Vietnam - new housing law
1Vietnam – new housing lawFreshfields Bruckhaus Deringer, August 2006Vietnam’s housing law is the first law to set out acomprehensive legal framework for the ownership, lease,use and management of houses, including apartments, bylocal and foreign individuals and organisations. The lawwas 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 thesurge in property development activities in Vietnam, thenew law is a welcome clarification of the rights andobligations of the parties to housing transactions.Ownership of housesIndividuals and organisations are separated intocategories that determine their right to own houses inVietnam.Vietnamese individuals and domestic organisationscan own houses without regard to their place ofpermanent residential registration or businessregistration.Overseas Vietnamese individuals who satisfy one ofthe following conditions can own an unlimitednumber of houses (they were previously restricted toone house):– they have long-term investments in Vietnam;– they have contributed to the state;– they are involved in cultural and scientificactivities and have returned to Vietnam regularlyto contribute to building the country; or – they have returned to live in Vietnam.Overseas Vietnamese individuals who have lived inVietnam for six consecutive months can own onehouse (they were previously not entitled to do so).Foreign individuals and organisations investing indevelopment projects to build houses for lease will beissued with house ownership certificates for theduration of their investments. When a developer sellsa building developed for sale, the purchaser will beissued with a house ownership certificate.Foreign organisations investing in developmentprojects to build houses for lease must transfer allhouses to the state upon expiry of their investmentcertificate.Foreign organisations investing in developmentprojects to build houses for sale must transfer unsoldhouses to the state upon expiry of their investmentcertificate.No compensation or payment to such organisations iscontemplated.Foreigners are not allowed to own houses for personaluse in Vietnam.All house owners must register their ownership and anychange therein with the authorities. A house cannot bethe subject of a housing transaction if ownership is notregistered.Vietnam – new housing law Vietnam’s housing law is the first law to setout a comprehensive legal framework forthe ownership, lease, use and managementof houses, including apartments, by localand foreign individuals and organisations.The law was adopted by the Vietnamesenational assembly on 29 November 2005and became effective on 1 July 2006. Giventhe scattered state of prior regulations andthe surge in property development activitiesin Vietnam, the new law is a welcomeclarification of the rights and obligations ofthe parties to housing transactions.BRIEFINGSUMMARY AUGUST 2006 2Vietnam – new housing lawFreshfields Bruckhaus Deringer, August 2006The housing law provides that companies providingmanagement services to apartment buildings are entitledto be treated in the same way as utilities companies,without specifying what such treatment may entail. Thisissue may be clarified in the implementing regulations.Leasing of housesThe rights of foreign organisations and individuals tolease houses have not changed substantially fromprevious regulations. To lease houses:– foreign individuals must have a valid visa to be inVietnam for three months or longer; and– organisations must have the right to be in Vietnamfor three months or longer,but overseas Vietnamese are not required to stay inVietnam for any minimum period.A lessee has the right to continue leasing the housewhen the owner of the house dies, and when thehouse is transferred to another owner. In both cases,the successor in title to the house has to continue toallow the lessee to lease the house, unless the partiesagree otherwise.Mortgaging of houses A house owner has the right to mortgage the house assecurity for one or several obligations if the value ofthe house is higher than the total value of allobligations. However, mortgages can be granted onlyto one single credit institution. The housing law is thefirst piece of legislation to introduce this restriction,probably to ease the difficulties in enforcement ofmortgages in practice.House owners can mortgage their houses only tocredit institutions permitted to operate in Vietnam.Housing development projectsConstruction requirement The housing law sets out some constructionrequirements for housing development projects.Apartments must account for the following percentagesof 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.FundingThe housing law allows the developer to accept up to 70 per cent of the value of the house lease or housepurchase contract from a potential purchaser or lessee,provided that the foundations for the house have beencompleted.Social welfare housingThe housing law sets out the legal framework for a socialwelfare housing fund in Vietnam for lease and hirepurchase to Vietnamese families. It also stipulates thathousing developers for low-income households willreceive special incentives such as land rental exemptionsand lower tax rates.Warranties Developers of residential buildings of nine floors or moremust provide a warranty for a minimum period of60 months. The minimum warranty period is reduced to36 months for buildings from four to eight floors, and to24 months for other residential premises. These warrantyperiods are substantially higher than the 12 monthwarranty requirement set out in the recent decree 2 dated5 January 2006 on management of new urban areas.Management of apartment buildingsThe housing law consolidates legal regulations on themanagement of apartment buildings. It clarifies therights 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 thispurpose).15848This material is for general information only and is not intended to provide legal advice.©Freshfields Bruckhaus Deringer 2006www.freshfields.comFor further information please contact Tony FosterT+84 4 8247 422F+84 4 8268 300Etony.foster@freshfields.com . 1Vietnam – new housing lawFreshfields Bruckhaus Deringer, August 200 6Vietnam s housing law is the first law to set out acomprehensive. housing transaction if ownership is notregistered .Vietnam – new housing law Vietnam s housing law is the first law to setout a comprehensive legal framework