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Some opinions on restricting real estate ownership of foreigners and 'Viet Kieu' in Vietnam


08-07-2021
Forewords

[1.] Throughout the various historical periods and along with the development of the economy, issues related to the ownership, use and transfer of houses, land, construction work, land-attached assets have been through significant changes in how they are approached when it comes to foreign actors in the direction of being more open to the subjects that are allowed to own different kinds of real estate in Vietnam based on the constitutional principle that the land is owned by the people (organizations and individuals do not have the right to own lands but only land use right).[1]

Limitations

[2.] Upon analyzing the laws of Vietnam, it can be seen that real estate is not defined generally but listed as: (i) land; (ii) houses, constructions attached to land; (iii) other assets attached to land, houses and constructions; and (iv) other assets as prescribed by the laws.[2]  Thus, the term “real estate” is relatively wide and even the current laws have not seemed to cover all types of property that are considered real estate.  For the sake of presentation, the author shall only mention the two most popular types of property which are land and housing, and the term “real estate” used hereinafter shall be construed to only include the above two (02) types of property.

Foreigners and ‘Viet kieu’

[3.] The Nationality Law does not provide a precise definition on foreigner and it is instead prescribed in the Entry and Exit Law, whereby: “‘Foreigners’ are those who carry papers proving their foreign nationalities, or those without nationalities who enter, leave, transit through, or reside in Vietnam”.[3]  Accordingly, foreigners can be construed to include individuals with nationality of a country other than Vietnamese nationality and those without nationalities.[4]

[4.] The laws of Vietnam contain no legal definition on ‘Viet kieu’ (even though this is a rather popular and frequent term in reality) and instead use the term ‘Vietnamese residing overseas’ to refer to these individuals, in particular: “Vietnamese residing overseas are Vietnamese citizens and persons of Vietnamese origin who permanently reside in foreign countries”.[5]  On this account, the laws of Vietnam have pointed out the distinguishing characteristics of a ‘Vietnamese residing overseas’ regarding (i) geography (permanently resides in foreign countries); and (ii) nationality (is having Vietnamese nationality) or is of Vietnamese origin. [6]

[5.] In some cases, persons of Vietnamese origin (who no longer have Vietnamese nationality) are also considered foreigners and shall follow legal regulations as if they are foreigners or Vietnamese residing overseas (usually enjoy a wider scope of priority in this case) when they participate in some legal relationships in Vietnam, in particular real estate transactions as later mentioned in this paper.

Legal provisions on restricting foreign ownership of real estate

[6.] At the moment, the right to own real estate of foreigners are regulated in many different texts such as the Land Law 2013, Housing Law 2014, Real Estate Trading Law 2014 and their guiding documents.  Basically, the restrictions can be categorized into two groups, which are restriction on land use right and restriction on house ownership right, in which, foreigners are imposed much more significant restriction on ownership right in comparison with Vietnamese residing overseas.

 

6.1 Restriction on land use right

 

6.1.i Land user:

The Land Law 2013 does not state that foreigners are subjects that are allocated land, leased land, certified land use right and receivers of land use right transfer by the State.However, this restriction is not applicable to Vietnamese residing oversea as this subject is entitled to land use right according to Article 5.6 of the Land Law 2013.For the sake of clarification, persons of Vietnamese origin shall not inherently be land user in Vietnam if they choose not to enjoy the status of being Vietnamese residing overseas as they no longer have Vietnamese nationality.

6.1.ii Form of land use:

As they are not entitled to land use right, according to Article 186 of the Land Law 2013, in case of receiving inheritance, foreigners shall not be able to inherit land use right and shall not be granted Certificate, but they can give away the land use right/transfer away the land use right (while receiving land use right value in return) to subjects who are entitled to land use right pursuant to the laws.

For Vietnamese residing overseas who are land users, there are certain restrictions on the scope and purposes of land use that would not apply to Vietnamese citizen:

(a) Land allocation with land use levy pursuant to Article 55.3 of the Land Law 2013, in details: “Vietnamese residing overseas and […] are allocated land to implement investment projects for the construction of houses for sale or for a combination of sale and lease”.

(b) Land lease pursuant to Article 56.1.dd and e of the Land Law 2013, in details: “[..], Vietnamese residing overseas and foreign-invested enterprises that use land to implement investment projects in agriculture, forestry, aquaculture or salt production, for non-agricultural business and production purpose, for construction of public facilities for commercial purpose, and for implementation of investment projects on houses for lease”; and [..], Vietnamese residing overseas and foreign-invested enterprises that use land for construction of non-business facilities”.

(c) Receiving land use right according to Article 169.1.b, dd and k of the Land Law 2013.[7]

 

6.2 Restriction on house ownership

6.2.i Subjects of house ownership:

According Article 7 of the Housing Law 2014 and Article 14.2 of the Real Estate Trading Law 2014, subjects of house ownership include foreigners and Vietnamese residing overseas, in which:

(a) Foreigners must fully meet the conditions such as: (i) permitted to enter into Vietnam; and (ii) are not given diplomatic immunity and privileges. [8]

(b) Vietnamese residing overseas must be permitted to enter into Vietnam.[9]  In case the foreign individual has confirmation documents that he/she is of Vietnamese origin, such individual can only choose to be either Vietnamese residing overseas of foreign individual to determine the scope of his/her house ownership in Vietnam.

6.2.ii Form of house ownership:

According to Article 8 and Article 159.2 of the Housing Law 2014, foreigners and Vietnamese residing overseas are entitled to own houses in the following forms:

(a) Foreigners are allowed to own apartments and individual houses in housing construction investment project, unless the project is in national defence and security area pursuant to the laws of Vietnam.

(b) Vietnamese residing overseas are entitled to own houses through purchase or lease-purchase of commercial houses from real estate enterprises and cooperatives; purchase, donation, exchange or inheritance of houses of households and individuals; receive the transfer of residential land use rights in commercial housing construction projects, which are allowed to sell the ground to organize the construction of houses on their own in accordance with law.

6.3.iii Number of houses owned:

For foreigners, the law applies a certain ratio of ownership, in details:

(a) For apartment buildings: only buy, lease-purchase, receive, inherit and own no more than 30% of the number of apartments in an apartment building, of which, for the forms of purchase and lease-purchase, foreigners are only entitled to purchase, lease-purchase of housing from investors in housing construction projects or purchase of houses from foreign organizations or individuals that have houses in Vietnam.[10]  In case an area with a population equivalent to a ward-level administrative unit has many apartment buildings for sale, lease or purchase, foreign individuals are only entitled to own no more than 30% of the apartments of each apartment building and no more than 30% of the total number of apartments of all these apartment buildings combined; and

(b) Individual houses (including villas, adjoining houses): in an area with a population equivalent to a ward-level administrative unit, only buy, rent, purchase, receive, inherit and own no more than two hundred and fifty (250) houses, of which:

+ In case there is only one project with less than two thousand five hundred (2,500) individual houses, foreign organizations and individuals are only allowed to own no more than 10% of the total number of houses in that project;

+ In case there is only one project with the number of individual houses equivalent to two thousand five hundred (2,500) houses, foreign organizations and individuals are only allowed to own no more than two hundred and fifty (250) houses;

+ In case there are two or more projects and the total number of individual houses in these projects are less than or equal to 2,500 houses, foreign organizations and individuals are only entitled to own no more than 10% of the total number of housing of each project.

(Note that the ratios/numbers of individual houses and apartments mentioned above are the total amount owned by both foreign entities and individuals)

The housing law does not have specific quantitative restrictions on Vietnamese residing overseas.

6.2.iv House ownership term:

For foreigners, house ownership term shall not exceed fifty (50) years from the date of issue of the Certificate and may be considered for a one-time extension with a maximum term not exceeding fifty (50) years.[11]There is no legal limit on the term of house ownership for Vietnamese residing overseas.Therefore, it can be understood that the term of house ownership by this group will be the same as for domestic individuals.

6.3 Restrictions on ownership of real estate other than housing (e.g., sea villas, tourist apartments)

According to Article 14.2 of Real Estate Trading Law 2014, Vietnamese residing overseas and foreign individuals are allowed to lease various types of real estate to use; to buy, rent, or lease-purchase houses in accordance with the housing laws.  Vietnamese residing overseas and foreign-invested enterprises may buy, rent and purchase houses and construction works to use them as offices, production, business and service establishments in accordance with the public use of the house and construction work.  Thus, foreigners are not allowed to own real estate other than housing such as sea villas, tourist apartments.[12]  Meanwhile, Vietnamese residing overseas do not seem to be bound by this restriction and are free to buy/rent houses and constructions with other uses.

6.4 Restrictions on trading rights in real estate

Although this content is not directly related to real estate ownership, it has an indirect impact on the rights to real estate of foreigners and Vietnamese residing overseas, in particular: foreigners are not allowed to trade in real estate (as an individual) in Vietnam.[13]  On the other hand, Vietnamese residing overseas, although more restricted than domestic individuals, are still entitled to conduct real estate business activities, such as: (i) regarding land leased by the State, to invest in the construction of houses for lease; investment in the construction of houses, construction works other than houses for sale, for lease, or for lease-purchase; (ii) for land leased from organizations, households or individuals, to invest in the construction of houses, construction works for lease in accordance with the land use purposes; (iii) receive the transfer of all or a portion of real estate project from an investor in order to construct houses and buildings for sale, lease, or lease-purchase; (iv) to invest in the construction of houses on land allocated by the State for sale, for lease, or for lease purchase; (v) for leased land, transferred land in industrial zones, industrial clusters, export processing zones, hi-tech zones or economic zones, to invest in the construction of houses and construction works for trading in accordance with the correct land use purpose.[14]

Inadequacies and recommendations

[7.] Subjects of land use rights: Article 19.1 of the Real Estate Trading Law 2014 stated that “The sales of houses and constructions must associate with the land use right”. Article 126.3 of the Land Law 2013 stated that “For projects on construction of houses for sale or for a combination of sale and rent or for lease-purchase, the land use term shall be determined in accordance with the duration of the project. Those who buy houses associated with land use rights may use land for a long and stable term”.  However, these articles seem to be very contradictory as Article 5 of the Land Law 2013 does not recognize foreigner as a subject of land use rights, and no foreigner is granted the Certificate.[15]  Nonetheless, in reality when a foreigner buys house, the information on the land parcel needs to be sufficiently recorded in the Certificate (without any particular remark) so it can definitely lead to the misunderstanding that foreigners are also granted the land use rights.  Therefore, it is necessary to have specific guidance on recording in the Certificate clearly that foreigners are not subject to land-related rights.

[8.] Scope of real estate trading right: The Land Law 2013 and Real Estate Trading Law 2014 allow Vietnamese residing overseas to receive the transfer of all or a portion of real estate project of investors to build houses, constructions for sale, for rent and for lease-purchase.  This regulation, in theory, is an open regulation but not feasible as in order to receive the transfer of real estate project, the transferee must be an enterprise doing business in real estate.  As such, in reality, establishment of enterprise is necessary to perform this right.[16]

[9.] Receive transfer of house purchase contract: According to Decree 99, foreigners are not allowed to receive the transfer of house from individuals, households even if the apartment/individual houses are in housing project area.[17]  This regulation is intended to regulate transfers and to limit foreign ownership of an excessive number of houses.  However, in reality, the need to buy houses by domestic entities is relatively high and may lead to donation transactions in the form of house ownership.  With inheritance, donation (not through the investor), the process to control and manage the number of houses owned by foreigners is also relatively difficult and complicated.  In addition, it is impossible in many cases to look up the information of the on the portal of the Department of Construction as there is no information, and applying for confirmation in writing is difficult and time-consuming.

[10.] Indirect access to land use rights through enterprise establishment: From the perspective of accessing land use rights, foreigners are not land users and this regulation seems to be aimed at protecting the most important national resources from foreigners.  However, this provision does not seem difficult to overcome by establishing a foreign-invested enterprise and/or buying capital contribution/shares of Vietnamese enterprises, through which these entities have the rights to lease land, receive the transfer of land use rights and land-attached assets as well as the right to trade real estate in a relatively wide scope in accordance with the current law.

[11.] Term of house ownership: The housing laws stipulate that the term of house ownership is no more than fifty (50) years for foreigners and can be extended.  As such, the law is not really clear about the purpose of limiting the time to own a house because this period can be extended to a maximum of fifty (50) years and at the end of the ownership term, the foreigner can fully assign it to another individual so that he/she can continue enjoying the right to extend or change to long-term use (if transferred to Vietnamese residing overseas or domestic individuals) and the foreigner will continue to buy another house/sublease the above house without any restriction.  In case an enterprise is not established, when the foreigner marries a Vietnamese or a Vietnamese residing overseas, the term limit on ownership will also be removed.

[12.] House selling price: in fact, the investors will often have to include the value of land use rights into the selling price when quoting for the buyers without categorizing whether they are domestic individuals or foreigners.  However, the problem is that the foreigner is not entitled to land use rights, and question shall be raised on whether the inclusion of land use levy in the housing value is appropriate because in reality, the land use right cannot simply be "moved aside" while the foreigner is owning the house.  Regarding the rebuilding of an apartment building, another issue arises in case an apartment building has to be demolished for rebuilding but the foreigner's house ownership period has not yet expired as there has can be question on how to ensure the benefits of the foreigner when he/she, by the law, has no right over the land for the construction of such apartment building.

Therefore, in my point of view, if there has been limitation on the geographical scope of house ownership (limited within commercial housing development project), there needs to be extension on land use rights for foreigners in this case by means of an appropriate mechanism for land use/land lease levy collection and monitoring land use in association with house ownership (For example: foreigner is still granted land use right but is not allowed to transfer this land use right and the land use term must match the house ownership term) in order to ensure the state management of land and the effective exploitation and use of land resources.

[13.] Number of houses owned: The housing laws limit the number and percentage of foreigners' house ownership.  However, with the prohibition of buying houses in national defence and security areas in accordance with Vietnamese law, this limit should be considered and extended because:

13.1 As analyzed above, foreign-invested enterprises (invested by foreign organizations and individuals and subject to the control of these investors) are still having access to the right to use land and housing in Vietnam.  This even happens in large scale and spreads throughout the Vietnam territory; and

13.2 The law still allows foreigners to rent houses and if foreigners rent houses for a long term, the foreigners are still entitled to many rights exclusive to the house owners in reality.  In cases where house ownership by foreigner is limited to 30%, subleasing housing by foreigners is not limited in proportion.  Therefore, in theory there may still be cases where a single residential building/apartment complex has only foreigners living.  Then, limiting this ratio no longer holds any value.

Therefore, the author personally thinks that, for areas with no security or defence restrictions, the limit on the number and ratio of house ownership should be considered to be eliminated.

Conclusion

[14.] Above is a summary of some of the provisions of the law on real estate ownership in accordance with the current law.  Thereby, it can be seen that although there are more open regulations for foreigners, there are still many shortcomings and inadequacies (inadequacies may come from the provisions of the law itself or in the process of practical application) that must be overcome to improve the system of regulations on real estate ownership by foreigners (including Vietnamese residing overseas).

 

Within this paper, there may still be many other shortcomings/inadequacies that due to the limitations on time and capacity, cannot fully be presented in this paper. As such, contributions are invaluable so that the paper can be completed and the author can gather more practical knowledge in this field./.

(This article is contributed by Nguyen Duc Long and Vu Anh Khue)

 

LIST OF ABBREVIATIONS

Within the scope of this paper, the following abbreviations shall be construed and explained as follows:

Abbreviations

 

Explanation

Constitution 2013

:

means the Constitution of the Socialist Republic of Vietnam, ratified by the National Assembly of the Socialist Republic of Vietnam on 28 November 2013 and came into effect on 01 January 2014.

Civil Code 2015

:

means the Civil Code no. 91/2015/QH13, ratified by the National Assembly of the Socialist Republic of Vietnam on 24 November 2015 and came into effect on 01 January 2017.

Land Law 2013

:

means the Law on Land no. 45/2013/QH13, ratified by the National Assembly of the Socialist Republic of Vietnam on 29 November 2013, came into effect on 01 July 2015 and amended on 01 January 2019.

Housing Law 2014

:

means the Law on Housing no. 65/2014/QH13, ratified by the National Assembly of the Socialist Republic of Vietnam on 25 November 2014, came into effect on 01 July 2015 and amended on 01 January 2021.

Real Estate Trading Law 2014

:

means the Law on Real Estate Trading no. 66/2014/QH13, ratified by the National Assembly of the Socialist Republic of Vietnam on 25 November 2014, came into effect on 01 July 2015 and amended on 01 January 2021.

Nationality Law

:

means the Law on Vietnamese Nationality no. 24/2008/QH12, ratified by the National Assembly of the Socialist Republic of Vietnam on 13 November 2008, came into effect on 01 July 2009 and amended on 24 June 2014.

Entry and Exit Law

:

means the Law on entry, exit, transit, residence of foreigners in Vietnam no. 47/2014/QH13, ratified by the National Assembly of the Socialist Republic of Vietnam on 16 June 2014 and came into effect on 01 July 2015.

Decree 99

:

means Decree no. 99/2015/ND-CP dated 20 October 2015 of the Government detailing and guiding the implementation of some articles of the Housing Law, amended and supplemented by Decree no. 30/2019/ND-CP dated 28 March 2019 of the Government amending and supplementing some articles of Decree no. 99/2015/ND-CP detailing and guiding the implementation of some articles of the Housing Law, came into effect on 15 May 2019 and amended and supplemented by Decree no. 30/2021/ND-CP amending and supplementing some articles of Decree no. 99/2015/ND-CP dated 20 October 2015, came into effect on 26 March 2021.

Certificate

:

means the Certificate of land use right, house ownership and other land-attached assets.

 

 

[2]           Civil Code 2015: Article 107.1

[3]           Entry and Exit Law: Article 3.1

[4]           Nationality Law: Article 3.1

[5]           Nationality Law: Article 3.3

[6]           Nationality Law: Article 3.4

4. “Persons of Vietnamese origin residing abroad” are Vietnamese people who used to have Vietnamese nationality which had been determined at the time of their birth on the consanguinity principle and their offspring and grandchildren are permanently residing in foreign countries

  1.           Land Law 2013: Article 169. Acquisition of land use rights
  1. Acquisition of land use rights is prescribed as follows
    • b) [..]; Vietnamese residing overseas may acquire land use rights through receipt of transfer of land use rights in industrial parks, industrial clusters, export processing zones, hi-tech zones or economic zones […]”;
    • ) Vietnamese residing overseas who are eligible to own houses in Vietnam under the housing law may acquire land use rights through purchase, lease-purchase, inheritance or donation of houses associated with land use rights, or acquire land use rights in housing development projects”;
    • k) [..], Vietnamese residing overseas and foreign-invested enterprises may acquire land use rights through the successful conciliation of land disputes which is certified by a competent People’s Committee, the agreement in the mortgage contract to handle the debt, or the decision of a competent state agency on settlement of land disputes, complaints or denunciations, the decision or judgment of a People’s Court, the decision on judgment enforcement of the judgment enforcement agency which has been executed, the document recognizing the result of the auction of land use rights in accordance with law, or the document on splitting land use rights for households or groups sharing land use rights in accordance with law”.

[8]           Decree 99: Article 74. Documents proving eligibility for owning houses in Vietnam

1. A foreign individual must have an unexpired passport bearing the entry seal of the Vietnam’s immigration authority and not given diplomatic immunity and privileges according to Ordinance on diplomatic immunity and privileges of diplomatic missions, consular offices, and representative authorities of international organizations in Vietnam.

[9]           Decree 99: Article 5. Documents proving eligible house owners

“2. The applicant being a Vietnamese citizen residing overseas must submit the following documents:

a) An unexpired Vietnamese passport that bears the entry seal of a Vietnam’s immigration authority; or

b) An unexpired foreign passport that bears the entry seal of a Vietnam’s immigration authority together with documents proving the Vietnamese nationality or Vietnamese heritage issued by the Department of Justice of a province, an overseas Vietnam’s diplomatic mission, or an authority in charge of management of overseas Vietnamese citizens, or other documents prescribed by Vietnam’s law.”

[10]          Decree 99: Article 76.2

[11]          Housing Law 2014: Article 161.2.c

[13]          Article 11 Real Estate Trading Law 2014

[14]          Article 11.2 Real Estate Trading Law 2014

[16]          Real Estate Trading Law 2014: Article 49. Requirements in terms of transfer of all or a portion of real estate project

3. The transferee must be a real estate enterprise, acquire financial competence and commit to keep conducting the business as prescribed in regulations of law and ensure that the project is conducted under proper progress and plan.

[17]          Housing Law 2014: Article 76.2

Post by: IBPro
08-07-2021

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