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Acquisition of land use right
Thanh Nien Daily continues a bimonthly column in which eminent jurists analyze various aspects of business and investment laws. The column appears on the second and fourth Fridays of the month.
This article considers if it is possible for a 100 percent foreign-invested company to acquire rights to use property, and whether there are any restrictions thereon, and if so, the details of such restrictions.
Acquisition of rights to use real property
In Vietnam, land is owned by the people and subject to exclusive administration by the state.
Ownership of land by an individual or organization is not permitted.
Individuals and organizations are however titled to use land (“land use right”).
The land use right may legally be obtained by way of allocation by the state or lease from the state or assignment from existing land users.
Ownership of buildings and other assets attached to land is permitted.
Restrictions on acquisition: form
Domestic organizations, households and individuals (including overseas Vietnamese) may select allocation of land or lease of land for the purposes of either non-commercial or commercial purposes.
They may convert from lease to allocation.
However, 100 percent foreign invested companies may only lease land to implement their investment projects in Vietnam (i.e. for commercial purposes).
Duration
Land may be allocated to domestic organizations, households and individuals (including overseas Vietnamese) for (i) an indefinite term for non-commercial purposes (including residential purposes), or (ii) a definite term (up to 50 years) for non-agricultural production and business purposes.
Meanwhile, leases are only for a definite term, and depend on the duration of the proposed investment project.
The term may be fixed up to 70 years in case (i) investment projects with large capital but slow capital recovery rate and investment projects in areas with difficult socioeconomic conditions or especially difficult socioeconomic conditions which require a longer period of land allocation or land lease, or (ii) one-off payment of land rent is made for the whole 50-year term of the lease.
Noticeably, upon expiry of the duration of allocation of land or lease of land, the state may grant an extension if the investor so requests.
In all circumstances the extended lease term for a foreign invested company may not exceed the term of previous duration.
Conditions for granting an extension include: (i) the extended duration must be consistent with the supplemented project as approved by the licensing authority, (ii) the foreign-invested company has strictly observed the laws on land during its use of such land, and (iii) the continued use of such land must be in conformity with the approved land use zoning.
Scope of rights to use real property
Currently, there are two options for payment of rent for lease of land, namely (i) annual payment of land rent and (ii) one-off payment of land rent for the whole term of the lease.
Scope of the land use right depends on the form of payment of rent.
In the case of one-off payment, the land users are entitled to deal with such land in much the same way as a freehold owner of land would in other countries.
This includes assigning, subleasing, mortgaging and contributing as capital the land use right.
Land users adopting annual payment do not have these rights.
In other words, such land is untouchable in terms of the rights to use real property.
Thanhnien
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