Vietnam - new housing law

Vietnam - new housing law

Vietnam – new housing law Freshfields Bruckhaus Deringer, August 2006

Vietnam’s housing law is the first law to set out a

comprehensive legal framework for the ownership, lease,

use and management of houses, including apartments, by

local and foreign individuals and organisations The law

was adopted by the Vietnamese national assembly on

29 November 2005 and became effective on 1 July 2006

Given the scattered state of prior regulations and the

surge in property development activities in Vietnam, the

new law is a welcome clarification of the rights and

obligations of the parties to housing transactions

Ownership of houses

Individuals and organisations are separated into

categories that determine their right to own houses in

Vietnam

Vietnamese individuals and domestic organisations

can own houses without regard to their place of

permanent residential registration or business

registration

Overseas Vietnamese individuals who satisfy one of

the following conditions can own an unlimited

number of houses (they were previously restricted to

one house):

– they have long-term investments in Vietnam;

– they have contributed to the state;

– they are involved in cultural and scientific

activities and have returned to Vietnam regularly

to contribute to building the country; or

– they have returned to live in Vietnam

Overseas Vietnamese individuals who have lived in Vietnam for six consecutive months can own one house (they were previously not entitled to do so)

Foreign individuals and organisations investing in development projects to build houses for lease will be issued with house ownership certificates for the duration of their investments When a developer sells

a building developed for sale, the purchaser will be issued with a house ownership certificate

Foreign organisations investing in development projects to build houses for lease must transfer all houses to the state upon expiry of their investment certificate

Foreign organisations investing in development projects to build houses for sale must transfer unsold houses to the state upon expiry of their investment certificate

No compensation or payment to such organisations is contemplated

Foreigners are not allowed to own houses for personal use in Vietnam

All house owners must register their ownership and any change therein with the authorities A house cannot be the subject of a housing transaction if ownership is not registered

Vietnam – new housing law Vietnam’s housing law is the first law to set

out a comprehensive legal framework for the ownership, lease, use and management

of houses, including apartments, by local and foreign individuals and organisations The law was adopted by the Vietnamese national assembly on 29 November 2005 and became effective on 1 July 2006 Given the scattered state of prior regulations and the surge in property development activities

in Vietnam, the new law is a welcome clarification of the rights and obligations of the parties to housing transactions.

Vietnam – new housing law Freshfields Bruckhaus Deringer, August 2006

The housing law provides that companies providing management services to apartment buildings are entitled

to be treated in the same way as utilities companies, without specifying what such treatment may entail This issue may be clarified in the implementing regulations

Leasing of houses

The rights of foreign organisations and individuals to lease houses have not changed substantially from previous regulations To lease houses:

– foreign individuals must have a valid visa to be in Vietnam for three months or longer; and

– organisations must have the right to be in Vietnam for three months or longer,

but overseas Vietnamese are not required to stay in Vietnam for any minimum period

A lessee has the right to continue leasing the house when the owner of the house dies, and when the house is transferred to another owner In both cases, the successor in title to the house has to continue to allow the lessee to lease the house, unless the parties agree otherwise

Mortgaging of houses

A house owner has the right to mortgage the house as security for one or several obligations if the value of the house is higher than the total value of all obligations However, mortgages can be granted only

to one single credit institution The housing law is the first piece of legislation to introduce this restriction, probably to ease the difficulties in enforcement of mortgages in practice

House owners can mortgage their houses only to credit institutions permitted to operate in Vietnam

Housing development projects

Construction requirement

The housing law sets out some construction

requirements for housing development projects

Apartments must account for the following percentages

of total construction area:

in special urban areas, at least 60 per cent;

in class 1 and class 2 urban areas, at least 40 per cent;

and

in class 3 urban areas, at least 20 per cent

Funding

The housing law allows the developer to accept up to

70 per cent of the value of the house lease or house

purchase contract from a potential purchaser or lessee,

provided that the foundations for the house have been

completed

Social welfare housing

The housing law sets out the legal framework for a social

welfare housing fund in Vietnam for lease and hire

purchase to Vietnamese families It also stipulates that

housing developers for low-income households will

receive special incentives such as land rental exemptions

and lower tax rates

Warranties

Developers of residential buildings of nine floors or more

must provide a warranty for a minimum period of

60 months The minimum warranty period is reduced to

36 months for buildings from four to eight floors, and to

24 months for other residential premises These warranty

periods are substantially higher than the 12 month

warranty requirement set out in the recent decree 2 dated

5 January 2006 on management of new urban areas

Management of apartment buildings

The housing law consolidates legal regulations on the

management of apartment buildings It clarifies the

rights and obligations of apartment owners and users,

including in the management of private and public areas

(the housing law defines private and public areas for this

purpose)

This material is for general information only and is not intended to provide legal advice.

© Freshfields Bruckhaus Deringer 2006 www.freshfields.com

For further information please contact Tony Foster

T + 84 4 8247 422

F + 84 4 8268 300

E tony.foster @ freshfields.com