New Law on Housing passed
Huynh Thi Thu Thuy – Attorney at law
Doan Minh Anh – Legal Assistant
On 25 November 2014, the National Assembly of Vietnam passed new Law on Housing (“new Housing Law”) which will take effect from 01 July 2015 and replace current Housing Law No. 56/2005/QH11 dated 29 November 2005. This new Housing Law, with several new regulations on ownership of properties for foreign organizations and individuals in Vietnam, is expected to better manage the real estate market in Vietnam in the near future.
The new Housing Law has added a number of prohibited acts in the housing sector. Notably, investors are not allowed to authorize or assign to their partners participating in investment cooperation, joint venture, association, business cooperation, capital contribution or other organizations or individuals to sign contracts on lease, lease – purchase, purchase, or deposit contracts for transactions on housing or land use right business in the projects.
However, the new Housing Law has not given the transitional provision on previously transactions which are contrary to the above provision. This restriction, if to be applied to the previous transactions, shall lead to disputes in the future.
Expanded subjects entitled to own houses in Vietnam
Under the new Housing Law, a foreigner who have been granted a visa to Vietnam is entitled to buy properties. In addition, foreign invested companies, branches, representative offices of foreign entities, foreign investment funds and branches of foreign banks operating in Vietnam are also allowed to buy properties in Vietnam.
Types of houses for foreign organizations and individuals
According to the current regulations, foreign organizations and individuals are only allowed to own apartments. However, under this new Housing Law, there is no restriction on the type of houses owned by foreign organizations and individuals, including such as villas, townhouses and separate houses in housing projects.
Use purposes of properties for foreign organizations and individuals
The new Housing Law stipulates that foreign organizations and individuals shall enjoy the same ownership rights as Vietnamese citizens, including such as rights to sublease, trade, inherit and mortgage. However, the properties of foreign organizations shall be only used for employees of such organizations to stay, not to be used for rent, or for office or for other purposes. In addition, foreign individuals shall send a prior written notice to the competent authority when leasing their houses and comply with the tax regulations related to this leasing activities.
Several restrictions in ownership of properties for foreigners
The total number of units owned by such organizations and individuals must not exceed 30% of the total units in one building, or not exceed 250 houses in one particular administrative area.
Duration of ownership for foreign individuals
Under the provisions of the new Housing Law, the duration of ownership for foreign individuals is in accordance with the agreement agreed by parties but not exceeding 50 years.
However, foreign individuals who are married to Vietnamese citizens or Vietnamese citizens living overseas shall be entitled to freehold tenure and have rights as Vietnamese citizens.
Transferring the houses sale/purchase agreements without House Ownership Certificates
The new Housing Law specifies a number of transactions that are not required to have house ownership certificates, such as transfer of sale purchase agreements for the commercial houses built in the construction projects of commercial houses, including the case that the houses have been handed over.
Conditions to be an investor of a commercial house construction project
The new Housing Law stipulates that the investors must deposit capital to implement each project and provide guarantee as prescribed by law on investment, however, the law is silent on specific amounts.
Term on use of condominium
For houses with term of use, buyers shall only be granted with house ownership certificates within the term and shall transfer the house ownership back to the initial owners in case of expiration of the term. The Government will specify this issue.
Term of condominium shall be determined by house management agency based on level of construction works and conclusion of quality examination. The provincial house management agency shall examine the quality of condominium at the time of expiration of the term or when it is seriously damaged or has threat of collapse or is unsecured for users. This provision shall facilitate to implement the condominium renovation easier than before.
Notarization and authentication of contracts
The new Housing Law states that in case of sale and purchase, donation, exchange, capital contribution, mortgage, transfer of sale and purchase contract of commercial houses, notarization or authentication of such contracts are required. The Law does not specify exception in case sellers or investors are real estate enterprises as prescribed by current regulations.
Mortgage on investment project of house construction and future houses
The new Housing Law sets out stricter regulations related to selling of or mobilizing capital for houses under construction which had been mortgaged to other lenders. The new regulations shall help preventing the cases that a house is mortgaged to a lender but sold to another buyer without the lender’s acceptance, causing disputes over ownership of the house amongst all parties.