In an attempt to reform licensing procedures for real estate (“RE”) projects in Vietnam as part of the overall change in Vietnam’s investment conditions and procedures, the National Assembly passed the new Law on Investment in 2020 (“ACT”), which also amends the Residential Housing Act 2014 (“LRH”) and the Property Affairs Act 2014 (“LREB”). The Vietnamese government has issued Decree 31/2021 on the implementation of the LOI, Decree 39/2021 amending Decree 99/2015 on the implementation of the LRH and this Decree 02/2022 of January 6, 2022 on implementation of the LREB as amended (“decree 02”). This decree 02 will replace decree 76/2015 implementing the LREB (“Decree 76”).
In this article, we will discuss the major changes to Executive Order 02 from Executive Order 76.
Conditions for carrying out RE activities
According to Decree 02, to carry out RE activities in Vietnam, an organization or an individual must meet the following conditions:
i) Establishing a business with RE activities as one of its registered business activities;
ii) Publicly disclose and update (A) business information (including office address, legal representative and contact number) and (B) ER (including mortgage information) and units sold/for sale) that the company intends to sell or lease on the company’s website, at the project office where the RE is located, or at the trading floor (if any) where the ‘er is negotiated; and
iii) Only RE exchanges that fully meet the conditions of sale or lease specified in the LREB.
Compared to decree 76, additional conditions are added to decree 02 to ensure strict compliance with the LREB. This reflects the government’s intention to restore order to the renewable energy market, which has been in a state of disarray for the past few years as many developers/agents have illegally received a substantial amount of prepayments from of buyers or have put non-qualified renewable energies on the market for sale. Decree 02 also stipulates that companies subject to these conditions must fulfill these new conditions within 6 months from the date of this decree 02 or must otherwise cease their RE activity.
Apart from the above conditions, if the company is a developer of an RE project, it must have equity amounting to at least 20% of the total investment capital of the RE project (for an area less than 20 ha) or no less than 15% of the total investment capital (for an area of 20 ha or more). This requirement is not new to RE developers as it is already stipulated in land laws.
Decree 02 also removes the requirement to have a registered capital of at least VND 20 billion, which applies to companies carrying out RE activities, to reflect changes to the LREB under the LOI. .
Sample contracts and other forms
While Decree 76 has six model contracts, Decree 02 introduces eight model contracts, as below:
- Contract for the sale and purchase (or rental and purchase) of an apartment
- Contract of sale and purchase (or rental and purchase) of condotel/officetel
- Contract of sale and purchase (or lease-purchase) of an individual dwelling house
- Contract of sale and purchase (or rental and purchase) of house/construction works other than those specified above
- Rental contract for a house/construction works
- Land use right assignment contract
- Land Use Rights Lease/Sublease Agreement
- Contract for the transfer of all or part of an EnR project
Unlike Decree 76, Decree 02 does not distinguish between selling and buying and renting and buying, but it does distinguish between apartments, condotels/offices, individual dwellings and other houses/construction works. Decree 02 also does not distinguish between existing housing and housing to be built in the future, but rather provides sample contracts for use in both cases.
Like Decree 76, Decree 02 does not seem to require strict compliance with the content of model contracts. Therefore, it can be argued that the parties can modify these model contracts as long as the basic fundamental terms/contents remain unchanged.
Decree 02 also includes other model forms, such as those for assignment of contracts (i.e. assignment documents) and transfer of RE projects (i.e. application, progress report and approval). In particular, if the transferee of a transfer contract relating to a RE project other than a RE project (all or part) is a company carrying out RE activities, he must notify this transfer to the competent center in Hanoi (i.e. the Ministry of Construction) for monitoring purposes. .
EnR project transfer procedure
Under Decree 02, the transfer of all or part of an EnR project must follow new procedures, as below.
- For RE projects that have been issued with an “Investor Approval” 1 and/or an Investment Registration Certificate (“IRC”), the parties must comply with the procedure provided for in letter d. ‘intention.
- For RE projects that have not received “investor approval” and/or IRC, the parties must follow the procedure set out in the LREB.
Although this provision appears to be consistent with the general rule set out in the LAW and the LREB, it may confuse investors since the procedure under the LOI is different from the procedure under the LREB. Previously, the sale of all or part of an EnR project was subject to the only procedure under the LREB.
Under the LREB procedure, the parties must first obtain the approval of the provincial people’s committee (“PC”) or the Prime Minister (as the case may be) for the project transfer, and then sign a project transfer agreement (“PTA”) (using the model agreement discussed above) and complete the transaction within 30 days of such approval. Thereafter, although not mentioned in the LREB and Executive Order 02, the parties will likely need to amend the Investment Policy Approval (“IPA”) and/or IRC to reflect the change in investor in accordance with the letter of intent. As with the LOI procedure, the project company will modify the IPA and/or IRC without the need to obtain approval for the project transfer.
As a notable change, Decree 02 stipulates that in the case of the LREB procedure, the parties must submit a draft PTA along with other application documents required for the issuance of approval for the transfer of the project to the authority. competent. This requirement is not stipulated by Decree 76. In the case of the following LOI procedure, the LOI and its implementing decree also stipulate that a signed agreement in principle or PTA (and not a draft PTA) must be filed with other application documents for the issuance of the IPA and/or the amended IRC.
In the event that the transferee is a company with foreign capital and the RE project is located in a town, district or border, coastal or island canton, the competent authority must seek the opinion of the Ministry of Defense or Department of Public Safety prior to issuing the Project Transfer Approval and/or Amended IPA/IRC.
Decree 02 reflects the intention of the Vietnamese government not only to reform the licensing procedures for renewable energy projects as originally envisaged and regulated in detail under the LOI, but also to tighten state management over renewable energy business activities (including the transfer of renewable energy projects) to restore order. in the renewable energy market and to strengthen national security.