The official versions of the New Law on Real Estate Business have been unveiled following several months since their adoption by the National Assembly on 28 November 2023. The Law takes effect from 1 August 2024. On the same date, its guiding decree, i.e. Decree 96/2024/ND-CP (“Decree 96”) also takes effect. Some important highlights of new Law on Real Estate Business (“Law on RE Business”) are discussed below.
The concept of foreign invested company is clarified
Under old Law on RE Business, there is no definition or guidance on “foreign invested company”. Consequently, there are various view on this concept in which the most conservative stance commonly adopted in practice is any company with foreign investment regardless of the percentage is considered as “foreign invested company” and subject to a limited scope when engaging real estate business.
The new Law on RE Business differentiates 2 types of foreign invested company consisting of:
New Law on RE Business harmonizes the concept of “foreign invested company” with the provision set forth under Investment Law. Accordingly, only foreign-invested company falling under item (a) above is required to subject to limited scope of engaging real estate business while those companies in (b) can freely conduct real estate business as a 100% domestic company. This amendment in the new Law on RE Business is expected to instill greater confidence among foreign-invested company when conducting real estate business in Vietnam.
“Separate floor area” is recognized as “real estate product” for putting into real estate market
Law on RE Business 2023 introduces “separate floor area” of construction work as a new type of real estate product for sale and purchase on real estate market. Specifically, “separate floor area” of construction works for education, medical, sport, culture, office, commerce, service, tourism, accommodation services, industry and mixed-use purpose are allowed to sell and purchase. The purchaser of “separate floor area” shall be issued with LURC.
Although the old Law on RE Business does not recognize sale of purchase of “separate floor area”, such sale and purchase presents on the market under various forms. Certain DONREs accept such transaction and records the purchaser of the “separate floor area” as a co-owner (together with the seller) of the construction work. It seems that the new Law on RE Business finally officially recognizes trading “separate floor area”.
Trading “separate floor area” is required to satisfy certain conditions at law for sale and purchase, including amongst others, the underlying land of the relevant construction work must be land allocated or leased with lump sum payment, the financial obligations in respect of the underlying land must have been fully paid or the financial obligations in respect of the “separate floor area” to be paid by the purchaser must be clearly determined in the relevant sale and purchase contract.
Requirement for disclosure of information of real estate product before putting into business
New Law on RE Business imposes a new condition for putting real estate product into business which is to disclose information of such real estate. Disclosure of information of real estate product is not a new obligation of real estate enterprise. This requirement has been provided under old Law on RE Business. However, under the old law, such requirement is not a prerequisite condition for putting real estate product into business. Requiring transparency in information of real estate products as a condition for putting such products into business puts much pressure on real estate enterprise. Accordingly, putting products into business without such disclosure in advance may render the relevant transaction for trading such real estate product null and void due to violations of legal prohibitions. This is an effort of the lawmaker in making information on real estate market more transparent.
LURC is not a prerequisite condition for project transfer
Under old Law on RE Business, LURC is one of conditions for project transfer.
However, under new Law on RE Business, such condition has been changed to “land allocation decision/land lease decision/decision approving change of land use purpose” and the financial obligation in respect of the underlying land has been fully paid. This change will help saving time given there is a time gap between full payment of financial obligation and LURC issuance.
Nevertheless, there would be concern regarding procedure for recording the title of the transferee over the underlying land use right. Specially, if LURC for the transferor has not been issued, how the title of the transferee over the underlying land shall be recorded. Under Decree 96, the project transfer agreement shall also be the land use right transfer agreement and the transferor and transferee shall be liable to conduct land registration procedure. It seems that the transferee shall be directly recorded on the LURC after project transfer based on the project documents and project transfer approval.
