In Vietnam, land belongs to the people and is managed by the Government. Private ownership over land is not permitted. Organizations and individuals only have land use rights (“LUR”) which include the rights to transfer, exchange, lease, donate, mortgage, contribute as capital, etc. Depending on the type of a land plot (e.g., agricultural, commercial or residential land) and its financial condition (e.g., is given by the local government on a free-of-charge basis, payment of rents on an annual or lumpsum basis, or land use fee, etc.), a land user may exercise those rights over his/her/its land plot and the attached asset or over its asset only. A lawful land user is issued an LUR Certificate (akin to title deeds in other jurisdictions) by the local government (more specifically, the local Department of Natural Resources and Environment). A land plot may be used only for the specific purpose for which it was leased or allocated (e.g., for the development of a project). Failure to meet the purported purpose may lead to the withdrawal of the land plot (for example, land is left unused for a long period of time).
The local governments grant the LUR to individuals and organizations via the form of land allocation of land (mostly for residential land), land lease (for commercial land, etc,), and recognition of LUR for persons who are currently using the land (i.e., similar to land allocation but the land user does not have the obligation to pay the land use fee).
The term of a LUR Certificate issued is unlimited (for residential land), and normally limited to a maximum of 50 years, although in certain circumstances (e.g., if the investment project involves large amounts of capital or it is located in an area having difficult socio-economic conditions), then the term may be for as long as 70 years, for other types of land.
Land Allocation
Local governments allocate land to land users and may collect land use fee for such allocation, depending on the purpose of land use. Types of allocated land plots with the collection of land use fees include the following:
- to family households and individuals for residential purposes;
- to economic organizations for implementing investment projects for construction of residential housing for purposes of sale or for sale and lease;
- to Vietnamese residing overseas and foreign-invested enterprises for implementing investment projects for construction of residential housing for purposes of sale or for sale and lease; and
- to economic organizations for implementing projects on investment in infrastructure of cemeteries and graves and for the purposes of transfer of the land use rights attached to the infrastructure.
Land plots obtained by way of allocation with the collection of land use fees can be transferred, donated, leased, mortgaged, guaranteed or used as a capital contribution, etc. In addition, land users are entitled to compensation for land when the State resumes possession of the land.
Land Lease and Other Forms of Land Acquisition in Vietnam
Another form of land acquisition available to land users (including Vietnamese residing overseas and foreign-invested enterprises), is land lease from the local government (i.e., the People’s Committee and/or the Department of Natural Resources and Environment). In this form, land users pay for the rents which are either in the form of one-off/upfront payment or annual payment basis. The land user who pays the rents on the one-off basis is allowed to transfer, sublease or mortgage the land plot/LURs. An user making an annual rent payment is only allowed to assign, sublease or mortgage the assets attached to the land owned by him/her/it.
Land plots can also be acquired via leasing from developers of industrial or economic zones. Generally, the rights of a lessee/tenant are similar to those of lease from the local government. In addition, land can also be acquired via capital contribution by the Vietnamese partner in a JV. It is worth noting, however, that foreign investors and foreign-invested enterprises are not allowed to directly lease/sublease land from individuals or family households.
Land rents are normally based on negotiation between a foreign-invested enterprise and an industrial zone developer. Land-related transactions between a foreign-invested enterprise and a local government such as rents, taxes and fees, can be based on the land prices as pre-determined by the local government.
Foreign Housing/Property Ownership
Currently, Vietnam allows foreign companies that develop residential projects in Vietnam, foreign-invested enterprises, representative offices and branches of foreign companies, foreign investment funds, branches of foreign banks operating in Vietnam and foreigners who have a visa to enter Vietnam to own selected properties in Vietnam. The ownership rights generally include the right to transfer, sell, lease out, donate, bequeath, mortgage, contribute as capital, etc.
Foreigners are allowed to own residential houses (including apartments and individual residential houses) in a new residential/commercial project. The total number of units owned by foreigners may not exceed 30% of the total units in one apartment building and not exceed 250 landed property units (i.e., houses) in one ward/commune. There is no limit on the number of apartments or houses for a foreigner.
Foreigners are permitted to own apartments for a maximum term of 50 years (with a renewal possibility upon expiration) and foreign companies are permitted to own apartments for a term equal to the term recorded in its IRC. The owner may sell his/her/its apartments/houses to those who are permitted to own real properties in Vietnam.
It is worth noting that foreigners cannot directly buy or sell houses from or to Vietnamese individuals or companies.
