed in

the NewLand

Law

X 8 8


Action Progress 0 1 2 Priority

Score

I

9 Old

Presently, the ability to mortgage

a land use right is severely

restricted for individuals,

households, and economic

organizations:

Individuals/households

may only secure a

mortgage for production

or business purposes. See

Land Law, art. 113.7.

Economic organizations

(both domestic and

foreign) may only secure

mortgages from on-shore

credit institutions. See

Land Law, art. 119.3(d).

These restrictions fail to recognize

the noncommercial reasons why

individuals may wish to borrow,

and fait to recognize the

importance of flexible mortgage

laws to corporate financing.

Amend the land

law to allow for

more flexible

mortgage

arrangements.

Specifically:

Amend

113.7 to

allow

individuals

and

households

to

mortgage

their land

use rights

for non-

business

purposes.

Amend

119.3(d) to

allow

economic

organizatio

ns to

mortgage

their land

use rights

to domestic

economic

organizatio

ns in

addition to

credit

institutions.

Amend

119.3(d) to

allow

economic

organizatio

ns to secure

a mortgage

from

offshore

The New Land

Law has

incorporated

many of

recommendations

by removing

restrictions on

purpose of

mortgaging land;

however, law still

limitsfor

economic

organisations,

Vietnamese

residing overseas

and FIE

tomortgage to

credit institutions

authorised to

operate in

Vietnam.

x 8 8

lenders.

Land users should

be permitted to

mortgage land use

rights to domestic

economic

organisation or

individual and not

just a credit

institution, which

will create more

flexible investment

mechanism.

10 Old

There is uncertainty as to whether

the rights of real estate

(enumerated in Decree 108, art

2.11 and the "right to develop on

land” are assets attached to land.

Certainty is required to clarify

what capital contributions land

use rights holders may make with

their land.

Amend the Land

Law to include

rights of real estate

and the right to

develop projects

on land as assets

attached to land.

Not addressed in

the New Land

Law

x 4 0

11 Old

Annual land rental tariffs, under

Circular No.94/2011/TT-BTC, are

set at 1.5% of the published land

price. However, local authorities

may instead set this rate as high as

3% if the property provides

"special profits" or "outstanding

advantage." These ambiguous

terms gives the authorities a great

deal of discretion over rental

tariffs without any guidance as to

where the higher

Provide more

detailed guidance

as to where the

higher tariffs are

appropriate.

Not addressed in

the New Land

Law and Decree

46/2014/ND-CP

dated 15 May

2014 ("Decree

46") on collection

of land rent and

water surface

rent.

X 5 0

No Age Issues

Suggested/Agreed


rates may be

appropriate.

12 Old

Leases obtained by

foreign invested

enterprises are almost

identical (particularly

in cost) to a land

allocation made to a

local or overseas

Vietnamese investor

(see Decree

69/2009/ND-CP, art.

13) yet the leases

made to foreign

invested enterprises

generally do not

share the stability or

longevity associated

with allocations. This

discrimination seems

unfair.

Amend the land law to

allow foreign invested

enterprises the same

terms given to local

investors.

Significant

improvement in

theNew Land Law,

where rights of lands

users are adjusted so

economic

organisationsand FIE

have more equal

rights to obtain land

allocation/land lease

from the state. Right

of land users to

obtain

allocation/lease now

based on project

rather than land users

being foreign or

domestic. In

particular, land

allocation applicable

to all entities who

invest in residential

housing projects for

sale/for sale and

lease provided

allocation is within

term of project; land

lease with one-off

payment/annual

payment applicable

for these entities that

invest in residential

projects for lease,

commercial projects

and other

agriculture/non-

agriculture projects.

However, according

to Article 127.3 of

the New Land Law,

economic

organisationsare

entitled for land use

right for use on a

stable and long term

basis upon

X 7 7

conversion of land

use purpose from

non- agricultural

land use right for use

on a stable and long

term basis to non-

agricultural land use

right for a definite

duration or from

non- aqricultural

land use right for a



definite duration to

non- agricultural

land use right for

use on a stable and

long term basis.

This provision is

however not

applicable for FIE. -

Further, according

to Article 55.4 of

theNew Land Law,

economic

organisations are

entitled to be

allocated land for

grave

yards/cemetery for

business purpose,

which is not granted

to FIE.

13 Old

Decree 69, art. 11,

allows for the re-

determination of tand

prices, creating

investor uncertainty

regarding the full

costs of an

investment.

Furthermore, the

decree provides no

objective guidance as

to how the

recalculated prices are

determined,

compounding its

inherent problems.

Under the LandLaw

relating to land prices,

land prices are to be

determined according

to market prices.

Unfortunately, there is

a lack of transparency

and clarity on the

procedures to

determine land prices

and this has caused

great difficulties to

developers and caused

projects to be delayed

unnecessarily.

Remove the provision

completely. At a

minimum, ensure that

objective guidelines are

provided as to when

and how

redeterminations are to

occur.

Article 114 of

theNew Land

Lawprovides a price

list which is

prepared for a 5

year period and can

be adjusted when

the common market

price increases by

20% or more as

compared to the

maximum price or

decreases by 20% or

more as compared

to the minimum

price in the land

price list.We agree

that the use of a

price list provides

more certainty but a

5 year period is too

long to properly

reflect changes to

the market prices

X 8 8

i

14 Old

Circular 94, art. 8.2,

repealed provisions

allowing for land

compensation and

clearance deductions

for agreements

reached directly

between land users

and foreign invested

enterprises or

overseas Vietnamese.

This arrangement

unnecessarily

penalizes developers

for directly

negotiating their

agreements.

Amend Circular 94 to

allow for the deduction

of all legally

documented

compensation

payments against any

payments due to the

State.

Decree 46 provides

that land

compensation and

clearance shall be

deducted from the

land rent payable if

the person leasing

land from the State

voluntarily

advances the

payment for

compensation and

site clearance.

X 8 16

No Age Issues Suggested/Agreed Action Progress 0 1 2 Priority Score

15 Old

Decree .No

02/2006/ND-CP

{"Decree 021')', art.

12.1(e) gives

developers of "New

Urban Zones" the

right to assign or

sublease their interest

in the land. However,

there are no

implementing

guidelines, and it

remains unclear how

these rights are

properly exercised.

This is an important

mechanism to encourage

healthy urban

development. Clarify the

requirements on the

assignment/subleasing of

New Urban Zones.

Marginal

progress.

Decree 02 is no

longer valid.

X 5 5

16 Old

The Investment Law

is unclear about what

percentage of foreign

ownership is required

to distinguish a

foreign invested

enterprise from a

domestic

enterprise.See

Investment Law, art.

3.6. The

determination

materially affects the

procedures for

acquiring land. See

Land Law, art. 108.

Provide clear

guidance as to the

threshold at which

a domestic

enterprise becomes

a foreign invested

enterprise.

Definition of

"Foreign Invested

Enterprise*1 status

triggers WTO

market access and

National

Treatment

limitations, so it

should be linked to

voiting control

(i.e., the 65/75%

threshold under

the enterprise law).

Clarify what steps

a land-holding

domestic

enterprise must

take upon

becoming a

foreign invested

enterprise.

Specifically,

address whether

land allocations

must become

leases and the

process for doing

so.

The New Land

Law has not

provided with the

threshold at which

a domestic

enterprise

becomes a foreign

invested

enterprise.

X 10 0

17 Old

Land with water

surface area is

narrowly restricted in

its use.See Land Law,

arts. 78- 80. Various

recreational,

commercial, and

residential uses are

not currently

provided for, making

investment in such

properties very

difficult.

Not necessary to set

out in the Draft Law

any limitation of the

use purpose of the

inland water surface.

Amend the Land Law to

provide a legal framework

for alternative uses for

water surfaces.

This is a technical

correction and should be

easy to make.

Clause 140 of the

Draft Law

provides that

inland water

surface shall be

leased to

Domestic Entities,

Foreign Entities

and JV Entities

for purposes of

aquaculture,

agricultural or

agricultural

combined with

non- agricultural.

Suggest removing

restrictions on

inland water

surface use

purpose and

setting out clearly

the form of water

surface lease

applicable to

investors for

clarity. Not

addressed in the

New Land Law.

X 6 0

No Age Issues

Suggested/Agreed


Score

1

18 Old

Difficulties of

businesses in

obtaining and1

developing land

outside of industrial

zones,

particularly in urban

centers where it

affects the services

economy.

The Government should

issue a decree or

implement other forms

of guidance to free up

more idle land for

development.

The Government is

driving

developments

toward areas

outside of the

traditional city

centers. Article 93

of the New Land

Law was

specifically

amended to allow

foreign invested

enterprises to lease

land from non-State

land use right

X 9 9

holders outside

industrial zones.

However, without

legal elaboration in

a Decree or

implementing

circular, most

provincial

authorities refuse to

allow this type of

land use except in a

few cases for port

projects.

There is still no

decree or

implementing

circular regarding

the procedures to

obtain and develop

land outside of

industrial zones.

19 Old

The Land Law's use

of "foreign investor”

is interpreted too

narrowly. Currently,

the embraces only

foreign invested

enterprises. This

interpretation is


Investment Law, Art.

3.4, and Decision No.

88/2009/QD-TTg,

which include

enterprises with

7149% foreign

ownership.

Amend the Land Law

to provide a definition

matching that of the

Investment Law.

Article 5 of New

Land Law provides

a clear definition of

enterprises with

foreign invested

capital (please see

item 3 for further

details).

X 7 7

20 New

Conversion of land

use purpose, Article

58.1 of the draft land

law, the following

types of land have

been additionally

included in those that

must get the approval

of the authorities for

It is not dear why the

requirement for

approval has been

inserted. To avoid

additional

administrative burden,

we suggest retaining the

provisions of the

LandLaw which do not

Article 57 of the

New Land Law

provides that

foregoing types of

land are required to

apply for the

approval of the

authorities for the

conversion of land

X 5 0

conversion of land

use purposes: (i)

Conversion of land

for other annual crops

to land for raising and

planting salt-water

aquatic products, salt

production, land for

raising and planting

aquatic products in

the forms of ponds,

lakes, marshes; (ii)

Conversion of forest

land for

require the approval of

the authorities for

conversion of land use

purposes.

use purposes.



production purpose to

forest land for other

purposes; and (iii)

Conversion of land for

construction of public

building works, land

used for public

purpose with business

purposes, land for non-

agricultural production

[and/or] business not

being land for

commercial, service

purpose to land for

commercial service

purpose; conversion of

land for commercial,

service purpose, land

for construction of

public building works

to land for non-

agricultural production

establishments.

In the Land Law, such

types of land are not

required to apply for

approval of the

authorities but just

need to be registered

with registration office

for land use rights.

21 New

Recovery of the

residential tand which

is under pollution or in

a threat of breaking

down and detrimental

to human lives,Article

68.1 (dd) has provided

the provisions on

recovery of the

residential land which

is under pollution or in

a threat of breaking


to human lives. It is

however unclear under

the draft land law as to

which criteria and who

is entitled to determine

if residential land is

under pollution and/or

the threat of breaking


to human lives.

Provide more

guidelines on this in the

draft land law

Article 65 of New

Land Law and

article 65 of Decree

43still not provide

the criteria and the

authority which is

empowered to

determine whether

any residential land

is affected by

pollution and/or the

threat of landslide

which may be

detrimental to

human lives. The

relevant legislation

however just

provides the order

and procedures for

land resumption in

areas with

environment

contamination

posing a threat to

human life;

residential land

likely to suffer

from landslides or

subsidence or to be

affected by some

other natural

disaster, causing a

threat to human

X h 0

life.

No Age issues Suggested/Agreed


Score

1

22 New

Land use right

certificate ("LURC")

which has been

issued with wrong

information


107.2(d) of the draft

land law, the State

shall be entitled to

withdraw the LURC

which has been

issued with wrong

information on

authority, land user,

land area, without

satisfaction of all

conditions for

issuance of LURC,

with wrong land use

purpose, land use

term or land use

source in accordance

with the land laws

unless the land user

has transferred the

land and the assets

attached with the

Clarify the action after

the land use rights

certificate is

withdrawn. There

should be a provision

for reissuance of a

corrected land use

rights certificate.


86 of Decree 43, land

user or owner of

assets attached to

land can submit an

application to request

for correction in the

case the error is due

to the fault of the land

user or owner of

assets attached to

land; or the land

registration office

requests the land user

or owner of assets

attached to land to

submit the issued

LURC for correction

in case the land

registration office

discovers an error in

the issued LURC.

X 5 10

land in accordance

with the land laws.

Note however that

the draft land law

does not mention if

the State shall issue

a new LURC in

which the wrong

information has been

corrected to the land

user especially in the

case where the

mistake is not the

fault of the land

user.

23 New

The time for

calculating for

payment of the land

use fees/land rentals

Article 109.3 of the

draft land law The

land use fees/land

rentals shall be

calculated and paid

from the date of

issuance of the

decision on land

allocation/land

rental, on conversion

of land use purpose

or recognition of

land use right by the

State. In practice,

after the issuance of

the decision on land

allocation/land

rental, it may take a

long time for the

land users to

compensate and

clear the land from

the previous land

holders. In the

circumstances, it is

not reasonable to ask

the land users to pay

Provide the time for

calculating for

payment of the land

use fees/land rentals

should be at the date of

issuance of the

decision on land

allocation/land rental,

on conversion of land

use purpose or

recognition of land use

right by the State but

payment to be made at

the time the

compensation and

clearance procedure

have been completed

Article 108 of New

Land

Lawhasrecognised

our recommendation

by providing that the

timing for calculating

land use fees/ land

rental shall be at the

dateof issuance of the

decision on land

allocation land/land

lease, on conversion

of land use purpose

or recognition of land

use right by the State.

Decree 45/2014/ND-

CP dated 15 May

2014and Decree 46

provide that the

payment of the land

use fees/land rental

with one off

paymentmust be

made within 90 days

after the notice from

the tax authority.

X 8 0

for the land use

fees/land rentals for

the time they have

not been yet handed

over the cleared

land.

No Age Issues

Suggested/Agreed


24 New

Specific regulations

on allocation or lease

of land in relation to

specialized use forest

land

Article 77.6 of the

LandLaw provides

that "The Government

shall provide specific

regulations on

allocation of


land; on the rights,

obligations and

interests of

organizations, family

households and

individuals being

allocated specialized

use forest land; on

allocation or lease of

land in buffer zones of


land; and on lease of


land in combination

with the joint

landscape and

Provide the specific

regulations on

allocation or lease of

land in relation to


land

Article 68.2 of

Decree 43provides

the order and

procedures for land

allocation, land

lease and

conversion of land

use purposes on

specialized use

forest land for

implementation of

investment projects.

The New Land Law

however fails to

provide specific

regulations on the

rights, obligations

and interests of

organizations,

family households

and individuals

being allocated

specialized use

forest land; on

allocation or lease

of land in buffer

zones of specialized

use forest land; and

X 4 4

ecological-

environmental

tourism business."

Note however that

this provision has

been removed from

Article 138 of the

draft land law.

on lease of

specialized use

forest land in

combination with

the joint landscape

and ecological-

environmental

tourism business

25 New

Regime on land for

construction of the

apartment blocks

The draft land law

only mentions that the

Government shall

provide the specific

regulations of the

regime on land for

construction of the

apartment blocks and

land for construction

of works servicing

directly the lives of

the households in

apartment blocks.


regulations relating to

the regime on land for

construction of the.

apartment blocks.

Regime on land for

construction of the

apartment blocks

has been provided

in Article 49 of

Decree 43.

X 8 16

26 New

Land recovery due to

failure of investors to

meet implementation

schedule: draft land

law retains provision

in Article 38.12 of

Land Law that

provides that the State

will recover land if it

allocate or lease the

land for investment

project and that land

is not used for a

period of 12

Remove additional

requirements as the

State already has the

authority to make the

decision not to grant

an extension. Institute

clearer appeal

mechanism.

Article 64 of Land

Lawhas no change

in substance.

X 9 0

consecutive months or

the

No Age Issues Suggested/Agreed Action Progress 0 1 2 Priority

Score

1

actual land use

schedule is 24- months

behind schedule

recorded in investment

project, and adds an

additional requirement

that an extension shall

be granted one time for

a maximum period of

24 months. Also shall

be no compensation or

refund by the State to

investors for their

expenses/assets

attached to land as

result of land recovery.

27 New

Issues related to

compensation in draft

land law:

1. According to

Articles 71 and

72.2 of the draft

land law, the

compensation

council shall

attend to the

compensation

process.

However, it

does not specify

who comprises

in the

compensation

council.

Therefore, it is

still unclear if

1. It should be clear in the

draft land law who

comprises in the

compensation council.

The investors who are

determined and approved

inprinciple by the State

authorities as the

investor for a specific

investment project

should be entitled to

attend to the

compensation process, so

that they can observe the

process and make

complains/recommendati

ons if their rights and

benefits are affected.

2. Not clear which entities

will have the right to

determine fault and how

Not

addressed in

the New

Land Law.

x 10 0

the

representative

of the investor

can be entitled

to attend to the

compensation

process or not

2. Lack of clarity

in determination

of fault in land

compensation if

there is a

difference in

price at point of

decision versus

actual time of

payment

(Clause 95.1).

this will be done, clearer

procedures needed.

28 New

Right to receive land

use right

Discrimination between

Domestic Entities and

Foreign Entities/JV

remains in the new

provision of the Land

Law regarding receipt

of the land use right.

Foreign Entities can (i)

receive land use right

pursuant to an

agreement in a

mortgage contract for

debt settlement/ an

administrative decision

of State body resolving

a complaint or

denunciation relating to

land/judgment of

relevant enforcement

body/legal instrument

on division of land use

right in accordance w/

law and (ii) receive of

assignment of

investment capital

Discrimination between the

Domestic Entities and Foreign

Entities should be eliminated by

giving the Foreign Entities the

same rights to receive the land

use right as the Domestic

Entities. Also, the draft land law

should also set out rights of

Foreign Entities/JV Entities in

respect of land use right

received and ability to use such

right to land.

Not

addressed in

the New

Land Law.

x 8 8

being value of land use

No Age Issues

Suggested/Agreed


right. The JV can receive

assignment of land use

right by receiving capital

contribution in form of

land use right.The draft

land law however does

not set out the rights of

Foreign Entities in

respect of the land use

right reeelvad and what

they can do to deal with

such land use right

29 New

Draft land law does not

set out clear procedures

and required documents

for issuance of land


decision applicable for

land with and without

completion of clearance

and compensation.

There should be specific

procedures and required

documents for land


applicable for land with

and without completion

of clearance and

compensation. Such

procedures should

separate the requirement

on investment

procedures from land

procedures to avoid

confusion and

unnecessary delays.

Not addressed X 6 0

30 New

Clause 167.3 of draft

land law proposes for

notarization/certification

of the transactions

involving land use right

as follows:

Notarization/certification

shall be compulsory for

transactions regarding

assignment, . bequeathal,

donation, mortgage, and

capital contribution of

land use right/asset

attached to the land. Such

requirement however

shall be optional to


exchange of agricultural

land use right, lease/ sub-

lease land use right/assets

attached to land; The

draft land law also

provide that (i) the

notarization shall not be

required for transactions

regarding assignment of

land use right/asset

attached to the land if one

party is a real estate

enterprise; and (ii) the

notarization for


bequeathal shall comply

with provisions of the

Civil Code.

Notarisation/certification

shall be optional of all

transactions involving

land use rights to enable

real estate transactions to

be conducted easily

Article 167 of New

Land Law

provides that

contracts regarding

performance of

rights of a land

usermust be

notarised/certified,

except for the case

that one or more

parties

participating in the

transaction are

organizations

conducting real

estate business

activities.

X 7 7



31 Old

Articles. 9-10 of the

Law on Real Estate

Business ("LREB”),

restricts the conduct

of foreign

organizations and

individuals in their

real estate

transactions and

businesses. Foreign

entities may not

lease or purchase

houses or

construction

facilities for the

purpose of sale,

lease, or sublease,

and may not invest

in or lease land for

the purpose of

improvement and

subsequent lease or

sublease. These

restrictions

unnecessarily restrict

investment in

Vietnam's real estate

sector. They may

also affect the

activities of non-real

estate foreign

invested entities in

acquiring facilities

for their own use.

Remove the

restrictions in Articles.

9- 10 so that the

foreign and domestic

investors will have the

same rights and

obligations

The draft LREBissued

in 2014 (“New Draft

LREB'Iprovides to

foreign organisations

and individuals and

to

Vietnamese

residing overseas the

rights as follows:

(i) invest in

the

construction of

residential housing for

sale, sub-lease or

leasepurchase; (ii)

lease houses, buildings

for subleasing; (iii)

invest in

construction

of

construction

works which are not

residential on leased

land for sale, sub-lease

or lease purchase; (iv)

receive assignment of

whole or part of real

estate project;

(v)

invest in

construction

of

houses,

construction works on

leased land (applied to

foreign entities), oron

leased land and land

got from assignment (

applied toVietnamese

residing overseaslin

industrial zone,

industrial complexes,

export processing

zones, high tech zones

or economic zones for

business in accordance

x 8 8

with the land use

purpose, and (vi)

provide real estate

business services. Note

however that foreign

organisations and

individuals and

Vietnamese residing

overseas are still

prohibited from

undertaking the

following: (i) purchase

houses and buildings

for sale, lease, Lease-

purchase; (ii) receive

the transfer of land use

right; (iii)invest in

construction of

technical



infrastructure works on

allocated land, land

from assignment or

lease, land under

lawful using right for

assignment and lease

of land already having

technical infrastructure

thereon. The right to

invest in construction

of technical

infrastructure works on

leased land is provided

under the existing laws

but will be

removed;(iii)assign

land use right in the

allocated land in form

of land plots which is


Land Law;(iv)lease

land from other

organisations or

individuals to invest in

construction of houses,

construction works for

sell, sublease, lease

purchase; and(v)invest

in the construction of

houses, construction

works on land got

from assignment and

land under lawful

using right for sell,

lease out, lease-

purchase.

New Article 4.3 of

the draft LREB

issued in 2013 ("Old

Draft LREB”):

Removing the word

"create"

The word "create" is

used when referring

to the business

activities of foreign

owned capital

enterprises. This

suggests that

construction works

must be "created"

which could exclude

renovation works.

Remove the word

"create" for Articles

4.3, 15 and 16;

replace with

"renovation" for

Article 4.14 and

adding the word

"renovation" after the

word "creation" for

Article 10.1 (a).

TheNew Draft

LREBhas replaced the

word "create" and

"renovation" with the

word "construct".

x 5 10



33 New

Article 7 of the Old

Draft LREB:

Conditions applicable

to real estate m^de

available for business

The Old Draft

LREBhas no

provision on cases of


under new urban area

projects, residential

housing projects

which have been

completely

constructed but have

not been issued with a

certificate of land use

right, ownership of

residential house and

other assets attached

to the land (the

"Certificate").

However, this may be

deemed as existing


Add cases of houses and

buildings under new

urban area projects,

residential housing

projects which have

been completely

constructed but have not

been issued with a

Certificate.

Not addressed in

the New Draft

LREB

X 5 0

and not the assets to

be formed in the

future.

34 New

Articles 7.2(e),

26.4(a) and 50.1 of

the Old Draft LREB:

the term “technical

infrastructure" is not

clearly defined. This

has caused uncertainty

and lack of clarity.

Insert clear definition of


in Article 7.2(e);Article

26.4(a) and Article 50.1

Not addressed in

the New Draft

LREB

X 5 0

35 New

Articles 8.1, 18 and

19.2(b) of the Old

Draft LREB and

Articles 25.2 (c), 69,

70 and 72 of the Old

Draft LRHon legal

capital

The Old Draft LREB

requires investors to

have legal capital but

a specific amount of

legal capital is not yet

provided. Further, the

Old Draft LRH laws

also specify certain

sources of the capital

to be mobilised which

limit investors’ ability

to raise capital. In

addition, the Old

Draft LREB also

requires the placing of

a deposit in an escrow

account for

investment

commitment.

Since there are already

requirements on

compulsory charter

capital contributions

which are a percentage

of the investment

capital required for a

project, requirements on

legal capital, these

requirements are

unnecessary. Remove

the requirements on

legal capital, the source

of capital and placing a

deposit in an escrow

account for investment

commitment.

Article 10 of the

New Draft LREB

requires investors

to have legal

capital of 20

billion VND and

the draft LRH also

requires the

investor to place a

deposit for

investment

commitment.

Further, Article 69

of the draft

LRHissued in

2014 (“New Draft

LRH") also specify

certain sources of

the capital to be

mobilised which

limit investors’

ability to raise

capital.

X 9 0



33 New


Draft LREB:

Conditions applicable

to real estate m^de

available for business

The Old Draft

LREBhas no provision

on cases of houses and

buildings under new

urban area projects,

residential housing

projects which have

been completely



certificate of land use

right, ownership of

residential house and

other assets attached

to the land (the

"Certificate").

However, this may be

deemed as existing


and not the assets to

be formed in the

future.

Add cases of houses

and buildings under

new urban area

projects, residential

housing projects which

have been completely



Certificate.

Not addressed in

the New Draft

LREB

X 5 0

34 New

Articles 7.2(e), 26.4(a)

and 50.1 of the Old

Draft LREB: the term

“technical

infrastructure" is not

clearly defined. This

has caused uncertainty

and lack of clarity.

Insert clear definition of


in Article 7.2(e);Article

26.4(a) and Article 50.1

Not addressed in

the New Draft

LREB

X 5 0

35 New

Articles 8.1, 18 and

19.2(b) of the Old

Draft LREB and

Articles 25.2 (c), 69,

70 and 72 of the Old

Draft LRHon legal

capital

The Old Draft LREB

requires investors to

have legal capital but

a specific amount of

legal capital is not yet

provided. Further, the

Old Draft LRH laws

also specify certain

sources of the capital

to be mobilised which

limit investors’ ability

to raise capital. In

addition, the Old Draft

LREB also requires

the placing of a



commitment.

Since there are already

requirements on

compulsory charter

capital contributions

which are a percentage

of the investment

capital required for a

project, requirements

on legal capital, these

requirements are

unnecessary. Remove

the requirements on

legal capital, the source

of capital and placing a



commitment.

Article 10 of the

New Draft LREB

requires investors

to have legal

capital of 20 billion

VND and the draft

LRH also requires

the investor to

place a deposit for

investment

commitment.

Further, Article 69

of the draft

LRHissued in 2014

(“New Draft

LRH") also specify

certain sources of

the capital to be

mobilised which

limit investors’

ability to raise

capital.

X 9 0



Score

1

36 New

Article 8of the Old

DraftLREB: Conditions

applicable to

organizations and

individuals engaged in

real estate business The

Old DraftLREB

stipulates that any

organization or

individual conducting

real estate business must

establish an enterprise or

co-operative. However

according to laws on

investment, organisation

or individual may also

Add the form of

entering into a business

cooperation contract

without establishment

of a legal entity in

order to conduct real

estate business.

Not addressed in

the New Draft

LREB

X 3 0

conduct real estate

business by way of

entering into a business

cooperation contract

without establishment of

a legal entity.

37 New

Articles 8, 61 and 66 of

the Old Draft LREB:

Practising cards

1. The words

"practicing

cards" in Articles

8.1, 8.2, 61 and

66 of the Old

Draft LREB do

not conform with

the term that has

been used in

other

regulations.

2. Article 66

providing on the

real estate

valuation

practicing cards

is not necessary

since the Law on

Price already has

such provisions

in relation to

Price Evaluator

Certificate,

includinq real

estate valuation.

(11 Replace the words

"practicing cards" with

"practicing certificates"

in Articles 8.1, 8.2, 61

and 66 of the Old Draft

LREB; (2) Remove

Article 66.

The New Draft

LREB has

replaced the

words

"practicing

cards" with

"practicing

certificates" and

removed Article

66

X 2 4

38 New


Draft LREB: Publicity

of information about

property which is made

available for business.

1. TheOld Draft

LREB has no

specific

regulations

regarding the

time to publicise

information

about the

properties, and

the cases in

which the

publicity of

information

about the

properties is

required.

2. TheOld Draft

LREB requires

the transfer of a

real estate

project between

investors to be

public. It may

cause adverse

impact to the

project as welt as

to the business

operations of the

concerning

investors.

1. Clarify the time

and cases

requiring

publicity of

properties

information.

2. Exclude the

cases of transfer

of real estate

project from

cases required

information

publicity.

Not addressed in

the New Draft

LREB

X 5 0


Action Progress 0 1 2 Priority Score 1

39 New


DraftLREB and

Articles 25.2 (a) (b)

and 116 of the

draftLRH issued in

2013 ("Old Draft

LRH”): Selection of

investors for real

estate project for

business

The draft laws require

two conditions, inter

alia, which are being

an enterprise

established and

operating in

accordance with the

provisions of law

concerning enterprises

and having registered

to conduct real estate

business. This shall

cause difficulties to

investors being

foreign individuals

and organisations who

make investment in

Vietnam for the first

time. Further, this

provision is in conflict

with the law on

investment which

requires that a foreign

investor who makes

investment in

Vietnam for the first

time must have an

investment project to

be entitled to establish

an enterprise.

Exempt foreign

individuals and

organisations who make

investments in Vietnam

for the first time from

these requirements.

Not addressed in

the New Draft

LREB and the

New Draft LRH

X 7 0

40 New

Article 20.6 of the Old

Draft LREB. Rights

of investors of real

estate projects

TheOldDraft LREB

provides that investors

are entitled to

exemption or

reduction of land use

fees or to be entitled

to pay land use fees

by instalments in

accordance with the

project schedule.

However, there are no

specific regulations on

the criteria for

eligibility.


regulations on the

criteria for eligibility.

The New Draft

LREB has

removed the

provision on the

right of investors

to be exempted or

reduced land use

fees or to be

entitled to pay

land use fees by

instalments in

accordance with

the project

schedule.

X 5 0

41 New


Draft LREB and

Articles 31.4 and

122.1 (c) of Old Draft

LRH. Payment for

real estate transactions

The draft laws

provides some

methods of payment

applied to real estate

transactions including

party to receive

payment, maximum

amount of advance

payments and deposit

allowed, fixed late

payment interest

Remove restrictions in


Draft LREB and

Articles 31.4 and 122.1

(c) of theOldDraft LRH

Article 57 of the

New Draft LREB

provides that the

first payment for

real estate to be

formed in the

future cannot

exceed 30% of the

contract value.

For the domestic

investors, in any

case the seller

cannot obtain

more

X 8 0

No Age Issues

Suggested/Agreed


■

rates. Parties should

be free to agree on

these processes

without restrictions.

than (i) 70% of the

contract value

before the handover

of the houses and

buildings; and (ii!

95% of the contract

value before the

issuance of the

Certificate.

For the foreign

investors, in any

case the seller

cannot obtain more

than (i) 50% of the

contract value

before the handover

of the houses and

buildings, and (ii)

95% of the contract

value before the

issuance of the

Certificate.

42 New

Time of transferring

ownership

Article 26.3(c) of the

Old Draft LREB and

Articles 13 and 150.3

of theOldDraft LRH

provides that the

purchaser shall be

entitled to own the

property after having

made payment in full

or upon the time the

contract on capital

contribution is

notarised or certified.

However, pursuant to

theNew Land Law,

the time of transfer of

the property shall be

the time such

transaction is

registered with the

land use right

registration office.

Amend such provisions

for consistency with the

land law: the purchaser

shall be entitled to own

the property after being

issued with the

Certificate.

Article 19.5 of

theNew Draft LREB

and Article 12.3 of

the Newdraft LRH

provide that the

ownership of the

property shall be

transferred upon the

handover of such

property

X 3 0

43 New


Draft LREB and

Article 4.21 of the

Old Draft LRH on

guarantee

There are no

provisions on what

the guarantee will be

and how it will be

implemented.

Clarify who the third

party having right to

provide guarantee is,

how much the

guarantee fee is, terms

regarding

responsibilities of the

guarantor and investor,

how it is performed.

Article 56 of the

New Draft LREB

provides that the

guarantee will be

provided by the

financial institution

or credit institution

licensed to operate

in Vietnam. In

addition, this Article

also provides the

contents and

guarantee fee will

be agreed by parties

in the contract.

X 4 0

44 New

Articles 28 and 32 of

theOldDraft LREB:

Sale and purchase of


(1) Regarding Article

28.2: TheOldDraft

LREB fails to

mention the transfer

of

(1) The transfer of

ownership of the

common areas in non-

mixed use building

projects, villas and

individual residential

housing projects with

1. Not

addressed in

the New

Draft LREB.

2. The New

Draft LREB

only

X 8 8



ownership of common

areas in cases of selling

houses and buildings not

in mixed use buildings or

in cases of

villas/individual

residential houses having

common areas.

2. Further, the form

of land use rights

for the non-

residential

components (i.e.

office for lease

and/or

commercial

centre area) is not

common areas should

be treated the same

way with those in

mixed use buildings.

12) Clarify that form of

land use rights should

follow the land use

purpose eg long term

and stable use for

residential components

and lease for the non-

residential

components.

provides thatthe

land use right of

owners after

purchasing areas

within a mixed

use building must

throughout follow

either of the forms

being long-term

and stable or

lease. Note that

the New Draft

LREB fails to

clarify that the

form of land use

right being long

term and stable

use will be

applied to

provided yet.

residential

components, and

the form of land

use right being

lease applied to

the non-

residential

components.

45 New

Articles 49, 50 and 51 of

the Old Draft LREB:

Assignment of the real

estate project. The Old

Draft LREB provides

that the assignment of a

real estate project must

be approved by

competent authority.

However, the draft

LREB does not provide

the criteria as well as

specific competent

authority for approving

the assignment of the

project. Further Old

Draft LREB only

provides a number of

cases in which transfer of

real estate project is

permitted. These

restrictions may cause

difficulties to investors in

their business activities,

especially in the

performance of

procedures.

In addition, currently

many State regulatory

agencies require that the

name of the investor

must be the same in all

of the project

documentations even

though the project is

permitted to be

Provide that the

competent authority

will consider if the

parties satisfy the

conditions for

assignment and

receiving such

assignment (not just

approval or

disapproval for

assignment) before the

parties enter into the

assignment contract;

and remove the

restrictions on cases of

transfer of real estate

project. Provide further

that approvals and

consents from the State

should be

automatically assigned

and transferred to, and

be received by the

receiving investor

without any further

procedures for re-

approval or for name

replacement if there is

no other change needed

in the content of the

approvals. In addition,

the transfer of project

is associated with the

transfer of land use

right, therefore, the Old

Draft LREB should

The criteria as

well as the

competent

authority for

approving the

assignment of the

project have been

addressed in

theNew Draft

LREB

Further, the

restriction on

numbers of cases

in which transfer

of real estate

project is

permitted has

been removed.

In addition, the

New Draft LREB

provides that the

assignees are not

required to

prepare the

project dossiers,

construction plan

and construction

permit if there is

no change under

the in principle

approval and

decision of

investment in the

project.

x 9 18

transferred and actually

has been transferred

(entirely or in part) to

another investor. This is

unnecessary in case there

is no change needed in

the content of the

approvals

provide regulations on

the conversion of the

form of land use from

land allocation to land

lease or vice versa in

case of transfer of

projects

N

o Age

Issues

. i

Suggested/Agreed

Action Progress 0 1 2

Priorit

y

Scor

e

except the name of the

investor. :"

from domestic investors

to enterprises with

foreign owned capital,

and regulations on

whether the Certificate

of the assignees shall

reflect the origin of

land use being receipt

of transfer in

part/entirety of project

or the form after

converting to land lease

or land allocation.

46 Ne

w


Draft LREB: Real

estate business services

contract

The Old Draft LREB

provides that the

notarization/certificatio

n of real estate business

services contracts shall

be as agreed by the

parties. Since'the law

does not require

notarisation/

certification of real


contract, it is

unnecessary to specify

this which leads to

more confusion. Article

53.3 of the Old Draft

LREB provides that the

Government will

specify the content of

each type of real estate

business services

contracts. This is

unnecessary since

parties should be free to


the contracts according

to their needs. If at all,

the Government only

needs to specify the

main and essential

contents.

Remove the clause on



services contracts and

stipulate only the main

and essential contents

of real estate business

services contracts.

The New Draft

LREBstill remains that

the



services contracts shall

be as agreed by the

parties.

The New Draft LREB

has recognised our

recommendation in the

previous report by

insertinga provision on

main content of a real


contract, instead of

providing that the

Government will


each type of real estate

business services

contracts.

X 3 0

47 Ne

w


Draft LREB: Market

price

The Old Draft LREB

provides that a

valuation of real estate

must be based on the

market price at the time

of valuation. However,

it is unclear what

"market price" is and

Provide clear

regulations on what is

"market price" and the

method for determining

market price.

The real estate

valuation business has

been removed from the

New Draft LREB.

X 9 0

how to determine

market price at the time

of price valuation.

DRAFT LAW ON RESIDENTIAL HOUSING I

48 Old

Article 131 of the Law

on Residential Housing

("LRH"), restricts the

lease of

Allow all resident and

non-resident foreign

individuals and

organizations to


159.1 of the New Draft

LREB, only foreign

x 7 7


Action Progress 0 1 2 Priority Score 1

residential property to

those foreign

organizations and

individuals permitted

to stay in Vietnam for

a period of 71 3

months. Purchasing

residential property is

likewise restricted by

Resolution

19/2008/NQ-QH12,

art. 2, to very few

classes of foreign

individuals — those

with direct investment

in Vietnam, those

honored by the

President or Prime

Minister, those

educated and working

in desirable technical

fields, those married

to Vietnamese

citizens, and non-real

property foreign

enterprise that have

employee housing

needs.

own and lease all types

of property with the

same term as applied to

Vietnamese.

individuals who

are permitted to

enter Vietnam will

have the right to

own houses in

Vietnam. We are

of the view that

this condition is

unnecessary and

can lead to

confusion.

Further, the

foreign entities'

rights are restricted

by the maximum

number of units of

apartment/ houses,

and the term of

ownership is 50

years at maximum

which may be

extended in

accordance with

laws.

We suggest

removing above

restrictions.

49 New


Draft LRH:

Recognizing

ownership over

residential houses

The Old Draft LRH

provides that the State

shall only recognize

the ownership rights

of purchasers by

issuance of a

Certificate. This will

not be done for the

investors. This will

cause difficulty to

investors who invest

in construction of

houses for sale where

there is a large

number of unsold

houses, and who

invest in construction

of houses for lease-

purchase while

waiting for the lessee-

purchaser to pay the

price in full. In

particular, the

investors are restricted

from having the rights

to mortgage

residential housing

units the construction

of which have been

completed but not yet

being issued with the

Certificate in order to

raise capital.

Provide that the State

shall issue the

Certificate to investors

at the request of

investors which

construct residential

houses for lease, for

sale but have not

successfully sold them,

or for lease- purchase

but have not received

the payments in full

from the lessees-

purchasers.

Addressed in

Article 9 of the

New Draft LRH

X 5 10 X

50 New


Draft LRH:

Ownership over


Provide that owners of


houses shall have the

right

Not addressed in

the New Draft

LRH.

x 9 0



houses vl

The Old Draft LRH

fails to provide the

multiple ownership

and common use

rights in respect of

common areas in the


houses projects (such

as swimming pools,

gymnastic rooms),

which currently exist

in many projects of

investment in

construction of


houses.

of multiple ownership

and common use rights

in respect of common

areas in the residential

projects if so agreed

between owners and

developer.

51 New


Draft LRH: term of

ownership of

apartment building

There is a proposal in

the Old Draft LRH to

define the term of

ownership of

apartment unitson

construction level and

conclusion on

evaluation of quality

of construction.

According to the draft

provision, apartment

unit owners are

required to surrender

their apartment units

and land to the

authorities at the end

of the ownership term

so that the apartment

building can be

demolished. The

apartment owners will

be resettled by the

State. This shall have

a very negative impact

on the housing market

This provision should

be rejected swiftly.

Not addressed in

the New Draft

LRH.

x 10

0

I

!

on the whole and

create great

dissatisfaction among

apartment unit owners.

52 New

Articles 14, 160 and

163 of the Old Draft

LRH: Rights of

owners of residential

houses

There is a significant

improvement in the

Old Draft LRH where

rights of owners of

residential houses are

adjusted so that

Domestic Entities and

Foreign Entities have

more equal rights.

However there still

exists the

discrimination among

rights of owners being

domestic organisations

and individuals and of

Vietnamese residing

overseas and foreign

organisations and

Remove the

discrimination between

domestic organisations

and individuals,

Vietnamese residing


organisations and

individuals with respect

to residential housing

ownership.

According to the

New Draft LRH,

the foreign entities’

rights are restricted

by the maximum

number of units of

apartment/ houses,

the maximum

tenure of ownership

as mentioned in

Item 48 above.

Aside from such

restrictions, there is

no discrimination

between domestic

organisations and

individuals,

Vietnamese

residing overseas

and foreign

organisations and

individuals with

respect to

x 8 8



Score

1

individuals regarding

their ownership over

residential houses.

Particularly, in

comparing with

rights of domestic

organisations and

individuals,

Vietnamese residing


organisations and

individuals are

lacking in the

following rights: to

lease-purchase; to

own residential

houses other than

residential houses in

commercial

residential housing

project; to lend

residential houses, to

permit others to

reside with them; to

make capital

contribution by

residential houses; to

exchange residential

houses; to request to

recognise the

ownership over

residential houses

which are lawfully

created; and to own

residential houses on

a long-term and

stable basis.

residential housing

ownership.

53 New


Draft LREB and

Articles 20, 32, 36,

37 and 42of the Old

Draft LHR: Social

houses

The draft- laws

provide that the

investors have to

Provide that the

investors shall not be

obliged to reserve a

land area for housing

construction with

completed technical

infrastructure within

the project for

constructing social

Not addressed in the

New Draft LRH. X 9 0

reserve a land area

for housing

construction with

completed technical

infrastructure within

the project for

constructing social

houses. This

provision may impact

the housing market

and create

dissatisfaction among

investors.

houses, but they may

choose other methods

such as contributing in

cash, arranging another

land area in other

project, or making

coordination with the

investor of other

project to jointly

contribute social

residential houses.

54 New

Articles 47 and 60of

the Old Draft LRH:

Sale of commercial

residential houses to

the State

The Old Draft LRH

does not clarify if

investors of

commercial

residential houses are

required to sell

commercial


the State to be used

as official residential

houses or residential

houses for

resettlement upon

request or not. if this

is

This should be

provided as agreements

between the State and

investors.

The New Draft LRH

hasrecognised our

recommendation in

the previous report

by removing the

provision on selling

price of commercial


the State.

X 8 16



and is detrimental to

investors.

55 New


Draft LRH: Warranty

of residential houses

The Old Draft LRH

provides that the main

structural part of a

residential house shall

be beams, pillars,

floors, ceilings, roof,

walls, pavings, tilings

and plasterings. In

practice, if the parts

being the pavings,

tilings, plasterings are

also deemed as the

main structure and

thus are guaranteed in

accordance with the

current provisions,

e.g. 60 months for

apartment buildings

from 9 floors or more,

it is too onerous to the

investors.

Remove the parts being

the pavings, tilings,

plasterings from the

main structure part of a

residential house.

Not addressed in

the New Draft

LRH.

X 5 0

56 New


Draft LRH: Unilateral

termination of

performance of

residential housing

lease contract

The Old Draft LRH

provides regulations

on the unilateral

termination of

performance of

residential housing

lease contract.

However, the Civil

Code also governs this

issue. Furthermore it

should be agreed by

the parties to decide

on this.

Remove this provision.

Not addressed in

the New Draft

LRH.

X

i 6 0

LAND EXECUTIVE SUMMARY

Prepared by Land Sub - Group

1. RIGHTS OF FOREIGN ENTITIES

a. Unlike domestic investors, foreign investors are not allowed to undertake the following

real estate business activities:

i. purchase houses or construction buildings for sale, lease or lease-purchase;

ii. invest in the construction of technical infrastructure works on allocated land, land from

assignment or lease, land under lawful using right for assignment or lease of land already

having technical infrastructure thereon. The right to invest in construction of technical

infrastructure works on leased land is provided under the existing laws but will be

removed;

iii. assign land use rights in the allocated land in the form of land plots. This is inconsistent

with the Land Law;

iv. lease land from other organisations or individuals to invest in construction of houses,

construction works for sale, sublease or lease purchase; and

v. lease land already having technical infrastructure works for sublease.

b. Foreign individuals and organisations who do not have real estate business functions are

not allowed to sub-lease office space which they have been leased/ purchased.

c. Restrictions and conditions for foreign entities to own houses in Vietnam:

i. Only foreign individuals who are permitted to enter Vietnam will have the right to own

houses in Vietnam;

Some inequality still exists in the rights to acquire, own and deal with residential houses

between the foreign and domestic organisations or individuals as the foreign entities'

rights are restricted by the maximum number of units of apartments/houses, the

maximum tenure of ownership and the purpose of use of the houses.

We suggest removing the inequalities stated above and to provide foreign organisations and

individuals with the same rights as the domestic organisations and individuals.

2. REGISTRATION OF SALE AND PURCHASE AGREEMENT OF APARTMENT

UNITS

The Law on Protection of Consumers' Rights has provided a very tedious application process for

the registration of the Sale and Purchase Agreement for apartment units and there are no

prescribed guidelines or rules on how the authority should vet the application documents

resulting in inconsistent application and unnecessary delays.

We propose to remove this requirement and implement a notification procedure instead.

3. TIME OF TRANSFERRING RESIDENTIAL HOUSING OWNERSHIP

The draft Housing Law proposes different points of time for the effectiveness of transfer of

residential housing ownership, subject to the type of transaction, which are inconsistent with the

Land Law and the Civil Code.

We propose to amend the effective time of the transfer of residential housing ownership, in all

types of transactions, to the time of registration of such transactions at the land used right

registration office to ensure consistency with the Land Law and the Civil Code.

4. ASSIGNMENT OF REAL ESTATE PROJECT

There are a lot of provinces which do not implement any transfer of project fully and in part due

to policy.

We would recommend that a clear instruction on the transfer of project, fully and in part, be

given to the Department of Construction and People's Committee in all provinces in Vietnam.

LAND POSITION PAPER

It has been an exciting year looking at the progress made in the new drafts Housing Law and

Real Estate Business Law which will replace the existing laws. Throughout the year, these 2

drafts have been reviewed and amended several times to further refine the laws in respect of

housing and real estate business.

However, there are provisions which can be enhanced further to provide more clarity and

enhance the real estate market. We would like to highlight some of the issues in the latest

amendments to those draft Housing Law and Real Estate Business Law and our

recommendations to resolve such issues.

1. RIGHTS OF FOREIGN ENTITIES AND DOMESTIC ENTITIES

Firstly, we would like to delve into the rights of the foreign entities and domestic entities. It

would be productive for us to look at the amendments made in the previous draft Real Estate

Business Law. In the previous draft, the foreign investors were given the rights to:

i. purchase and lease-purchase houses and construction works on the leased land for the

purpose of sub-leasing and lease-purchasing;

ii. invest in construction of technical infrastructure works on leased land to lease out the

land already having technical infrastructure works; and

iii. tease land already having technical infrastructure works for sublease.

However, all these rights have been removed in the latest draft.

Although the latest draft Real Estate Business Law allows the foreign investors to invest in the

construction of houses, construction works on leased land in industrial zones, industrial

complexes, export processing zones, high tech zones or economic zones for business in

accordance with the land use purpose, it is unclear whether they will be permitted to sell, lease or

lease purchase such property.

Further, the initial draft allows foreign individuals and organisations who do not have real estate

business functions to lease out office space areas which have been leased/ purchased by such

foreign individuals and organisations. However, such right has been removed in the latest draft

Real Estate Business Law.

Recommendation: We propose that the rights of foreign investors which were provided in the

previous draft as mentioned be reinstated.

In addition, we note that there are still some differences and inequalities between the scope of

operation of domestic investors and foreign investors in the field of real estate business. In

particular, foreign investors are not allowed to:

(i) purchase houses, construct buildings for sale, lease or lease-purchase;

ii. invest in construction of technical infrastructure works on allocatedland, landfrom

assignment or lease, land under lawful using right for assignment and lease of land already

having technical infrastructure thereon. The right to invest in the construction of technical

infrastructure works on leased land is provided under the existing laws but will be removed;

iii. assign land use rights in the allocated land in the form.of land plots which is inconsistent

with the Land Law;

iv. lease land from other organisations or individuals to invest in the constructionof houses,

construction works to sell, sublease, lease purchase; and

iv. invest in the construction of houses, construction works on land got from assignment and

land under lawful using right to sell, lease out, lease-purchase.

We now turn to the rights of the foreign entities and domestic entities provided in the draft

Housing Law.

The draft Housing Law provides that only Vietnamese residing overseas and foreign individuals

who are permitted to enter Vietnam will have the right to own houses in Vietnam. We are of the

view that this condition is unnecessary and can lead to confusion. We suggest removing the

qualification on that the Vietnamese residing overseas and foreign individuals must be permitted

to enter Vietnam so that any Vietnamese residing overseas or foreign individuals may own

houses in Vietnam.

Other differences are as follows:

i. Foreign entities are only allowed to purchase and lease-purchase houses not exceeding

30% of the total units in an apartment building or if there are many apartment buildings

in one ward, the government will have the authority to decide on the maximum number

of units which can be purchased, lease purchased and owned by the foreign entities;

ii. Foreign entities are only allowed to purchase and lease-purchase houses not exceeding

250 houses in one ward;

iii. The term of ownership for foreign individuals shall be 50 years (which may be extended)

and the term for foreign organizations shall be as recorded in the investment certificate;

and

iv. Foreign organizations can only use houses for the purpose of accommodation for their

staffs and are not allowed to use residential houses for leasing, office spaces or other

purposes.

Recommendation: We suggest removing all the inequalities and vesting in the Vietnamese

residing overseas and foreign organizations and individuals the same rights as the domestic

organizations and individuals.

2. REGISTRATION OF SALE AND PURCHASE AGREEMENT OF APARTMENT

UNITS

Secondly, we would like to highlight that the Law on Protection of Consumers’ Rights has

provided a very tedious application process for the registration of the Sale and Purchase

Agreement for apartment units. The authority is given 20 business days to vet through the

application documents and give comments to the applicant in respect of the application. In the

event that such application is not approved, the applicant has to prepare and re-submit all the

required application documents again and the authority will take another 20 business days to vet

through the documents. The same cycle of the application process will recur until the application

has been approved.

Further, there are no prescribed guidelines or rules on how the authority should vet the

application documents. In practice, the officers in charge will usually give their comments on the

application documents based on their personal opinion. This creates a lot of inconsistencies and

doubts on the requirements for the application documents and causes unnecessary delays.

Recommendation: We propose to remove the current application process and implement a

notification procedure instead.


Thirdly, the latest draft Housing Law proposes different points of time for the effectiveness of

the transfer of residential housing ownership, subject to the type of transaction. For instance:

i. In the case of purchase and sale, lease-purchase of housing between individuals and

individuals, the time of transfer of housing ownership is when the purchaser or the lease

purchaser has made adequate payment of such purchase or lease purchase of housing; and

In the case of capital contribution, donation or exchange of housing between individuals and

individuals, the time of transfer of housing ownership is when the donor or theexchanger of

housing has handed over such housing to the recipient of such donation or exchange,-

ii. in the case of purchase of housing between the investor and the purchaser, the time of

transfer of housing ownership is when the investor has handed over such housing to the

purchaser or lease purchaser; and

iii. In the case of inheritance of housing, the time of transfer of housing ownership is from

the opening of such inheritance in accordance with the taw on inheritance.

This provision is inconsistent with the provisions of Land Law and the Civil Code.

According to the current Land law, the time of transferring the land use rights in respect of

transactions of exchange, transfer, tease, sub-lease, bequeathal, donation, mortgage of land use

right, assets attached to the land, capital contribution by land use right, assets attached to the land

shall be the time of registering such transaction at the land use right registration office. Also, the

Civil Code stipulates that "the transfer of ownership rights with respect to real estate shall be

effective as from the time of registration of ownership" and "where the law requires that

ownership rights with respect to asset which is the subject matter of a contract for sale and

purchase must be registered, such rights shall pass to the purchaser upon completion of the

procedures for registration of the ownership rights with respect to such asset".

Recommendation: We propose to amend the effective time of the transfer of residential housing

ownership in all types of transactions provided in the draft Real Estate Business Law to the time

of registration of such transaction at the land used right registration office for the purpose of

ensuring it is consistent with the provisions in Land Law and the Civil Code to avoid any

confusion and related disputes.


There are a lot of provinces which do not implement any transfer of project fully and in part.due

to policy.

Recommendation: We would recommend that a clear instruction on the transfer of project, fully

and in part, be given to the Department of Construction and People's Committee in all provinces

in Vietnam.

COMMENTS ON LAW ON RESIDENTIAL HOUSING - DRAFT 2014

Prepared by Mr. David Lim Head of Land Sub - Group

We would like to present our comments on amendments made in the the draft Law on

Residential Housing which shall replace the Law on Residential Housing No. 56/2005/QH11

("Draft RHL").

1. CONDITIONS TO OWN HOUSES IN VIETNAM

According to Articles 154.1 and 157.3 of the Draft RHL, only Vietnamese residing overseas and

foreign individuals who are permitted to enter Vietnam will have the right to own houses in

Vietnam. We are of the view that thisconditionis unnecessary and can lead to confusion.

Recommendation: We suggest removing the qualification on that the Vietnamese residing

overseas and foreign individuals must be permitted to enter Vietnam so that any Vietnamese

residing overseas or foreign individuals may own houses in Vietnam.

2. RIGHTS OF RESIDENTIAL HOUSING OWNERS

There is a significant improvement in the Draft RHL by adjusting rights of housing owners being

foreign organisations and individuals so that domestic organisations and individuals, Vietnamese

overseas and foreign organisations and individuals have more equal rights in acquiring, owning

and dealing with residential houses.

Accordingly, foreign entities including foreign organisations and individuals owning houses in

Vietnam by way of purchase, lease- purchase, donation, or inheritance shall have the same rights

given to the domestic organisations and individuals. However, there are certain discriminations

that still exist:

i. Foreign entities may only own residential houses in residential housing development

projects located at the areas, which do not limit or prohibitthe ownership of the

residential houses by foreign residents. We note however that the Draft RHL fails to

provide the areas which limit or prohibit the ownership of the residential houses by the

foreign residents;

ii. Foreign entitiesare allowed to purchase and lease-purchase houses with a higher price

than the price provided by the Government from time to time;

iii. Foreign entities cannot own but only receive the value of the houses if the houses are not

within a commercial residential project;

iv. Foreign entitiesare only allowed to purchase and lease-purchase houses not exceeding

30% of total units in an apartment building or 250 houses in an administrative division;

v. The term of ownership in case of foreign individuals shall be 50 years (which may be

extended), or the term as recorded in the investment certificate including its extension in

case of foreign organisations. Please note that according to the initialdraft, the maximum

term of ownership for foreign organisations and individuals is 70 years, which can be

extendable; and

vi. Foreign organisations can only use houses for the purpose of accommodation for their

staffs and are not allowed to use residential houses for leasing, office spaces or other

purposes.

As we have expressed our concerns for many times, the restrictions to foreign organisations and

individuals in owning residential houses in Vietnam shall restrict the access to several sources of

capital necessary to develop the real estate market and also cause significant impact to

investment activities in other fields in Vietnam.

Recommendation: In general, we suggest removing the above discrimination between domestic

organisations and individuals, Vietnamese residing overseas, and foreign organisations and

individuals with respect to residential housing ownership by vesting in the Vietnamese residing

overseas and foreign organisations and individuals all the rights as same as those of domestic

organisations and individuals. This again will allow the access to several sources and create

benefits in real estate field bringing big interest to Vietnam.

3. CONDITIONS TO BE MET TO BE ENTITLED TO DEVELOP COMMERCIAL

RESIDENTIAL HOUSES

Article 22.1 of the Draft RHL set out that foreign investors attending in development of

residential housings in Vietnam for the first time shall need to satisfy the following conditions (i)

being an enterprise or co-operative established and operating in accordance with the provisions

of law; and (ii) Having sufficient legal capital and capital for placing deposit and carrying out

each residential housing development project in accordance with the law concerning real estate

business. Similar conditions to be met to act as investors of projects for upgrading, re-

constructing apartment buildings are also set out in Article 112.3 of the Draft RHL. Please note

that these provisions currently cause difficulties to investors being foreign, individuals and

organisations who make investment in Vietnam for the first time. Pursuant to the laws on

investment, a foreign investor who makes investment in Vietnam for the first time must have an

investment project to be entitled to establish an enterprise and obtain an investment certificate.

However, these provisions require foreign investor who makes investment in Vietnam for the

first time to set up a company before it can be engaged in a project as required by the laws on

investment. The vicious cycle of procedure and these overlapping provisions have caused many

investment activities of foreign investors impractical in reality, made the Ircence issuing

authorities confused, caused big obstacle and delay to several real estate projects in general and

commercial residential housing development projects in particular.

RecommendatiomWe suggest replacing.the current provisions under Article 22.1 and 112.3 of

the Draft RHL by the following:

"Being an enterprise or co-operative established and operating in accordance with the provisions

of Vietnamese law except for investors being foreign individuals and organisations who make

investment in Vietnam for the first time;

Having registered to conduct real estate business in accordance with the laws on real estate

businessexcept for investors being foreign individuals and organisations who make investment in

Vietnam for the first time;

Having sufficient legal capital and capital for placing deposit and carrying out each residential

housing development project in accordance with the law concerning real estate business."

4. RESPONSIBILITY FOR CONSTRUCTING SOCIAL RESIDENTIAL HOUSES

Pursuant to Article 15.1 and Article 17.3 of the Draft RHL, an investor of a project for

commercial residential housing development must reserve a certain area for residential housing

construction in the project for which the technical infrastructure system has been invested and

constructed for construction of social residential houses in accordance with the regulations of the

Government. Article 54.3 provides that the investor must reserve at least 20% of the land area for

lease of social housing.

Please note that pursuant to Articlel5.3 of the Draft RHL, social residential houses in urban areas

of special type, type 1 and type 2 must primarily be apartment buildings. According to that, the

requirement that investors of individual residential housing projects, particularly high- class villa

projects, must reserve 20% of the land area for construction of apartment buildings to be used as

social residential houses is inappropriate and impractical. It is realised from the practice that

investors of projects for commercial residential housing development must_not necessarily

reserve [land/house] from the land funds, housing funds right under their projects for commercial

residential housing development for constructing social residential houses tobe handed over to

the State, but the investors may choose other methods such as (i) to arrange another land area in

other location equivalent to 20% of the land fund under the concerning project to construct social

residential houses, (ii) to exchange [value of] 20% of such land fund under the concerning

project to a monetary amount to be paid to the budget so that the local authorities may actively

use such amount to invest in development of social residential houses in the locality in

compliance with the zoning plans; or (iii) to associate with the investor of other project to jointly

contribute social residential houses on the land area on which the project of associated investor is

carried out.

Recommendation: We suggest adding the provision that the investors shall not be obliged to

reserve [land/house] from the land funds, housing funds right under their projects for commercial

residential housing development for constructing social residential houses, but they may choose

other methods such as make contribution by monetary payment, by arranging another land fund

in other projects, or associate with investor of other project to jointly make contribution, to

Articles 15.1,17.3 and 543 of the Draft RHL.

5. RECEIPT OF ADVANCE PAYMENT BY CUSTOMERS

Advance payments for purchase and sale of social housesto be formed in the future

Pursuant to Article 61.5 of the Draft Housing Law, the advance payment for purchase and sale of

social houses is conducted in accordance with the sale and purchase agreement andthe

construction progress of social houses, but must not exceed 70% of the value of the house before

handover of such residential houses and 95% of the value of the house before issuance of the

Certificate.

We are of the view that the restriction on the maximum advance payment is unnecessary and

should be removed since it should be decided and agreed between the parties.

Recommendation: We suggest amending Article 61.5 of the Draft RHL as follows: “withrespect

to the sale and purchaseof social houses to be formed in the future, the investors shall be entitled

to receive advance amounts paid by customers according to the housing construction progress

subject to negotiation and agreement with customers".

b. Advance payments for lease of residential houses to be formed in the future

There should also be a clear provision that advance payments can be collected for lease of

residential houses to be formed in the future.

Recommendation: We suggest adding a provision to mention about the lease of residential

houses to be formed in the future, including commercial and social houses.


Pursuant to Article 13of the Draft RHL, the time of transferring residential housing ownership

shall be effective as from different point of time subject to each type of transactions. In

particular,

i. where it is purchase and sale, lease-purchase of housing between individuals and

individuals, the time of transfer of housing ownership is when the purchaser or the lease

purchaser has made adequate payment of such purchase or lease purchase of housing;

ii. Where it is capital contribution, donation or exchange of housing between individuals

and individuals, the time of transfer of housing ownership is when the donor or the

exchanger of housing has handed over such housing to the recipient of such donation or

exchange;

iii. Where it is purchase or tease purchase of housing between the investor and the purchaser

or lease purchaser, the time o~f transfer of housing ownership is when the investor has

handed over such housing to the purchaser or lease purchaser;

iv. Where it is inheritance of housing, the time of transfer of housing ownership is from the

opening of such inheritance in accordance with the law on inheritance.

Please note that according the current law on land, the time of transferring the land use right in

respect of transactions of exchange, transfer, lease, sub-lease, bequeathal, donation, mortgage of

land use right, assets attached to the land, capital contribution by land use right, assets attached

to the land shall be the time of registering such transaction at the Land use right registration

office. Atso, the Civil Code stipulates that "the transfer of ownership rights with respect to real

estate shall be effective as from the time of registration of ownership" and "where the law

requires that ownership rights with respect to asset which is the subject matter of a contract for

sale and purchase must be registered, such rights shall pass to the purchaser upon completion of

the procedures for registration of the ownership rights with respect to such asset". Therefore, we

request that the provisions on transfer of ownership in the Draft RHL must be consistent with the

provisions of the taw on land and the Civil Code so as not to cause confusion to parties involving

in transactions and competent bodies when disputes on time of transferring ownership arise.

Recommendation: We suggest amending Article 13of the Draft Housing Law in the direction

that the time of transferring the ownerships in all transactions shall be the time of registering the

transaction at the Land use right registration office or the time of issuance of the Certificate to

purchasers, lessees-purchasers, recipients of donation, recipients of houses in housing exchange

transactions, recipients of bequeathal, recipients of capital contribution for the purpose of

consistency with- the provisions provided for in the law on land, the law on enterprises and the

Civil Code.

7. RESIDENTIAL HOUSING CONTRACTS

Article 118.2of the Draft RHL provides that notarisation/certification is required in case of sale

and purchase donation, exchange, capital contribution, mortgage of residential housing except

for the case where (i) donation of donated houses; (ii) capital contribution by the organisations;

(iii) assignment of residential housing sale and purchase agreements; (iv) leasing, lending,

permitting others to reside with them, authorizing another person to manage [their residential

houses] shall not be required to be notarized/certified except where the parties wish to do so.

We note that according to Article 66.3 of the previous draft, notarisation/certification is also not

required for the case where enterprises conducting real estate business or housing management

agency selling, leasing and lease-purchasing residential houses. This exception, however,has

been removed from this Draft RHL.

Recommendation: We suggest amendingthis provision so that notarisation/certification is not

compulsorily required which is a more convenient and favourable to the investors.

8. WARRANTY

Article 86.4 stipulated that the main structural parts of a residential house shall be beams, pillars,

floors, ceilings, roof, walls, pavings, tilings, plasterings.

In practice, if the parts being the pavings, tilings, plasterings are also deemed as the main

structure and thus are guaranteed in accordance with the current provisions, e.g. 60 months for

apartment buildings from 9 floors or more, it is too onerous to the investors.

Recommendation: We suggest the drafting committee re-consider and remove the parts being the

pavings, tilings, plasterings from the main structure.

c. AREAS UNDER COMMON OWNERSHIP

Article 11.1 of the Draft RHL provides that owners shall have the ownership over the residential

houses and have the right to jointly use the public facilities works within that housing

development, it is however unclear what public facilities works include.

Recommendation: We suggest having further clarification on what public facilities works

include.

d) FINANCING FOR RESIDENTIAL HOUSING DEVELOPMENT

Article 65of the Draft Housing Law is provisions in which list out forms of financing for

developing residential houses. We suggest removing these provisions since in view of the current

difficult real estate condition, investors should be encouraged to mobilise capital from any

sources permitted by law in accordance with the provisions in relevant laws. Therefore, the

listing of sources of capital and forms of financing which the investors are permitted to mobilise

in this Article is unnecessary and causes difficulties as well as restricts the investors from

mobilising capital for their projects.

Recommendation: We suggest removing Article 65of the Draft RHL.

e) TRANSITIONAL PROVISIONS

There should be transitional provisions to deal with on-going residential housing projects

pursuant to the old law regarding the satisfaction of conditions stated in this law.

COMMENTS ON THE DRAFT LAW ON REAL ESTATE BUSINESS Prepared by Mr. David Lim Head of Land Sub - Group

We would like to present our comments on amendments made in the draft Law on Real Estate

Business which shall replace the Law on Real Estate Business No. 63/2006/QH11 ("Draft

LREB").

1. PERMITTED SCOPE OF REAL ESTATE ACTIVITIES AVAILABLE TO FOREIGN

INVESTORS

The Draft LREB has recognised our recommendation in the previous report by inserting a

number of rights of the foreign investorswho conduct real estate business. In particular, Article

8.3(d) of the Draft LREB provides that the foreign investors are allowed to purchase and lease

houses and construction works on the leased land for the purpose of leasing and lease-

purchasing. We note that this is an additional right for the foreign investors to purchasethe

construction works in Vietnam.

The Draft LREB however does not deal with the situation where the foreign investors wish to

sell the houses or construction works purchased when they no longer need them. This issue arises

because there is still the difference and inequality between the scope of operation of domestic

investors/ Vietnamese residing overseas and foreign investors in the field of real estate business.

In particular, foreign investors are not allowed (i) to purchase houses, construction buildings,

which are on all types of land and not only limited to leased land, for sale, lease, lease-purchase;

and (ii) to invest in construction of technical infrastructure works on allocated land, land got

from assignment, land under lawful using right for assignment, lease of land already having

technical infrastructure thereon.

Further, the initia.ldraft allows domestic and foreign investors to lease out office space areas

which have been leased/purchased by such domestic and foreign investors. We note however that

the Draft LREB has removed such right.

Recommendation: As recommended in the previous draft, we request that the foreign and

domestic investors should have the same rights and obligations, including the rights set out in

Clauses 1(e) and (h) of Article 8 of the Draft LREB. Also, we suggest reinstating the right to

tease out office space areas which have been leased/purchased by investorsin the initialdraft to

Article 8 of the Draft LREB.

2. CONDITIONS FOR ESTABLISHMENT OF ENTERPRISES ENGAGED IN REAL

ESTATE BUSINESS/FOR REGISTRATION OF INVESTORS OF REAL ESTATE

PROJECTS

a) Condition on establishment an enterprise and register the real estate business

Article 7.1 of the Draft LREB stipulates that any organization or individual providing real estate

business services must establish an enterprise or co-operative. According to the laws on

investment, organisation or individual may also conduct real estate business by way of entering

into a business cooperation contract without establishment of a legal entity. Therefore, we

suggest adding this form in addition to the establishment of enterprises.

Recommendation: We suggest adding "or sign business cooperation contracts with the entities

conducting real estate business" to Article 7.1.

b) Condition on legal capital

Article 7.1 of the Draft LREB reintroduces a provision which has been removed from the

previous draft in respect of the enterprises conducting real estate business must have legal capital

as stipulated by the Government but such legal capital shall not be less than VND20Billion. The

minimum requirement of legal capital of VND20 billion may be too high as such requirement

applies to all types of projects, irrespective of the capital requirements of the project; hence it

may cause concerns and uncertainties to investors. Also, when investors apply for real estate

business permission, the licensing authorities shall assess the investment capital to consider if the

investment capital is sufficient to implement the project and the investors are capable of

conducting such project.

Recommendation: The requirement on legal capital is unnecessary and should be removed.

3. REAL ESTATE VALUATION BUSINESS, REAL ESTATE AUCTIONEERING AND

REAL ESTATE ADVERTISING

a) Real estate valuation business

The real estate valuation business has been removed from the Draft LREB. Article 78 of the

Draft LREB only provides that real estate valuation certificate which has been issued before the

date of validity of this Draft LREB shall be valid for 5 years from the date of validity of this

Draft LREB; and when the term of 5 years has expired such real estate valuation certificate can

only be issued to companies which have met the conditions under the laws on pricing. We note

that it is, however, unclear under the Draft LREB if:

(i) the enterprises doing real estate evaluation services will have to meet the conditions in

accordance with the laws on pricingafter the date of validity of this Draft LREB; or

(ii) this requirement only applies to new companies established after the date of validity of

this Draft LREB.

if the requirements under the laws on pricing apply to the existing companies, it is unfair andwill

cause concerns and difficulties to the enterprises already established and currently providing real

estate evaluation servicesas they have to re-organise their enterprises and change their operations

to meet such requirements.

Recommendation: We therefore suggest that there should be a transitional provision stating that

enterprises which have already been established before the new Law on Real Estate Business

takes effect shall follow the requirements under the law at the time when they were established

and shall not be governed by laws on pricing.

b) Real estate auctioneering and real estate advertising

The provisions on real estate auctioneering and real estate advertising have been removed from

the Draft LREB. There are therefore no guidelines for the setting up and operation of enterprises

conducting real estate auctioneering and real estate advertising.

Recommendation: We, therefore, suggest that the relevant authority clarifieswhy the provisions

on real estate auctioneering and real estate advertising have been removed from the Draft LREB

and which legislations shall apply for enterprises conducting real estate auctioneering and real

estate advertising.

4. PURCHASE OF HOUSES AND BUILDINGS IN ASSOCIATION WITH TRANSFER

OF LAND USE RIGHT

Article 21 of the Draft LREB stipulates that the sale of houses and buildings must be associated

with the assignment or lease of land use right. Further, the land use right of owners after

purchasing areas within a mixed use building shall be under common ownership and must

throughout follow either of the forms being long-term and stable or lease. Please note that the

term "mixed use buildingsfor several purposes" is not defined under the Draft LREB. Further,

another term “mixed use building"is used in Article 12 which creates confusion.

Further, please note that apart from the common areas, there are also private areas under the

mixed use buildingsfor several purposes. Therefore, it is inaccuratefor the private areas within a

mixed use building for several purposesto be classified ascommon ownership. This provision

should refer to land use right of common areas only.

Also, please note that in practice, a mixed use building for several purposesusually includes the

area of apartments for sale, office for lease and/or commercial centre area. Pursuant to the Law

on Land, residential land is the land allocated on a long-term and stable basis. Furthermore, when

purchasing apartments in mixed use buildingsfor several purposes, the purchase price is often

included the value of land use right (including land costs such as site clearance, land rental/land

use fees, etc.). Meanwhile, with respect to the area of office for lease and/or commercial centre,

it is determined as land for business and commercial purposes, and as such the investors are only

allowed to lease such land. Therefore, it must be clarified that form of land use rights should

follow the land use purpose e.g. long term and stable use for residential components and lease for

the non-residential components.

Further, the Draft LREB fails to mention the transfer of ownership of common areas in cases of

selling houses and buildings not in mixed use buildings for several purposesor in cases of

villas/individual residential houses having common areas within a residential project.

In addition, the provisions in relation to equipment and furnishings under common ownership are

removed from the Draft LREB. It is therefore unclear if the equipment and furnishings under

common ownership are associated with the common areas.

Recommendation: We suggest amend the third sentence of Article 21.2 of the Draft LREB that

"the land use right of owners after purchasing areas within a mixed use buildingfor several

purposes regarding the common areas and equipment and furnishings under common ownership

in such buildings shall be under common ownership and the land use purpose of the areas

purchased shall be long term and stable use for residential components and lease for the non-

residential components. Further, we suggest these provisions shall apply to the transfer of

ownership of the common areas in non-mixed use building projects, villas and individual

residential housing projects with common areas as well. In addition, we suggest adding the

definition of "mixed use buildingsfor several purposes" to the Draft LREB: "A mixed use

building means a form of development in which a building contains both residential and non-

residential uses”.Further, we suggest using this term consistently in the whole Draft LREB,

including but not limited to Articles 12 and 21.


(a) Article 52.3 provides that the project assignee must be an enterprise lawfully

incorporated and registered to conduct real estate business. We note that these conditions can

apply to assignees being domestic investors and foreign investors who already have existing

projects, in Vietnam; however they cause many difficulties to investors being foreign individuals

and organisations who make investment in Vietnam for the first time with the investment project

being the assigned project. This overlapping and conflicting regulation has restricted the rights to

receive transfer of real estate projects of foreign investors who make investment in Vietnam for

the first time and also caused big difficulty and delayed many real estate transfer projects.

Recommendation: We therefore suggest adding the phrase "except for investors being foreign

individuals and organisations who make investment in Vietnam for the first time" to Articte 52.3

of the Draft LREB.

(b) Article 52.3 of the Draft LREB provides that investors receiving the transfer of the entire

real estate projects shall pay a deposit as a commitment to continuously implement the project.

The Draft LREB, however, fails to provide the following:

(i) the payable amount of the deposit;

(ii) the authorities which shall have the right to manage the deposit account; and

(iii) the circumstances when the assignees are refunded the deposit amount.

Please note that a big amount of deposit will cause adverse impact to investors, as they have to

perform their payments to the transferor as well as have to deposit monies.

Recommendation: We suggest thatthe making of the deposit should be subject to agreement

between the parties.

6. CONDITIONS APPLICABLE TO REAL ESTATE MADE AVAILABLE FOR

BUSINESS

Pursuant to Article 6.1(c)(d), the required dossiers and documents for houses and buildings to be

made available for business shall include (i) the certificate of land use right, ownership of

residential house and other assets attached to the land (the "Certificate") with respect to existing

houses and buildings; or (ii) the construction permit (for applicable cases), documents of the

project and the drawings, design for construction which have been approved, and documents

regarding inspection and acceptance of construction completion of technical infrastructure

serving such properties with respect to houses and building to be established in the future.

Please note however that the Draft LREB has no provision on the cases of houses and buildings

under new urban area projects, residential housing projects which have been completely

constructed but have not been issued with a Certificate. However, this may be deemed as

existing houses and buildings and not the assets to be established in the future, and this type of

houses and buildings should not be restricted from being made available for trading just because

the Certificate has not been issued.

In addition, the provision on project dossiers is too general and unclear; therefore, in application

of such provision in reality, relevant State authorities in each locality may have different

requirements regarding the documents included in project dossiers.

Recommendation: We suggest adding the following paragraph to Article 6.1(e) as follows "In

the case of houses or buildings that will be formed in the future and houses and buildings under

new urban area projects, residential housing projects not being issued with a Certificate, there

must be a Construction permit or an project file with design drawings for building execution,

construction progress that have been approved". Also, required documents in the project dossiers

should also be clarified

7. DEFINITIONS

Please note that the term "mixed use buildings" mentioned in Article 12 of the Draft LREB

hasnot been defined. Furthermore, another term "buildings with mixed use for several

purposes"is used in Article 21 which creates confusion.

Recommendation: We suggest adding the definition of "mixed use building" for clarity purpose:

"A mixed use building means a form of development in which a building contains both

residential and non-residential uses", and use this term consistently in the whole Draft LREB,

including but not limited to Articles 12 and 21.

8. TYPES OF REAL ESTATE PERMITTED TO BE MADE AVAILABLE FOR

TRADING

Article 5 of the Draft LREB lists out a number of real estate allowed to be made available for

business and also removes the terms "other types of real estate stipulated by law" from this

provision. In practice, there may be other kind of real estates which are not listed in the list of the

real estate allowed to be made available for business in the Draft LREB and therefore such

amendment shall cause difficulties to the transactions regarding such real estates. Therefore, it is

not necessary to list down the real estate allowed to be made available for business which may

prevent the flexibility of the investors in investing in the real estate projects.

Recommendation: We suggest reinstating the current provision of the LREB.

9. MAKING CAPITAL CONTRIBUTION BY PROJECT DEVELOPMENT RIGHT

Article 18.4- of the initialdraft permits the capital contribution by project development right.

However, this provision has been deleted under the current Draft LREB.

Recommendation: We suggest re-instating such right by adding it as a new clause 10.3 under the

Draft LREB. Also, detailed regulations should be issued separately regarding this right,

including the approval from a competent State agency that the enterprise has the right to develop

the project, the method for price valuation and regulations on transfer of this right.

10. PUBLICITY OF INFORMATION ABOUT PROPERTIES MADE AVAILABLE FOR

BUSINESS

The current regulation of the Law on Real Estate Business as well as Article 12of the Draft

LREB have no specific regulations regarding the time to publicise information about properties,

and the cases in which the publicity of information about properties is required. The case of

transfer of a real estate project between investors may be excluded from the cases in which the

publicity of information about properties is required since this transfer is a private transaction

between the two investors and the publicity of the price for project transfer may cause adverse

impact to the project as well as to the business operations of the concerning investors.

Recommendation: We suggest that the case of transfer of a real estate project between investors

be excluded from the cases in which the publicity of information about the properties is required.

11. CONTRACTS FOR REAL ESTATE BUSINESS

The Draft LREB stipulates that an enterprise conducting real estate business must adopt

contracts for real estate business stipulated in Article 16.3 including (i) contract for sale and

purchase of existing houses and buildings or house, construction buildings to be in the future; (ii)

contract for transfer, lease, sub-lease of land use right; (iii) contract for lease, sub-lease of

existing houses and construction buildings or to be formed in the future; (iv) contract for lease-

purchase of existing house, construction buildings or house, construction buildings to be formed

in the future; and (v) contract of transfer of the whole real estate project. Please note that this list

of contracts for real estate business is quite short and does not include other types of contracts for

real estate business which may exist in practice and as such it may cause difficulty to enterprises

conducting real estate business in conducting its business.

Recommendation: In avoidance of mistakes in listing types of contracts for real estate business

which may cause difficulty to enterprises conducting real estate business and organisations and

individuals making real estate transactions, we suggest adding "other contracts for real estate

business in accordance with the provisions of law" to Clause 3 of Article 16.

12. PAYMENT FOR REAL ESTATE TO BE FORMED IN THE FUTURE

(a) According to Article 19.2 of the Draft LREB, the first payment for real estate to be

formed in the future cannot exceed 30% of the contract value. We note that the Draft LREB

already limits the maximum amount to be paid by the purchasers before the handover of the

houses, buildings and the issuance of the Certificate. We therefore are of the view that the

additional limitation on the first payment of real estate to be formed in the future isunnecessary

since it should be decided and agreed between the parties. Recommendation: We therefore

suggest removingthe limitationon the maximum amount to be paid the first time for the real

estate to be formed in the future under Article 19.2 of Draft LREB.

(b) Article 24.2(b) proposes one of the following options shall be considered for the payment

of houses and buildings to be formed in the future

Option 1: In any case the seller cannot obtain more than (i) 70% of the contract value before the

handover of the houses and buildings; and (ii) 95% of the contract value before the issuance of

the Certificate.

Option 2: For the domestic investors, in any case the seller cannot obtain more than (i) 70% of

the contract value before the handover of the houses and buildings; and (ii) 95% of the contract

value before the issuance of the Certificate.

For the foreign investors, in any case the seller cannot obtain more than (i) 50% of the contract

value before the handover of the houses and buildings, and (ii) 95% of the contract value before

the issuance of the Certificate.

Recommendation: In order to allow the flexibility of the investors' financial capacity for the

projects and to facilitate investors doing real estate business, we suggest that the advanced

amount paid by customers according to the housing construction progress should be subject to

negotiation and agreement with customers. If a maximum amount must be fixed, we recommend

choosing option 1 having the same amount for both domestic and foreign investors to avoid any

discrimination between domestic and foreign investors which may cause difficulties and negative

impacts to the attraction of the foreign capital to Vietnam.

Please do not hesitate to contact Oliver Massmann under [email protected] if you

have any questions on the above. Oliver Massmann is the General Director of Duane Morris

Vietnam LLC.

mailto:[email protected]

INTERESTED IN DOING BUSINESS IN VIETNAM? VISIT: www.vietnamlaws.xyz

THANK YOU VERY MUCH!

https://urldefense.proofpoint.com/v2/url?u=http-3A__www.vietnamlaws.xyz&d=AwMFaQ&c=Uk4MC68c_p3FA5jX7N-Q91WDvpli5Y9kf-6DmZwtkEI&r=Yw0PPS0Zd9VYZKFJQVh49aIkK__i-Bsst2OZaFPrSbY&m=9XwoqgZwWUtq7nGtFIY2erspsJogm2Lxbc9Yh3R-MzU&s=oh1IDjD3U9P7xp4yGNrYCBz9YtQCDB61FcP_P_2TFGc&e=

land and real estate in vietnam

Documents