On 6 January 2017, the Government of Vietnam issued Decree No. 01/2017/ND-CP (“Decree 01”) amending three decrees relating to the 2013 Land Law. It is encouraging to note that some key comments raised at the Vietnam Business Forum by David Lim, the Managing Partner of ZICO Law Vietnam, were incorporated into this Decree 01.
5 key developments relating to Decree 01
Right to obtain a certificate of land use right, ownership of residential houses and other assets attached to land (“Ownership Certificate”) for part of the construction works
Project developers may now obtain separate Ownership Certificates for each item or each area of such item of works shown in the various prescribed documents, such as investment certificates, investment registration certificates and construction permits. This highly anticipated development is expected to boost sale and purchase transactions of parts of construction works.
Right to lease assets attached to land with annual land rent payment
Enterprises, including foreign invested enterprises, which:
may now enjoy the right to lease assets attached to the land if such enterprises meet the conditions under the laws on real estate business. This is a new right which was not previously specified by the 2013 Land Law. We note, however, that this right is not applicable to enterprises leasing or subleasing land in high-tech and economic zones.
Developers’ right to terminate contracts on lease of land in industrial zones, export processing zones, industrial clusters and craft villages
It is now mandatory to specify a schedule on use of land in the land lease contract between a lessee and a lessor (which is an enterprise investing and conducting businesses relating to the infrastructure of industrial zones, export-processing zones, industrial clusters and/or craft villages). If the lessee does not follow such schedule, then the lessor has the statutory right to unilaterally terminate the land lease contract. This development was made to ensure the effective use of land. Note that lessees should themselves ensure strict adherence to the land use schedule in the land lease contract before agreeing to it. Further, parties predicting that they would not be able to meet the deadline should attempt to negotiate for an extension of such schedule well before the deadline.
Right to transfer land use right and assets after termination of project
Investors may now potentially maximize the value of their assets upon the termination of their projects.
Subject to certain conditions and restrictions, an investor may continue using the land for 24 months from the date of termination of the project, during which time, such investor may transfer the right to land use and sell lawful assets attached to the land to other investors. If the investor has not yet completed any such actions within the 24-month period, the State will recover the land.
Right to convert land use purpose after capital contribution or land transfer
If an existing land use purpose is different from that of the project or business that the investor wishes to undertake, such land use purpose may be converted following a capital contribution or land transfer by such investor.
Note that for agricultural land, the investor of a non-agricultural production and business project may only obtain land use right by way of capital contribution or land transfer after having obtained the written approval of the competent authorities in accordance with the law.
This development helps clarify the existing procedures on conversion of land use purposes.
We expect that there will be further guidelines from the Ministry of Natural Resources and Environment on the implementation of Decree 01.
If you have any questions or require any additional information, you may contact Phuc Nguyen or the ZICO Law partner you usually deal with.
This alert is for general information only and is not a substitute for legal advice.