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Knowledge Highlights 23 July 2024
On 8 February 2021, Decree 148/2020/ND-CP (“Decree 148”), which was adopted by the Vietnam Government on 18 December 2020, came into effect. Decree 148 amends and supplements a number of provisions set out in Decree 43/2014/ND-CP, Decree 47/2014/ND-CP and Decree 01/2017/ND-CP which provide guidance on the Law on Land 2013 (“Law on Land”).
In addition, on 26 March 2021, Decree 30/2021/ND-CP (“Decree 30”) came into effect. Decree 30 amends and supplements a number of provisions in Decree 99/2015/ND-CP (“Decree 99”), which provides guidance on the Law on Residential Housing 2014.
This article discusses the key highlights of the new Decrees.
1. Clarification on auction of land use rights and bidding on land-using projects
Decree 148 seeks to clarify certain scenarios where the auction of land use rights (“LUR”) and bidding of land-using projects may be exempt.
Investment projects exempt from land use fees or land rent
Pursuant to the Law on Land, the allocation or lease of land by the State to develop projects which are exempt from land use fees or land rent (“LUF/Rent Exemption Projects”) will not be subject to auction of LUR or bidding on land-using projects.
Decree 148 clarifies the circumstances where auction of LUR or bidding on land-using projects will still apply to LUF/Rent Exemption Projects. These are as follows:
There is, however, no further detail or guidance on what “commercial or service purposes” entails. In particular, it remains unclear whether manufacturing projects which are entitled to the land use fee or land rent exemption, would be regarded as having a “commercial purpose” and therefore subject to the process of auction of LUR or bidding on land-using projects.
Small, narrow land parcels managed by the State
The term “small and narrow” land parcels refer to parcels of land having an area and/or shape that does not satisfy the minimum conditions prescribed by laws for division into separate land parcels (“Small and Narrow Land Parcels”).
Decree 148 provides that Small and Narrow Land Parcels managed by the State, which satisfy certain prescribed conditions and are not used for public purposes, may be allocated or leased to an adjacent land user without auction for LUR, unless there are two or more adjacent land users seeking allocation or lease of the same Small and Narrow Land Parcel.
The adjacent land user who successfully obtains the LUR for the Small and Narrow Land Parcels will be required to consolidate the land into his existing land.
State Land situated among other parcels of land of a project
Decree 148 clarifies the process of granting land lease or land allocation, to an investor, in relation to parcels of land of the State (“State Land”) where such State Land is situated among, and may pose a hindrance to, other parcels of land within the investor’s project area as follows:
The State Land in the above context refers to bare land in the following cases:
2. Stricter regulations on management of apartment buildings’ sinking fund
The inadequacies of the previous regulations which guide the use, management and handover of a “sinking fund” - 2% of the value of a sale or hire-purchase of an apartment or other premises within apartment buildings (“Sinking Fund”) - have resulted in disputes among the developers, the building management board and the residents of apartment buildings.
To address such issues, Decree 30 seeks to impose stricter controls on the Sinking Fund.
3. Change of approach in determining residential projects where foreigners can purchase residential units
Under Decree 99, foreigners are not allowed to buy residential properties in projects located in national defence and security areas listed within the negative list issued by the DOC and based on guidance of the Ministry of Defence and the Ministry of Public Security. However, the negative list has not been publicly issued, most likely due to national defence sensitivities and concerns. The process relating to the issuance of LUR certificates (which legally reflect ownership of the residential property) to foreigners has therefore been relatively complicated. The Land Registration Authority may not issue LUR certificates to foreigners until it is made clear by the relevant authorities, on a project-by-project basis, that the project is not located in national defence and security areas.
To solve this issue, Decree 30 has taken an opposite approach, requiring the DOC to issue a positive list of projects where foreigners will be able to own residential properties. The positive list is expected to be released soon which will hopefully facilitate a more efficient process for the recognition of foreigners’ ownership of residential properties on LUR certificates. Nevertheless, it should be noted that the effectiveness of this new regulation will still largely depend on how active the DOC is in developing the positive list.