New law on Real Estate Business
By Tran Cong Quoc & Pham Xuan Hoan
Attorney at law
Among the series of attractive new laws recently passed by National Assembly of Vietnam, the Law on Real Estate Business 2014 (the “New Law”), repealing the Law on Real Estate 2006 (the “Current Law”), together with the Law on Housing 2014, would expectedly pave the way for the growth and boost of real estate business market.
The most striking point of the New Law is probably a requirement of performance guarantee from credit/finance institutions licensed in Vietnam against the sale/lease purchase of in-future properties of real estate development projects. If a developer fails to hand over the properties under the sale/lease purchase contract, then his guarantor shall compensate any advance payment by buyers/lease purchasers on demand.
Another remarkable change of the New Law is that it clearly provides legal documentation required for real estate to be put into trading. While the Current Law sets out a massive list of legal documents which are not easily identifiable to be applicable to existing real estate or in-future ones, the New Law now clearly distinguish them in a quite clearer manner. Accordingly, the certificate of land use rights (LURs)/construction works is the prerequisite documents for putting into trading of the existing LURs/construction works respectively, save for the case of the existing construction works in real estate development projects in which the LUR certificate is just required. In respect of in-future real estate, it must have the LUR certificate, approved designed drawings, construction permit and minutes for check and acceptance for technical infrastructure milestone of real estate development projects, or the check for acceptance documents of completion of foundation milestone in case of condominium or mixed-used building projects. Such provisions are precise and consistent with the regulations on resident housing development.
The minimum legal capital of real estate business enterprise, after various debates, is now set at VND 20 Billion, an increase for over three times as compared to the Current Law. This regulation shall not apply to households and unincorporated business entities/ individuals conducting the real estate business, and the Government is delegated to make the detail guidance on this exception.
The New Law, in consistence with the Law on Land 2014, introduces the term “foreign invested company” in lieu of the confusing precedent term “offshore entity” regarding real estate businesses funded by foreign invested capital. The foreign invested companies are now permitted to carry out more activities, such as undertaking s a business of lease for sublet of the properties.
With regard to real estate broker practice certificate, under the New Law, the practitioner is required an additional qualification namely a high school degree or higher education.
Another noteworthy provision under the New Law is the removal of the burdensome requirement that any real estate transaction by real estate business entities/individuals must be conducted via a licensed real estate trading floor, which is now optional.
The New Law shall take effect as from 01 July 2015.