Vietnam’s housing law is the first law to set out a comprehensive legal framework for the ownership, lease, use and management of houses, including apartments, by local and foreign individuals and organizations. The law was 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 the surge in property development activities in Vietnam, the new law is a welcome clarification of the rights and obligations of the parties to housing transactions.

 

Ownership of houses

Individuals and organizations are separated into categories that determine their right to own houses in Vietnam.

·         Vietnamese individuals and domestic organizations can own houses without regard to their place of permanent residential registration or business registration.

·         Overseas Vietnamese individuals who satisfy one of the following conditions can own an unlimited number of houses (they were previously restricted to one house):

–        they have long-term investments in Vietnam;

–        they have contributed to the state;

–        they are involved in cultural and scientific activities and have returned to Vietnam regularly to contribute to building the country; or

–        they have returned to live in Vietnam.

·         Overseas Vietnamese individuals who have lived in Vietnam for six consecutive months can own one house (they were previously not entitled to do so).

·         Foreign individuals and organizations investing in development projects to build houses for lease will be issued with house ownership certificates for the duration of their investments. When a developer sells a building developed for sale, the purchaser will be issued with a house ownership certificate.

Foreign organizations investing in development projects to build houses for lease must transfer all houses to the state upon expiry of their investment certificate.

Foreign organizations investing in development projects to build houses for sale must transfer unsold houses to the state upon expiry of their investment certificate.

No compensation or payment to such organizations is contemplated.

·         Foreigners are not allowed to own houses for personal use in Vietnam.

All house owners must register their ownership and any change therein with the authorities. A house cannot be the subject of a housing transaction if ownership is not registered.

 

Housing development projects

Construction requirement

The housing law sets out some construction requirements for housing development projects. Apartments must account for the following percentages of 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.

Funding

The housing law allows the developer to accept up to 70 per cent of the value of the house lease or house purchase contract from a potential purchaser or lessee, provided that the foundations for the house have been completed.

Social welfare housing

The housing law sets out the legal framework for a social welfare housing fund in Vietnam for lease and hire purchase to Vietnamese families. It also stipulates that housing developers for low-income households will receive special incentives such as land rental exemptions and lower tax rates.

Warranties

Developers of residential buildings of nine floors or more must provide a warranty for a minimum period of 60 months. The minimum warranty period is reduced to 36 months for buildings from four to eight floors, and to 24 months for other residential premises. These warranty periods are substantially higher than the 12 month warranty requirement set out in the recent decree 2 dated 5 January 2006 on management of new urban areas.

 

Management of apartment buildings

The housing law consolidates legal regulations on the management of apartment buildings. It clarifies the rights 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 this purpose).

The housing law provides that companies providing management services to apartment buildings are entitled to be treated in the same way as utilities companies, without specifying what such treatment may entail. This issue may be clarified in the implementing regulations.

 

Leasing of houses

·         The rights of foreign organizations and individuals to lease houses have not changed substantially from previous regulations. To lease houses:

–        foreign individuals must have a valid visa to be in Vietnam for three months or longer; and

–        organizations must have the right to be in Vietnam for three months or longer, but overseas Vietnamese are not required to stay in Vietnam for any minimum period.

·         A lessee has the right to continue leasing the house when the owner of the house dies, and when the house is transferred to another owner. In both cases, the successor in title to the house has to continue to allow the lessee to lease the house, unless the parties agree otherwise.

 

Mortgaging of houses

·         A house owner has the right to mortgage the house as security for one or several obligations if the value of the house is higher than the total value of all obligations. However, mortgages can be granted only to one single credit institution. The housing law is the first piece of legislation to introduce this restriction, probably to ease the difficulties in enforcement of mortgages in practice.

·         House owners can mortgage their houses only to credit institutions permitted to operate in Vietnam.

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