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  • Writer's picturePham Ba Thien

State-Leased Land with Annual Lease Payments is transferrable under the amended Land Law?


The Amended Land Law of 2024, passed by the National Assembly at its 5th extraordinary session ("Land Law 2024"), regulates the lease rights in land lease contracts for land users concerning land leased by the State with annual lease payments ("Land Lease Rights"). Accordingly, land users (including foreign-invested enterprises leasing land from the State to implement investment projects in Vietnam) can transfer Land Lease Rights as a transferable property right, depending on satisfaction of the statutory conditions related to the transfer of assets attached to land in relation to the Land Lease Rights.


1. ARE LAND LEASE RIGHTS CONSIDERED PROPERTY RIGHTS WHICH IS MONETARILY ASSESSABLE AND TRANSFERABLE?

Clause 37 of Article 3 of the Land Law 2024 stipulates Land Lease Rights "as the rights of land users formed when the State leases the land with annual lease payments. The land users can transfer the lease rights in the land lease contracts; the transferees of lease rights in the land lease contracts inherit the rights and obligations of the land users as regulated by this Law and other relevant legal provisions."


Article 155 of the Civil Code 2015 defines that "Property rights are rights that can be valued in money, including property rights over intellectual property objects, land use rights, and other property rights." According to this provision, Land Lease Rights under the Land Law 2024 can be considered a monetarily assessable property right that can be transferred flexibly upon agreements among parties.


2. POTENTIAL IMPACT

The Land Law 2024's addition of new regulations on Land Lease Rights partly institutionalizes Resolution No. 18-NQ/TW on the state's policy regarding mainly leasing land through the form of annual lease payments and promoting the commercialization of land use rights.


Permitting Land Lease Rights transactions is considered a significant change compared to the current laws, where land users of the land leased by the State with annual lease payments did not have the right to transfer such land use rights. Under the current land law provisions, in practice, a real estate transaction involving State-leased land with annual lease payments typically involves the current lessee (seller/transferor of the transaction) voluntarily returning the land to the State. Then, related administrative procedures are conducted for the State to permit the buyer/transferee to continue leasing such land, or to auction the land use rights (depending on the specific case).


Hence, the provision regarding Land Lease Rights as transferable property rights is expected to create flexibility in land use rights transactions, reducing the administrative burden, promoting the development of the land use rights market, and thereby increasing revenue for the State budget from land use right transfer taxes, fees, and charges when conducting land use rights transactions.


3. CONDITION PRECEDENTS FOR TRANSFERRING LAND LEASE RIGHTS

Given the sensitive nature of land issues in Vietnam, the Land Law 2024 also stipulates conditions that parties in transactions of transferring Land Lease Rights must satisfy to prevent policy abuse. Specifically, as regulated in Articles 34, 38, and 41 of the Land Law 2024, the transfer of Land Lease Rights includes the transfer of assets attached to the land, and such transfer must first satisfy the following conditions:


  • The assets attached to the leased land must be legally established and have been registered according to relevant laws and regulations.

  • The construction on land must be completed in accordance with the detailed construction planning and the approved investment project (if any), except in cases where it must be implemented according to a court's judgment, decision of the enforcement authority, or conclusion of the competent state authority regarding inspection and audit.

  • The advanced compensation, support, resettlement amount for land clearance have not yet been fully deducted from the payable land lease due.

Nevertheless, the regulations related to the transfer of Land Lease Rights under the Land Law 2024 remain general and many points are still unclear, such as:


  • How are Land Lease Rights valued? Are parties free to negotiate the value of Land Lease Rights?

  • How is the application of Land Lease Rights determined? Do cases that have been leased by the State with annual lease payments before the effective date of the Land Law 2024 benefit from this right?


Considering there is about 1 year left for the Land Law 2024 to take effect (on 01 January 2025), the Government will need to timely issue relevant guiding documents to clearly explain the practical application of the Land Law 2024 related to transactions relating to lease rights in land lease contracts.


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This article reflects the subjective viewpoint of the author on the subject matter of this article and does not constitute legal advice from Minh Thien Law and should not be applied to resolve any specific legal situation.

 

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