23 January, 2018
Ownership of housing in Vietnam for foreign nationals remains largely aspirational; long-term lease structure becomes increasingly common
The Housing Law No. 65/2014/QH13 dated 25 November 2014 (2014 Housing Law) was introduced more than three (3) years ago and took effect on 1 July 2015. The 2014 Housing Law was intended to relax foreign housing ownership rules in Vietnam, subject to certain regulations. Though progress has been made, obstacles remain. Currently, the biggest obstacle to foreign housing ownership in Vietnam is the restriction pertaining to land areas considered sensitive to national defense and public security.
1. Delay in Issuance of Pink Books to Foreign Nationals
"Pink Books" are the primary title document for residential ownership in Vietnam. Foreigners are supposed to be able to obtain Pink Books for the residential properties they buy. But pursuant to Decree No. 99/2015/ND-CP (Decree 99) dated 20 October 2015 providing guidance on the implementation of the 2014 Housing Law, foreign nationals are not allowed to own houses in land areas zoned for national defense and security. The Ministry of Public Security (MOPS) and the Ministry of National Defense (MOND) have issued official dispatches to the Ministry of Construction (MOC) regarding this regulation. On that basis, the MOC instructed provincial/city people’s committees to identify projects where foreign nationals are not allowed to own houses based on the guidelines provided by the MOPS and MOND.
However, at the provincial level, departments of construction, natural resources and environment, planning and architecture, justice and police have so far been unable to finalize and publish their local list of projects where foreign nationals are not allowed to buy houses due to security issues. In such case, there is no legal basis for land registration offices under provincial departments of natural resources and environment to grant ownership certificates or Pink Books to foreign nationals.
At the latest Vietnam Business Forum (VBF) in December 2017, Managing Partner Fred Burke (as the representative of VBF’s Investment & Trade Working Group) raised this issue with the Prime Minister.
However, it remains unclear as to when the respective provincial lists of projects where foreign nationals are not allowed to buy houses will be issued.
Thus, it remains practically very difficult for foreign nationals to buy houses in Vietnam. We expect the Prime Minister to instruct the relevant ministries to accelerate the progress of this outstanding work at the provincial level to allow the issuance of Pink Books to foreign nationals in the near future, but the nature of the task means that further delays are likely.
2. Long-term Lease Structures
Given the aforementioned administrative difficulties, a trend has developed by which foreign nationals sign long-term lease agreements with developers for apartments that they eventually intend to buy, usually with the maximum legal lease term of 50 years.
This structure may cause concern for foreign nationals because, technically, they will be paying a lump sum amount for a long-term lease and still be unable to receive any leasehold title. However, in most cases, such long-term lease arrangements purport to offer a cost-free right of ownership conversion when the procedural obstacles are cleared. As a mere tenant, the "buyer" may not enjoy the same rights to sub-lease, mortgage, transfer or inherit the property, depending on the lease terms. As such, this long-term lease structure comes with certain pros and cons which foreign nationals should carefully consider if they plan to enter into such an arrangement.
For further information, please contact:
Frederick Burke, Partner, Baker McKenzie
frederick.burke@bakermckenzie.com
