Noteworthy regulations and policies in the field of lands and real estate business coming into effect in August 2024

Minh Thien Law is pleased to introduce our Legal Update briefly summarizing certain new regulations and legal policies taking effect in August, impacting individuals and businesses, notably in the fields of lands and real estate businesses.

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August begins with a series of significant legal regulations coming into effect, prominently including the early enforcement of the trio of 2024 Land Law, 2023 Law on Real Estate Business, and 2023 Housing Law. Among these are policies such as land use fee exemptions for lands used to build production workshops, construct clean water facilities, or serve as parking lots. Additionally, there are regulations dealing with lands allocated ultra vires piror to the date such trio of laws comes into effect, abolishment of apartment ownership period, and substantial changes in the scope of real estate business for foreign-invested enterprises.

Instead of originally planned for 01 January 2025, these three pivotal laws, the Land Law, Real Estate Business Law, and Housing Law, have been accelerated by four months and will take effect from 01 August 2024. Consequently, certain notable provisions of these laws will also come into force accordingly, as outlined below.

A.    Removing regulations on land price frames, issuing "red books" for land without documentation before 01 July 2014 and lands allocated ultra vires from 01 July 2014 to before 01 August 2024

The 2024 Land Law acknowledges the removal of land price frames, a provision that existed in the previous 2013 Land Law. Instead of a five-year interval, the land price list will now be published annually. The annual land price list will be proposed by provincial People's Committees and decided, amended, and supplemented by the corresponding People's Councils.

Other provisions of this Law include scenarios such as land without documentation before 01 July 2014, which may qualify for a Land Use Right Certificate (or "Red Book") under certain conditions, such as no violation of land laws, not falling under cases of ultra vires land allocation, and confirmation by the Commune People's Committee that the land is not in dispute. Similarly, if land was allocated ultra vires after 2014, issuing a Red Book remains feasible if there are no disputes, it aligns with land use planning, and the user has provided proof of land use fee payment.

Other notable points of the 2024 Land Law include additions such as exemptions for land use fees, for example, using land for constructing manufacturing workshops, building clean water supply facilities, or as parking lots. It also supplements more detailed regulations on compensation forms for individuals affected by land expropriation, stipulating that land can only be expropriated after providing resettlement housing, or allowing individuals and businesses not directly engaged in agriculture to receive land transfer for rice cultivation.

B.    Expanding the scope of real estate business for foreign-invested enterprises, limiting the deposit ratio for future house purchases, and specifying detailed provisions for various types of real estate business contracts

The 2023 Law on Real Estate Business Law introduces several new provisions. Foreign-invested enterprises with foreign ownership below 50% of charter capital can now operate in real estate similarly to domestic companies. Conditions for these companies include maintaining a certain ratio of credit and bond debt to equity, and they must not be prohibited from conducting real estate business, or having their businesses suspended by any judicial decisions by competent state authorities.

Deposits for purchasing off-the-plan properties are capped at 5% of the sale price. Real estate brokers must operate under real estate service companies rather than independently, and their commissions must be paid via bank transfer. Payment through banks is mandatory for project developers and real estate businesses receiving payments from clients under real estate or related service contracts. Before listing for sale on the market, all property details must be publicly disclosed on the Housing and Real Estate Market Information System and the company's website if applicable.

The 2023 Law on Real Estate Business also categorizes contracts more clearly, distinguishing between 11 types of real estate contracts (such as sales contracts, lease agreements, land use lease contracts) and 4 types of real estate business contracts (including brokerage, advisory, and property management contracts). Each type of contract must include specific essential contents, emphasizing accurate pricing in real estate transactions.

C.    Defining mini apartment buildings, removing apartment ownership periods

The 2023 Housing Law introduces several new provisions, such as mini-apartment buildings (for example, residential buildings with two or more floors, each floor designed as separate units for sale or rent), which will be granted a red book (land use right certificate) upon meeting specific requirements regarding fire safety, road access, and operational management. Apartments will no longer have ownership periods but will only have a usage term determined based on the design documents and the actual usage period as concluded by the authorized agency.

Furthermore, new regulations on compulsory relocation of deteriorated apartment buildings and incentives for social housing investors not funded by public investment are also highlights of the 2023 Housing Law.

When these new laws come into effect, they are expected to significantly impact the real estate market in Vietnam with indicators suggesting a more positive outlook compared to the previous laws. The government is also swiftly drafting decrees to guide the enforcement of these laws, ensuring their adaptability within the framework of the new regulations governing the real estate market.

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