Vietnam clarifies law relating to real estate business
On 6 January 2022, the Vietnam Government issued Decree 02/2022/ND-CP (“Decree 02”) which clarifies some of the provisions of the Law on Real Estate Business 2014. Decree 02 came into effect on 1 March 2022 and replaces Decree 76/2015/ND-CP (“Decree 76”).
This article highlights some of the salient points of Decree 02.
1. Notable changes to statutory conditions applicable to enterprises conducting real estate business
Capital requirements
Decree 02 removes the condition that enterprises conducting real estate business must have a legal capital of at least VND20 billion which is consistent with the changes under the Law on Investment 2020.
Decree 02 also supplements the condition regarding the ratio of owner’s equity capital and investment capital required for a real estate project. The amendment is consistent with Decree 43/2014/ND-CP which clarifies the Law on Land 2013. Pursuant to Decree 02, an investor is required to have an owner’s equity capital of (a) not less than 20% of the total investment capital for a project with a land use area of less than 20 hectares, or (b) not less than 15% of the total investment capital for a project with a land use area of 20 hectares or more.
The owner’s equity capital of a real estate company will be determined based on its latest audited financial statements or independent financial statements. In respect of newly-established enterprises, the owner’s equity capital will be the paid-up charter capital of the real estate company.
Publicising information of real estate projects
Under Decree 02, enterprises conducting real estate business must publicise the following information on their websites, at the headquarters of the competent project management authorities (in respect of real estate business investment projects), and at the real estate exchange (in respect of real estate business conducted through a real estate exchange):
- Salient information of the enterprise including enterprise name, head office address, contact phone number, and name of legal representatives;
- Information of the real estate put into business (such as location, type and scale of real estate, information regarding real estate planning, price for sale, transfer, leasing out, sub-leasing out or grant of hire purchase of the real estate, etc.);
- Information related to mortgages of houses, construction works, and real estate projects put into business (if any); and
- Information related to quantity and types of real estate products permitted to trade, the quantity and types of real estate products which had been sold, transferred and lease-sold, and the quantity and types of real estate products remaining in trading.
2. Contract templates in real estate transactions
While the contract templates for real estate transactions in Decree 76 were solely for reference purposes, Decree 02 requires the use of contract templates in the sale, transfer, lease, lease-purchase and sub-lease of real estate and for the transfer of real estate projects. The following contract templates are provided in Decree 02:
- Contract for sale and purchase/hire-purchase of apartments (Form 1);
- Contract for sale and purchase/hire-purchase of tourist apartments (or “officetel” apartments) (Form 2);
- Contract for sale and purchase/hire-purchase of individual residential houses (Form 3);
- Contract for sale and purchase/hire-purchase of houses and construction works (Form 4);
- Contract for lease of residential houses and construction works [Form 5];
- Contract for transfer of land use right (Form 6);
- Contract for lease/sub-lease of land use rights (Form 7); and
- Contract for transfer of whole (or part) of a real estate project (Form 8).
Transactions that have been executed, but not completed, before 1 March 2022 are not required to use the contract templates under Decree 02.
3. Transferring real estate projects
Decree 02 provides that, in addition to compliance with conditions relating to the transfer of real estate projects as stipulated in Article 49 of the Law on Real Estate Business 2014, the transfer of whole (or part) of a real estate project may only be permitted where the project is carried out according to the project implementation schedule and particulars which have been approved by the competent authorities. This new requirement will restrict the transfer of whole (or part) of real estate projects where the project developers have not complied with approved project implementation schedules and particulars of the projects.
Decree 02 also clearly distinguishes the laws applicable to the transfer of real estate projects as follows:
- Where a project is granted with an investor approval or an Investment Registration Certificate in accordance with the Law on Investment 2020, the transfer of such project will follow the procedures regulated under the Law on Investment 2020; and
- Where a project does not fall within the above category, the transfer of such project will follow the procedures regulated under the Law on Real Estate Business 2014 and Decree 02.
