Legal Newsletter in February 2024 (Real estate business, Housing, Support program for sustainable business of private sector enterprises from 2023 to 2025)

Newsletter in February 2024

Our Newsletter #19 would lead you on the following:

LEGAL UPDATE

I. Issuing the Law on Real Estate Business 2023

On 28 November 2023, the National Assembly of Vietnam passed the Law on Real Estate Business 2023, which will take effect from 01 January 2025, with some notable innovations as follows:

1. New principles on deposits when trading off-plan residential houses and buildings
  1. The real estate project investor may only receive a deposit for the housing or building or its floor area which has met relevant conditions for being put on the market. The received deposit shall not exceed 5% of the selling price or lease purchase price;
  2. The selling price or lease purchase price of the housing or building or its floor area must be specified in the deposit agreement; and
  3. Payment for sale and purchase of off-plan housing or building or its floor area will be made several times. The initial payment, including deposit, shall not exceed 30% of the contract price, and subsequent payments will be paid according to the construction schedule, provided that the total amount of such payments made before handover of the housing or building or its floor area to the buyer does not exceed 70% of the contract price. This amount cannot exceed 50% of the contract price if the seller is a foreign-invested business organization.
2. Conditions for enterprises engaging in real estate business

A real estate business enterprise is required to meet the following requirements:

  1. It is not subject to any court’s judgment or decision, or a competent authority’s decision, regarding prohibition or suspension of real estate business;
  2. It must maintain safe ratios of outstanding credit balance and outstanding bonds to owner equity; and
  3. The real estate enterprise approving a real estate project must ensure that its owner’s equity is not lower than 20% of total investment for that project, if the area of land used is less than 20 ha, or 15% of total investment for that project, and if the area of land used is 20 ha or more. It also must ensure that it is capable of raising capital to implement that project.

If a real estate enterprise implements several real estate projects at the same time, its owner’s equity must be sufficient to fund all such projects at the above-mentioned percentage.

3. Detailed conditions for transfer of entire or partial real estate project
  1. The investment guidelines for the project or investment in the project are decided or approved by a competent authority; the project investor is selected or certified, if procedures for certification of the project investor are required;
  2. A detailed planning for the project is approved in accordance with regulations of laws on construction and laws on urban planning;
  3. The compensation and support for resettlement with respect to the project or its part to be transferred have been completed. If the entire project on construction of infrastructure facilities is transferred, the construction of corresponding technical infrastructure facilities must have been completed according to the approved schedule, design, detailed planning and content of the project;
  4. Rights to use land of the project or its part to be transferred are not in any dispute which has been notified, handled or is under consideration by a competent authority, or such land-use rights (“LURs”) are only involved in disputes which have been completely resolved under sentences, decisions or judgments that have taken legal effect; such LURs are not distrained to serve judgment enforcement; are not banned from trading; and are not suspended from trading;
  5. There has been no decision to suspend or terminate operation of the project or decision on land expropriation given by a competent authority. If the project or its part to be transferred involves an administrative violation, the project investor must have implemented the decision to impose administrative penalties issued by a competent authority;
  6. If the project is being mortgaged as collateral to serve the fulfillment of obligations, procedures for collateral release must be followed;
  7. The project duration is not yet expired;
  8. If a part of the real estate project is transferred, work items or their use or business purposes of that part must be independent from those of the remaining part of the project; and
  9. The transferor has received a decision from a competent authority on land allocation, land lease or land repurposing for implementing the project; and has fulfilled land-related financial obligations, including land levy, land rent and other relevant taxes, fees and charges (if any), with respect to the land area used for implementing the project or its part to be transferred without requiring certificate of LURs.
4. Individuals who do not have the right to operate independent real estate brokerage services

According to the Law on Real Estate Business 2023, individuals do not have the right to operate independent real estate brokerage services, but must meet the following conditions:

  1. He/ she must possess a practicing certificate for real estate broker; and
  2. He/ she must work for an enterprise providing real estate trading floor services or a real estate brokerage enterprise.
II. Issuing the Law on Housing 2023

On 27 November 2023, the National Assembly of Vietnam passed the Law on Housing 2023, which will take effect from 01 January 2025 with some notable innovations as follows:

1. Detailed regulations on mini apartments

a. Mini apartments definitions

Mini apartments under the Law on Housing 2023 are also known as multi-storey, multi-unit apartment buildings with land-use rights (“LURs“) developed for the purpose of sale, lease purchase, or lease. Accordingly, mini apartments include the following types:

  1. Houses of at least 2 storeys where each storey accommodates dwelling units designed, built for sale, lease purchase, or a combination of sale, lease purchase, lease; and
  2. Houses of at least 2 storeys and at least 20 dwelling units for lease.

The owner of mini apartment obtains a Certificate of LURs in accordance with the regulations of laws on land, and sells, rents, purchases, and leases it in accordance with the provisions of Law on Housing and laws on real estate business.

b. Conditions for individuals with LURS to sell, lease, buy, or rent mini apartments

  1. Satisfy eligibility of developers of housing investment and construction projects, comply with construction law and other relevant law provisions with respect to housing investment and construction laws in investment and construction; and
  2. If building a house with 02 or more storeys and less than 20 dwelling units and on each storey there is an apartment designed and built for rent, the following regulations must be followed:
  • Satisfy construction requirements of private multi-storey multi-unit houses according to regulations of the Ministry of Construction;
  • Satisfy fire prevention and firefighting in accordance with regulations on fire safety applicable to private multi-storey multi-units houses;
  • Satisfy requirements regarding roads for firefighting facilities set forth by provincial People’s Committees in respect of private multi-storey and multi-unit houses; and
  • If the multi-storey, multi-unit apartment building is built for sale, rental or purchase, then the owner of the multi-storey, multi-unit apartment building must meet the conditions of being an owner of residential construction investment project.
2. Amending regulations on the lifespan of apartment buildings
  1. Lifespan of apartment buildings shall be determined by:
    • Design dossiers (lifespan of apartment buildings according to design dossiers shall be specified in written appraisal of competent authorities in accordance with construction laws); and
    • Actual useful life of apartment buildings according to conclusion of competent authority.
  2. Lifespan of apartment buildings shall start from the date on which apartment buildings are commissioned for use in accordance with construction laws; and
  3. If the lifespan of apartment buildings according to design dossiers expires or the apartment buildings in question are damaged, are prone to collapse, or do not guarantee safety for owners and occupants of apartment buildings before expiry of lifespan, provincial People’s Committees shall coordinate an inspection and quality assessment of apartment buildings.
3. Amending some regulations on social housing

a. Changing principles for leasing, leasing, buying and selling Social Housing

According to the Law on Housing 2014, social housing buyers were only allowed to sell houses within 5 years (according to the term of the social housing lease contract) to that social housing management unit or sell it to entities entitled to buy that social housing if the management unit does not buy the house at the selling price of the same social housing in the same location at the same time and does not have to pay personal income tax.

According to the Law on Housing 2023, within 5 years, if there is a need to sell the social housing, it can only be resold to the investor of a social housing construction investment project or resold to entities entitled to buy that social housing at a maximum price equal to sale price of the social housing under sale contracts signed with developers of social housing investment and construction projects; and must pay personal income tax.

b. Expanding beneficiaries of Social Housing assistance policies

Law on Housing 2023 has added two additional groups as follows:

  1. Students, learners in universities, specialized education institutions as per the law; and
  2. Enterprises, cooperatives, and joint cooperatives in industrial parks.

c. Increasing incentives for investors of social housing investment projects

  1. Developers are exempt from land rent, land levy for land area of the projects;
  2. Developers are not required to determine land value, calculate land rent or land levy from which they have been exempt; are not required to apply for exemption from land rent and land levy, except when developers are allowed to reserve up to 20% of homestead land area within projects where technical infrastructure investment and construction has been implemented to facilitate investment and construction of service, mercantile or residential real estate structures;
  3. Developers of social housing investment and construction projects may separately record expenditures and revenues, must not include costs for investment and construction of service and mercantile structures in social housing price, and may benefit from all revenues generated by the service and mercantile structures; and
  4. Developers are eligible for maximum profit of 10% of total investment in regard to the area on which social housing is built.
III. Approval of a support program for the sustainable business of private sector enterprises from 2022 to 2025

On 08 February 2022, the Prime Minister issued Decision No. 167/QD-TTg approving a support program for the sustainable business of private sector enterprises from 2022 to 2025 (“Program 167”) with some notable content as follows:

1. Sustainable Business definition

Sustainable Business includes the following business models:

  1. Business models applying circular economy: Design, production, consumption and service activities set the goal of reducing raw material exploitation, materials, extending product life cycles, limiting waste generated and minimizing negative impact on the environment;
  2. Inclusive business model: Mobilizing low-income citizens to participate in the value chain of businesses and production and business establishments; low-income people can participate as suppliers, customers, distributors or workers participating in production and business activities; and
  3. Other sustainable business models.
2. Subjects of application of Program 167
  1. Sole proprietorship carrying out Sustainable Business;
  2. Organizers that promote Sustainable Business;
  3. Competent State agencies assigned to implement Program 167 activities; and
  4. Organizations and individuals involved in Sustainable Business.
3. Activities of Program 167
  1. Developing an ecosystem to support the carrying out of Sustainable Business through a number of activities as follows:
    • Disseminating information and communication through mass media and social networks to raise awareness of society and the business community about Sustainable Business;
    • Building a network of consultants to support sustainable businesses;
    • Building and developing an information platform to form a data base on Sustainable Businesses; and
    • Organizing conferences, seminars, and discussions to share information, experiences, and good practices on Sustainable Business models; measurement solutions and tools; evaluating and recognizing sustainable businesses; connecting businesses implementing sustainable business with credit institutions and investors; connecting typical domestic and international organizations, experts, and successful businesses.
  2. Supporting Sustainable Businesses through a number of activities as follows:
    • Supporting consulting, training, on strategy building, model design, and sustainable business plans; personnel; finance, production, sales, market, internal management and other contents related to production and business activities of the enterprise;
    • Technology support includes: searching, selecting, decoding and transferring technology suitable for businesses; applying standards and technical regulations; costs for inspection, calibration, testing, and measurement of product and service quality; and intellectual property consulting, exploitation and development of intellectual property; consulting on choosing digital transformation solutions; and
    • Supporting for communication, trade promotion, market expansion for sustainable business products and services of businesses: supporting for successfully registering accounts to sell products and services on commercial floors international electronics; support for account maintenance costs on domestic and international e-commerce platforms.
  3. Program 167 management:
    • Developing guidance documents and procedures for implementing the Program; developing a framework for evaluating and monitoring the Program; and
    • Organizing and annually evaluating and summarizing the implementation of the Program, report to the Prime Minister and propose amendments and supplements to the Program’s content and activities

The above is not official advice from BLawyers Vietnam. If you have any questions or suggestions about the above, please contact us at consult@blawyersvn.com. We would love to hear from you.

Date: 29 February 2024

Writer: BLawyers Vietnam

Legal News and Update Team

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Newsletter #19 (EN version)

Maybe you are interested in reading other Newsletters of BLawyers Vietnam: Legal Newsletter in Dec 2023/ Legal Newsletter in Nov 2023/ Newsletter in Oct 2023

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