Foreigners’ ownership to residential housing in Vietnam: Difficulties standing in the way

Junior Lawyer - Ms. Thai Thu Dao

DIMAC Law Firm

In line with the incentive policy for attracting the foreign investment and employment, quite a few foreigners have decided to choose Vietnam as an ideal place in order to invest and develop their careers. Accordingly, many foreigners wish to own the residential houses in Vietnam to implement the investment activities as well as long-term residence. At present, the laws on residential houses have made significant progress in recognizing and expanding the foreigner’s housing ownership in Vietnam compared to the previous regulations. However, in practice, many foreigners are still struggling to make their wishes come true.

Not allowed to own residential housing due to no issue of the list of housing projects restricted to foreigners’ ownership

Pursuant to Article 75.1 of Decree 99/2015/ND-CP dated 20 October 2015 of the Government providing detailed provisions and guidelines for implementation of the Law on Residential Housing (“Decree 99”), foreigners are only permitted to own residential housing (comprising apartments in apartment buildings and individual residential houses) belonging to investment projects for construction of commercial residential housing, except in national defense and security areas (“Permitted Scope”). Accordingly, the Ministry of National Defense and the Ministry of Public Security have the responsibility to fix specifically the national defense and security areas in each locality and to send a written notice thereof to the provincial people's committee in order for the latter to instruct the provincial Department of Construction to fix specifically a List of investment projects for construction of commercial residential housing within areas where foreign organizations and individuals are not permitted to own residential housing (“Restricted List”).

Nevertheless, from 10 December 2015, when Decree 99 took effect, up to now, no official Restricted List has been issued by the local authorities yet, resulting in the suspension of the procedures for granting the housing ownership certificate (“Certificate”) to the foreigners by the competent authorities. This has caused difficulties and worries to many domestic and foreign investors operating in the real estate business that have to wait for the availability of a Restricted List to be able to conduct legitimate housing sale transactions. Meanwhile, the foreigners’ increasing demand in purchasing the houses in Vietnam should have been dealt with, thereby helping sell a large number of mid-end and high-end apartments currently in stock.

Not allowed to put the name with minor children on the Certificate

Facing the difficulties in having their names in the Certificate as analyzed above, some foreigners refer to the option where they are named in the Certificate with their adopted Vietnamese minor children as the latter’s guardian/representative. However, this option turns out to get stuck by view of restrictions relating to the foreigners’ housing ownership, specifically as follows:

Under Article 21 of the 2015 Civil Code, civil transactions (including those in respect to real  property) of each child under six years of age must be established and performed by his/her legal representative. civil transactions to which the minor is a party must be either established and performed by his or her legal representative (for the minor being less than six years old) or approved for establishing and performing such civil transactions (for the minor being from six to under fifteen years old). Understandably, in order to legalize a residential housing transaction to which the minor is a party and obtain the Certificate, as the case may be, such transaction must be established, performed or approved by his/her parents prior to its establishment and performance.

Nevertheless, pursuant to Article 134.3 of the 2015 Civil Code, the foreigner may only be authorized to exercise his/her representation if he/she has civil legal capacity and full capacity for civil acts as appropriate to the civil transaction entered into and performed. This means that the foreigner is not allowed to represent the minor child to establish and perform the transaction for purchasing a number of residential houses such as an individual residential house attached to the land use right of the Vietnamese individual or household because the foreigner is only permitted to own houses to the extent of the Permitted Scope. Regarding the houses within the Permitted Scope, the foreigner may not represent his/her minor child to do the establishment and performance due to the non-existence of the Restricted List. Consequently, nor may the foreigner be granted the Certificate as the minor child’s representative.

Uncertainty about the possibility for their minor children to be granted the Certificate after the foreign parents’ consent to a residential housing transaction

 

As analyzed above, civil transactions involving immovable property where a minor from six (06) to under fifteen (15) years of age is a party to the transaction must be approved by his/her legal representative prior to their establishment and performance. At present, there is no provision requiring the consent of the representative to be based on the civil legal capacity and civil act capacity of the representative corresponding to the civil transaction established and performed. At the same time, the laws on land and residential housing neither prohibit minors from putting his/her name in the Certificate nor limit the age for an individual holding Vietnamese nationality to be granted the Certificate.

However, the feasibility of this option depends on the consideration and approval of the local authority on a case-by-case basis. In our experience in similar cases, the local authorities often consider many factors for minor children to be listed on the Certificate, such as (i) the risk where the foreigner controls and puts the minor’s name in the Certificate to indirectly own residential houses in Vietnam; (ii) restrictions on the ownership of residential housing of foreigners in Vietnam; and (iii) interpretations of the State agencies regarding current legislation on the subjects eligible to be granted the Certificate.

In our opinion, if Vietnam has a policy to allow foreigners to own houses in Vietnam, the consistent promulgation of the relevant law and its guiding documents is a must in order for such policy not to lie on the paper only but become embodied in reality. Accordingly, with respect to foreigners' right to residential housing ownership, the Government should empower the local authorities with the right to self-determination, i.e. the Department of Construction decides the Restricted List after its notification to and seeking the opinion of the Provincial People's Committee. In addition, concerning the right to own a residential house by the minor, the legal provisions on land and residential housing should clarify the conditions and ability to grant the Certificate to the minor corresponding to each age-based group in compliance with provisions of the prevailing Civil Code.