Rounding out a legal framework for vacation properties

February 25, 2018 | 16:00
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The development of vacation properties has given rise to a number of issues, including a legal framework needed for the condotel and hometel segments to rectify uncertainties in earnings commitments. Additionally, some regulations are required to guide shared-holiday ownership (fractional ownership). Associate professor Nguyen Quang Tuyen, associate dean of the Economic Law Faculty of Hanoi Law University, explores the issue.

Lacking legal framework

rounding out a legal framework for vacation properties
Nguyen Quang Tuyen

We have seen the rapid growth of the vacation property segment in recent years. Large-size developers like Vingroup, Sun Group, and CEO Group have in fact launched a sequence of products, including multi-purpose building complexes with residential and commercial units called officetel (short for ‘office’ and ‘hotel’), condotels (combination of ‘condominium’ or ‘condo’ and ‘hotel’), hometels (‘home’ and ‘hotel’), and high-end resorts. These properties have gained popularity among a small population segment and second-home owners over time.

The attractiveness of the promised returns on investment in second homes came in the context of more and more foreign tourists arriving to Vietnam each year, and local high-earning visitors looking to travel and spend holidays during the year.

Nevertheless, this type of investment is pretty new in Vietnam, and as a result, there are no local laws in place, should disputes between developers and investors/buyers arise. There are no specific standards and regulations for the ownership as well as the trading of the different vacation properties above.

Let us take the following example: while most mortgaged housing projects are listed on the website of the municipal and provincial departments of Natural Resources and Environment, mortgaged condotel projects are not widely known to the public. As a consequence, many projects of this kind have been sold to buyers while still being mortgaged at different lenders, causing troubles and risks for second home buyers. This information asymmetry has put the segment in a dangerous position.

A number of second home buyers in Bavico Nha Trang, for instance, have unexpectedly discovered that their properties all of a sudden belonged to a bank, even though they had paid the developer in full some two years back. The information regarding the property being mortgaged by owner Bach Viet Co., Ltd. has never shown up on the Khanh Hoa Department of Natural Resources and Environment’s website.

What is more, the current Land Law only recognises land used for tourism and holiday purposes, which falls under the category of non-agricultural land (Article 10 of the Land Law 2013). The law has yet to standardise any specific regulations on mixed-purpose land that combines residential and commercial purposes. Also, there has not been any official land registration/certificate available for this type of property.

In reality, property developers have been referring to the Law on Real Estate Business 2014 and other relevant documents, such as the Law on Housing 2014, the Law on Tourism, as well as the Law on Urban Planning 2009, to apply to the vacation property segment.

Localities are currently building their ‘tourism towns’ based on the requirements and standards of an urban area, which is considered an overall waste of resources and will be difficult to operate in a professional manner to attract and accommodate tourists. In addition, as there is no legal framework to regulate the vacation property segment, issues related to investment procedures, land planning and construction design are complex.

Based on the characteristics of condotels, land allocated to these kinds of projects is deemed residential in some cities and provinces and homebuyers are granted certificates for long-term ownership. A typical example includes Flamingo Dai Lai Resort in the northern province of Vinh Phuc. Whilst in other areas, such as the central province of Khanh Hoa and Phu Quoc Island in the south, this sort of project would be treated as non-residential, and homebuyers are still granted long-term ownership certificates.

It is observed that almost all condotel projects wish to provide homebuyers with ownership certificates in line with the property’s purpose of use. Unfortunately, not all condotel buyers get the document. Certificates for ownership are issued in accordance with the Ministry of Natural Resources and Environment’s Circular No.23/2014/TT-BTNMT, dated May 19, 2014. Only condotel buyers of projects that meet the requirements for trading under the Law on Real Estate Business 2014 can receive a certificate of ownership.

The developers of those condotel projects which are registered under the hotel model, in accordance with the Law on Tourism, are not allowed to sell condotel units. ‘Vacation property’ is not a recognised legal title under the current law, yet according to Circular 23, the certificate for a condotel project may not necessarily say ‘condotel’, ‘resort apartment/villa’ or ‘holiday apartment/villa’ would also suffice. This means to avoid confusions with hotel and vacation property projects (which are not divided into plots and units for sale).

Apart from these problems, there are also some downsides on debate lately as Article 159 of the Law on Housing 2014 does not allow foreign individuals to purchase condotels for investment, which is a great hurdle for the tourism industry.

Similarly, the Land Law 2013 does not have specific regulations on the collection of land use rentals for residential projects and non-agricultural projects that are planned to develop resorts, vacation properties, and condotel projects.

rounding out a legal framework for vacation properties
Depending on the locality and the individual property, not all condotels come with certificates of ownership


First of all, the Land Law 2013 needs to be amended and supplemented to legalise the residential use of condotel and officetel projects. The maximum duration of land use for the project owners is set at 50-70 years by current regulations. Project owners should be able to transfer their land use rights within this time period. The parties receiving the transferred land should then be granted a certificate of land use right as well as a certificate of ownership for the property and assets attached to the land for a foreseeable future.

The Ministry of Construction should study and promulgate regulations on the ownership and business activities of vacation properties.

The Land Law 2013 should also be amended and supplemented in a way that specifically regulates mixed-purpose land as well as issues certificates of land use right and ownership of the properties and attached assets for the vacation property category.

The law should also look at allowing foreign individuals to buy condotels for the purpose of investment to increase the liquidity and capital for the development of condotel projects and promote the sustainable development of the tourism industry.

Last but not least, the Law on Housing 2014 ought to come up with a set of regulations for collecting land use levies for residential housing projects and rent from non-agricultural projects planned to develop resorts, second homes, and condotel projects, and ensuring the levies and rates are sensible enough.

By Nguyen Quang Tuyen

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