A. REAL ESTATE
1. Law on Housing No. 27/2023/QH15 dated 27 November 2023
Law on Housing No. 27/2023/QH15 was adopted by the National Assembly on 27 November 2023, consisting of 13 Chapters and 198 Articles (“Law on Housing”), which introduces various progressive amendments to the country’s housing policy. In overview, the new Law on Housing is deemed to be practical, capable of ensuring congruence and overcoming the “bottlenecks” in comparison to the former regulations. You may find below our summary of several new policies which received much attention recently:
Firstly, in terms of policies for apartment buildings
1. Supplementing multiple new regulations on the construction and management of mini-apartments
According to the new Law on Housing, individuals having residential land use rights (“LUR“) must satisfy conditions as the investors carrying out the housing construction project when constructing houses in cases as follows:
(i) houses of at least 02 floors, where on each floor there are apartments designed, built for sale, lease purchase, or a combination of sale, lease purchase, lease; or
(ii) houses of at least 02 floors and at least 20 apartments for lease.
The above-mentioned apartments (normally referred to as mini-apartments) shall be considered for issuance of Certificates from 01 January 2025 once all prescribed conditions are satisfied.
In addition, in case of construction of houses that do not fall into two (02) cases as aforesaid but still have at least two (02) floors, where each floor has apartments for lease with the scale of fewer than 20 apartments in total, then requirements regarding fire prevention and fire-fighting or conditions regarding roads for firefighting vehicles to perform its tasks must be satisfied.
It can be seen that these new regulations accurately reflect practical needs, contributing to resolving concerns on fire prevention and fire-fighting for mini apartments in recent times.
2. Demolition and relocation of apartment buildings The Law on Housing details circumstances in which apartment buildings must be demolished, specifically when the apartment buildings:
(i) are damaged due to fire, natural disaster or foreign threats and no longer satisfy safety requirements for further use;
In this case, the Provincial People’s Committee must issue an emergency relocation decision and organize the relocation of apartment owners and users to temporary accommodation.
(ii) suffer severe damages, display overall dangerous status to primary load-bearing elements, are prone to collapse or do not qualify for further use, etc.
In this case, the Provincial People’s Committee issues a relocation decision subject to the approved compensation and relocation solutions.
3. Solving the “hot spot” of the apartment maintenance fund
The revised Law on Housing contains more detailed regulations than the existing Law regarding the forced handover of apartment maintenance expenses aiming to solve the problem of investors’ delay in handover, which caused frustration in the past time. Accordingly, upon occurrence of the above-mentioned, the Apartment Building Administration Board (“Administration Board”) shall require the district People’s Committee to make the request for handover. In case the investor fails to hand over within 10 days, the district People’s Committee shall be responsible for enforcing and organizing recovery of maintenance expenses for purpose of handing over to the Administration Board.
In particular, the Law on Housing supplemented that it is the People’s Committee’s duty to make requests and send evidence to the investigation authorities in cases of the Investor displays criminal elements. The strengthening of possibilities of criminal violation indicates the drastic spirit of the legislative authority in completely resolving the situation of investors intentionally violating the laws.
Secondly, in terms of policies for social housing
1. Modifying the subjects and conditions for enjoyment of supportive policies on social housing
The Law on Housing supplements several subjects eligible for supportive policies on social housing such as enterprises, cooperatives, and joint cooperatives in industrial parks or individuals engaging in cryptography operations.
In addition, while the current Law on Housing promulgates three (03) conditions for supportive policies on social housing, comprising of (i) housing, (ii) residence; and (iii) income, the condition on residence is now removed by the new Law. Therefore, as of 01 January 2025, social housing buyers shall no longer be required to satisfy the residence condition. This is deemed to be appropriate and aligned with the movement and attraction of labor among localities in each period.
2. Incentives for investors to construct social housing The Law on Housing further supplements preferential policies for investors of social housing construction projects to facilitate development of such type of housing, typically as:
(i) exemption from land use fees, land lease fees for the entirety of project land area, especially it is clearly defined that investors are not required to evaluate land prices or calculate the exempted amounts as well as carry out any procedure to request for exemption;
(ii) enjoyment of a maximum profit of 10% of the total invested costs for construction in terms of the social housing construction area;
(iii) being able to obtain loans at preferential interest rates.
In general, the new regulations provided by the Law on Housing, coming into force on 01 January 2025, are expected to give rise to an increase in social housing and favorably support the social housing development strategy in Vietnam, and simultaneously, act as ground for setting up transparent housing management mechanism, enabling further development of the housing market and satisfying increasing need.
II. Law on Real Estate Business No. 29/2023/QH15 dated 28 November 2023
On 28 November 2023, the 15th National Assembly officially passed the amended Law on Real Estate Business (“Real Estate Law 2023”) replacing the Law on Real Estate Business 2014 (“Real Estate Law 2014”). Acting as one of the laws directly regulating investment and business activities regarding real estate in Vietnam, the Real Estate Law 2023 is expected to resolve the disadvantages of former regulations and create favorable conditions for the real estate market to develop safely and sustainably in the coming time. Here are some notable amendments and supplements of the Real Estate Law 2023:
Firstly, supplementing and clarifying the conditions for organizations engaging in real estate business and prescribing the obligation of disclosing real estate information before putting it into business
In addition to the requirement of registering the real estate trading business line, the Law on Real Estate 2023 supplements two additional (02) conditions for organizations engaging in real estate business in comparison to the Real Estate Law 2014, being:
(i) Not during the period of being banned from real estate business activities, temporarily suspended or suspended from operating; and
(ii) Maintaining safe ratios of outstanding credit balance and outstanding bonds to the owner’s equity.
Simultaneously, Real Estate Law 2023 has also legislated regulations on the owner’s equity of enterprises carrying out real estate trading through real estate projects shall not be lower than 20% of total investment capital for projects with land use area of less than 20 hectares, not lower than 15% for projects with land use area of 20 hectares or higher; and clearly stipulated that in case the real estate enterprise implements several real estate projects at the same time, its owner’s equity must be sufficient to fund all of such projects at the above-mentioned percentage.
In addition, the Real Estate Law 2023 also prescribes obligations for real estate enterprises to disclose information about real estate and real estate projects on (i) the information system for housing and real estate market, and (ii) the real estate enterprise’s electronic webpage before putting it into business. Regarding information to be disclosed, the Real Estate Law 2023 specifically regulates each type of information that needs to be disclosed for (i) Real estate projects, (ii) Off-plan housing or building, (iii) Existing housing or building; and (iv) Land use rights with technical infrastructure in real estate projects to ensure detail and clarity for implementation.
Secondly, supplementing conditions for transferring real estate projects in whole or in part
In addition to the conditions inherited from the Real Estate Law 2014, the Real Estate Law 2023 supplements several material conditions in respect of the project or part thereof to be transferred, such as:
(i) LURs are not in any dispute, or distrained to serve judgment enforcement; are not prohibited, temporarily suspended or suspended from trading as prescribed by law;
(ii) The investor must have implemented the decision on administrative penalties (if any);
(iii) Must be released from mortgage in case of being mortgaged as collateral to guarantee fulfillment of obligations;
(iv) The project duration has not yet expired.
In addition, while the Real Estate Law 2014 stipulates that “completion of compensation and site clearance” is one of the conditions for transferring real estate projects, it is now amended by the Real Estate Law 2023 as to “completion of compensation and support for resettlement”.
Thirdly, amending several regulations regarding payment in real estate transactions
Accordingly, the Real Estate Law 2023 limits the maximum deposit amount that investors are entitled to collect from off-plan housing or building buyers at maximum of 5% of the selling price or lease purchase price at the time such housing or building has met relevant conditions for putting on the market. Setting such “ceiling” helps reflect its exact nature while limiting risks for the buyers (who are often the disadvantaged party in the transaction).
In addition, the Real Estate Law 2023 also lowers the ratio of total prepayments for the landlord of off-plan housing or building to no more than 50% of the contract value, instead of 70% as it currently is. This amendment, on the one hand, helps ensure safety, prevent risks and reduce financial pressure for the tenant-buyer, and on the other hand, aims to enhance the investors’ responsibilities to complete their “products” on time.
Regarding payment methods, the Real Estate Law 2023 clearly stipulates that investors and real estate enterprises must receive payment from customers via bank accounts.
With the abovementioned new points, the Real Estate Law 2023 is expected to remove current shortcomings and obstacles and harmonize all parties’ interests in real estate business activities, aiming to help the real estate market develop with safety and sustainability. The Real Estate Law 2023 shall come into force as of 01 January 2025.
III. Decision No. 25/2023/QD-TTg dated 03 October 2023 on reduction in land rents of 2023
The post-COVID-19 situation has been producing many difficulties for socio-economic activities in general and enterprises’ production and business activities in particular. On 03 October 2023, the Prime Minister issued Decision No. 25/2023/QD-TTg on the reduction in land rents of 2023 (“Decision No. 25”) to further bring the role of the exemption, reducing land rents policy into play, helping businesses overcome difficulties and resuscitate production and business post-COVID-19. Here are some notable points of Decision No. 25:
Firstly, regarding the subjects eligible for and amount of reduction in land rent of 2023
Subjects eligible for reduction in land rents of 2023 are (i) organizations, units, businesses, households, and individuals that are directly leasing land from the State under Decisions, Contracts or land use right Certificates (“LURC”) via the method of land leases with annual rental payment (“Land lessees”); and (ii) The Land lessees who are ineligible for exemption from or reduction in land rents, those whose exemption or reduction periods have expired and those whose land rents are reduced according to the regulations of land laws.
According to Decision No. 25, the Land lessees are entitled to a 30% reduction in land rents payable in 2023; in case a Land lessee is being given a reduction in land rents as prescribed and/or a deduction of compensation and ground clearance from land rents under regulations of laws on land rents, the 30% reduction shall apply to the land rents payable (if any) after reduction or/and deduction. In addition, outstanding land rents for years before 2023 and late payment amount (if any) shall not be reduced.
Secondly, regarding procedures application for land rent reduction
Step 1: The Land lessees submit one (01) application for reduction in land rents to the tax authority assigned to collect land rents, Economic Zone Management Board, Hi-Tech Park Management Board or other agencies as prescribed by laws on tax administration via one of three methods: in person, online method or by postal services. The application shall comprise of:
(i) An application form for reduction in land rents of 2023, using the Form in the Appendix enclosed with Decision No. 25; and
(ii) Copies of the land leasing decision or land leasing contract or LURC.
It is crucial for Land lessees to pay attention to the timeframe for submitting the abovementioned applications starting from 20 November 2023 until 31 March 2024. The policy of reduction in land rents under Decision No. 25 shall not be applied to those cases where Land lessees submit such application after 31 March 2024.
Step 2: The competent authority determines the amount of land rents to be reduced and issues a Decision on the reduction in land rents within 30 days from the date on which the satisfactory application is received.
Above are some notable points provided by Decision No. 25 regarding the reduction in land rents of 2023, which are expected to continuously support citizens and enterprises in overcoming post-COVID-19 difficulties, creating opportunities to encourage enterprises’ investment, production, and business activities as well as accelerate the pace of the economic recovery in the near future. This Decision took effect as of 20 November 2023.
B. CIVIL
IV. Precedent No. 68/2023/AL published under Decision No. 364/QD-CA dated 01 October 2023 regarding the right to receive residential housing as the inheritance of the heir who is overseas Vietnamese (“Precedent No. 68”)
Precedent No. 68 is based upon Decision No. 06/2019/DS-GDT of Council of Judges of the Supreme People’s Court concerning the civil case “Dispute on inheritance, claiming for the effort put on nurturing, taking care and preserving house, land and claiming house, land” and is enforceable as of 01 November 2023.
The situation of Precedent No. 68 involves the owner of the estate, which are housing ownership rights and land use rights, died before the Law on Land 2013 and the Law on Housing 2014 came into force. However, the dispute over estate inheritance was resolved by the Court at the time the Law on Land 2013 and the Law on Housing 2014 already took effect. Since both aforesaid laws give no instruction on which law shall be applied, leading to confusion in determining in practice.
In resolving the abovementioned matter, Precedent 68 provides the following specific legal solutions:
(i) Firstly, upon the occurrence of the abovementioned, the Court shall apply the Law on Land 2013 and the Law on Housing 2014 to settle the dispute; and
(ii) Secondly, those heirs who are overseas Vietnamese are entitled to receive residential housing as the inheritance once he/she is eligible to receive residential housing in accordance with the Law on Housing 2014 and such inheritance can be divided into physical assets.
It can be seen that the introduction of Precedent No. 68 is necessary to complement and apply the law uniformly. Moreover, solutions provided by Precedent 68 are deemed as convincing, which results in laws on inheritance being found to be easy to execute, making conditions to ensure the heirs’ rights, demonstrating humanity in treating those living far from home.
C. COMMERCIAL ARBITRATION
V. Precedent No. 69/2023/AL published under Decision No. 364/QD-CA dated 01 October 2023 regarding authority of Commercial Arbitration in resolving non-disclosure and non-competition agreement disputes (“Precedent No. 69”)
Precedent 69 is based upon Decision No. 755/2018/QD-PQTT of the Ho Chi Minh City People’s Court (“Decision No. 755”) regarding request to revoke an arbitral award issued by the Vietnam International Arbitration Center (“VIAC”). Precedent 69 provides insight into the authority of Commercial arbitration over non-disclosure and non-competition agreements (“NDA”) between employees and employers. This Precedent shall be applied from 01 November 2023.
The situation of Precedent 69 involves execution of an NDA by an employee and an employer, which obligates that, after termination of the labor contract, the employee is not allowed to carry out similar or competing work for a certain period of time, and related disputes, if any, shall be settled by commercial arbitration.
Precedent 69 provides a legal solution, which states that the Court must determine such non-disclosure and non-competition agreement are independent from the labor contract and shall fall under the jurisdiction of commercial arbitration.
Furthermore, although the NDA’s validity is not directly recorded in the official content of Precedent No. 69, it was analyzed in Decision 755 by the Court, which reads, that the employer and the employee had executed the NDA voluntarily when the employee had full capacity for acts in accordance with the laws and was not forced, deceived or coerced to execute such NDA. Therefore, the NDA is valid and the Tribunal’s recognition of its validity is in accordance with the laws. Previously, Vietnamese laws did not have specific regulations regulating arbitration’s authority to settle NDA disputes, which often led to confusion in practice. Adopting Precedent No. 69 is found to be necessary to resolve the abovementioned, extending the scope of arbitration’s authority in dispute settlement, and recognizing the independence of NDA.
