Vietnam – Business Of Existing Real Estate Under The LOREB 2023.
Introduction
The real estate market in Vietnam is developed from two main kinds of real estate, off plan and existing ones. While the business of off plan real estate has been challenging, and rarely have new products been launched for recent years due to legal matters, the business of existing real estate has become more attractive recently. Starting August 1, 2024 the LoREB 2023[1] provides many new promulgations imposable to this business segment. Please follow this article to have the takeaways.
– Takeaway 1: The LoREB 2023 gives the new definition of an existing real estate. Accordingly, a real estate is defined existing as its construction is completed and its test for use is acceptable in compliance with regulations on construction.
– Takeaway 2: Transfer of existing real estate is conditional, varying from which an existing product formed. Conditions to transfer an existing product that is not formed from a real estate project differ from transfer of an existing product that is formed from a real estate project.
– Takeaway 3: As an existing building has been constructed on free hold land or one-off rent paid land, its area floor can be transacted.
Takeaway 4: LoREB 2023 provides list of subjects eligible to buy or lease existing products formed from a real estate project.
1. Existing real estate for transactions
Under the LoREB 2023, a real estate is defined existing if its construction is completed and its test for use is acceptable in compliance with regulations on construction. It may include an existing house or an existing building to be served for education, healthcare, commerce, service, tourism, industry or mixed use purpose or a floor area of the building[2].
In principles, an existing real estate to be transacted must satisfy among other conditions (basic conditions):
a. Its existence at moment of transaction, which means its construction is completed and its test for use is acceptable;
b. Availability of its ownership certificate or land use right certificate if it is a part of a real estate project developed by its developer;
c. Free from a dispute against land use right or ownership that is noticed, handled and under consideration by a competent authority unless the dispute is resolved by a valid verdict or a decision of a competent authority;
d. Free from a distrainment to serve for judgment enforcement; free from forbiddance or suspension to transact; and
e. Public disclosure of its information as prescribed by laws.
2. Transaction of existing products formed from a real estate project
The list of conditions as mentioned above are extended if the existing product is formed from a licensed real estate project. In addition to meeting the basic conditions, the project developer must be sure that the project is licensed in conformity with regulations on land planning, land, investment, construction; the project construction complies with the approved design, the approved construction permit; follows the implementation duration as approved by competent authorities; the project developer obtains the as-built acceptance for use; the project developer has fulfilled land-related financial obligations, etc.
Under the LoREB 2023, a real estate developer may transact a floor area of existing building provided that in addition to meeting the conditions set forth above, the real estate developer is also requested to satisfy other relevant legal requirements. First, a floor area of existing building can be traded if it is built legally on free hold land or one-off rent paid land. Second, the floor area has specific use purpose separated from other areas in the building as per the approved design that must align with technical specifications, standards applicable to construction and use of that building. Third, in transaction documents the developer is required to identify whether land area and land use right attached to the floor area is private or joint, and land-related financial obligations imposable to the floor area. Finally yet importantly, the developer shall ensure that the floor area is satisfactory to conditions of property registration so that its ownership is entitled to a buyer who buys the floor area.
3. Eligibility to buy or lease existing products formed from a real estate project
Below is the table of subjects eligible to buy or lease existing products formed from a real estate project:
For further information, please contact:
DUONG Anh Duyen, Partner, LNT & Partners
anhduyen.duong@lntpartners.com
[1] LoREB 2023 means the Law on real estate business promulgated in 2023 and takes effect on August 1, 2024
[2] Article 3.4, Article 5, Article 12 LoREB 2023
[3] LoH 2023 means the Law on Housing promulgated in 2023 and takes effect on August 1, 2024
Article 15.2 LoREB 2023, Article 8.2.b LoH 2023
[4] Article 15.2 LoREB 2023, Article 21.2.b LoH 2023
[5] Article 15.2 LoREB 2023, Article 21.2.b LoH 2023
