WHEN BUYING REAL ESTATE, WHAT LEGAL ISSUES SHOULD BE CONSIDERED?
The business activities related to real estate are currently regulated not only by the 2014 Law on Real Estate Business but also by other legal documents such as the 2015 Civil Code, the 2014 Housing Law, the 2013 Land Law as amended and supplemented in 2018, the 2014 Notary Law , and others. This is because the real estate sector is inherently complex and involves various aspects of society.
In this article, we will highlight some important legal issues to to consider when conducting real estate transactions, as follows:
1. The subject of a civil transaction is Real Estate
According to Article 107.1 of the 2015 Civil Code, immovable property includes land, houses and constructions attached to land, other property attached to land, houses, constructions, and other property as prescribed by law. When using real estate for business purposes, specific conditions must be met. For instance:
In case of land
When exchanging land use rights, the transaction parties need to satisfy conditions outlined in Article 188 of the Land Law 2013 (amended and supplemented in 2018), the Law on Housing 2014, and Article 9 of the Law on Real Estate Business 2014. These conditions include:
– Having certificates of land use rights, ownership of houses, and other assets attached to the land, except for the case specified in Clause 3, Article 186 of the 2013 Land Law amended, supplemented in 2018;
– Ensuring the absence of disputes over land use rights;
– Non-disposal of land use rights to secure the execution of judgments; and
– Having valid land use rights.
To ensure the legality of the land use rights exchange transaction, the transferee should carefully check the documents related to the land involved in the transaction and verify that the land area specified in the legal papers matches the actual land area.
In case of house or construction attached to land
Not all houses or constructions attached to land can be used for business purposes. The Article 9.1 of the 2014 Law on Real Estate Business sets conditions for real estate to be eligible for business purposes, which include:
– Having registered ownership of houses and construction attached to land in certificates of land use rights;
– The absence of disputes over land use rights, house ownership, or constructions attached to land;
– Compliance with the term of land use.
Buyers should check and ensure the validity of accompanying legal documents when purchasing real estate to avoid cases of forged documents for fraudulent purposes.
2. Entities allowed owning real estate
Under Vietnamese law, not all entities are permitted to own real estate. According to Article 5 of the 2013 Land Law amended and supplemented in 2018, and Article 7 of the Law on Housing 2014, entities allowed to own real estate in Vietnam only include:
– Domestic organizations, households and individuals;
– Foreign organizations include enterprises with 100% foreign invested capital, joint venture enterprises, Vietnamese enterprises in which foreign investors buy shares and contribute capital and are operating in Vietnam; and
– Overseas Vietnamese under the law on nationality.
In addition, according to the provisions of Article 8 of the Law on Housing 2014, the above-mentioned subjects who want to be recognized as housing ownership in Vietnam must meet the following conditions:
– Domestic organizations, households and individuals; for overseas Vietnamese, they must be allowed to enter Vietnam; for foreign organizations and individuals, they must satisfy all conditions specified in Article 160 of this Law.
– Having legal housing through the following forms:
– For domestic organizations, households, and individuals, they can acquire housing through various forms such as investment in construction, purchase, lease-purchase, receiving gifts, receiving inheritance, receiving capital contributions, housing exchange, and other forms as prescribed by regulations of the law;
– For overseas Vietnamese, housing can be acquired through various means such as purchasing or leasing commercial housing from enterprises or real estate business cooperatives (hereinafter collectively referred to as real estate business enterprises), buying, receiving gifts, exchanging, and inheriting houses from households and individuals, and receiving the transfer of residential land use rights in commercial housing construction investment projects permitted to sell foundations for self-organization of housing construction in accordance with the law;
– For foreign organizations and individuals, the forms specified in Clause 2, Article 159 of this Law shall be adopted.
In case the buyer belongs to the group of entities that are not allowed to own real estate but still sign the contract, which may lead to legal consequences such as unilateral termination of the contract, a dispute or not being approved by the competent authority when registering the contract, … Therefore, buyers need to be aware of this issue before making transactions to receive real estate ownership.
3. Real estate Purchase and Sale Contract
Contract is one of the contents specified in the Civil Code 2015 for the purpose of expressing the agreement between the parties on the establishment, change or termination of civil rights and obligations. Contracts can be used in many situations in life, including real estate sales. Currently, most disputes about land or real estate arise because real estate purchase and sale contracts do not ensure the form and legal effect prescribed by law. Therefore, buyers need to thoroughly check the legality of the Real Estate Purchase and Sale Contract both in terms of content and form, specifically as follows:
Contents of the contract
Houses and Construction Purchase and Sale Contract is a type of civil transaction, specifically a property contract. Therefore, the form and content of a Real estate Purchase and Sale Contract must comply with the contract law specified in Chapter XVI of the Civil Code 2015. Besides, Article 18 of the Law on Real Estate Business 2014 details the main contents of Houses and Construction Purchase and Sale Contract.
It should be noted that, when signing a real estate purchase and sale contract, the buyer has the right to request the seller to complete the procedures for sale and purchase of houses and construction according to the contract term, request the seller to deliver the house or construction work on time, quality and other conditions agreed upon in the Contract; deliver certificates of land use rights, ownership of houses and other assets attached to land and related documents as agreed upon in the contract, request the seller to warranty the house or construction, request the seller to compensate for damage caused by the delivery of the house, construction are not on time, quality and other commitments in the Contract.
Similarly, contract for transfer of land use rights also needs to contain the main contents specified in Section 7, Chapter XVI of the Civil Code 2015.
The following are some basic terms that real estate buyers should keep in mind when entering into a contract for sale and purchase of houses, construction works or contracts for transfer of land use rights:
– Names and addresses of the parties
– Real estate information
– Payment methods and terms
– Warranty (Land use right transfer contract does not contain this clause)
– Rights and obligations of the parties
– Liability for breach of contract
– Penalties for breach of contract
– Cases of termination, cancellation of contracts and handling measures
– Dispute resolution
– Effective date of the Agreement
In fact, we find that specifying the payment method as a transfer is the most flexible and convenient option for the parties, Additionally, it serves as a safety measure for buyers when making money transfers.
The form of the contract
Housing Purchase and Sale contract and Land use right Transfer Contract must ensure effective conditions in form. Specifically, according to Section 1, Article 122 of the Law on Housing 2014 and Article 167.3.(a) of the Land Law 2013 amended and supplemented in 2018, this contract must be made in writing and notarized in accordance with the provisions of law and the contract only arises after being notarized.
Thus, the aforementioned are legal issues that buyers should carefully consider when engaging in real estate investment and business. By outlining these provisions of the law and clarifying the legal aspects of purchasing real estate, TNTP aims to enhance your understanding of this matter. If you have any questions, please feel free to contact TNTP for more detailed instructions.
TNTP International Law Firm and Associates