Transfer of house purchase contract to foreign individuals and organization – Correct interpretation

The official permission for foreigners to own residential houses in Vietnam in accordance with the laws on residential housing in recent years has created a strong attraction for foreign organizations and individuals to look for investment, business and work opportunities in Vietnam. However, in practice, in the implementation of regulations governing this issue, there are still some that have unsuitable interpretations and applications regarding the right to receive transfer of commercial house purchase contract (“HPC”) of foreign organizations and individuals, which obstruct the legitimate rights and interests of the concerned parties.

From “open” prescriptions in by the laws…

The 2014 Law on Residential Housing and Decree No. 99/2015/ND-CP detailing and guiding the implementation of some articles of the Law on Residential Housing (“Decree 99”) have specific provisions on the conditions of a transferee of an HPC being a foreign organization or individual that does not invest in construction of a housing project in Vietnam, specifically as follows[1]:

(a) If the transferee is a foreigner, he/she must have full civil act capacity to conduct house transactions under Vietnamese law; be allowed to enter Vietnam and not be eligible for diplomatic or consular privileges and immunities according to the laws [2]; is not required to register for temporary or permanent residence at the place where the house is located;

(b) If the transferee is a foreign organization, it must be a foreign-invested enterprise, a branch or a representative office of a foreign enterprise, a foreign investment fund or a foreign bank branch operating in Vietnam[3] and have an Investment Certificate or a paper related to its permission to operate in Vietnam issued by a competent Vietnamese State authority; [4] and

(c) In addition to the above conditions, the project having a house that is the object of the HPC must not be included in the List of housing projects that foreign organizations and individuals are not allowed to own houses thereof issued by the Department of Construction where the project is located; The number of houses owned by foreign organizations and individuals must be consistent with the quantity permitted in each housing project according to the current regulations. [5]

Screening the above provisions, it is understood that Vietnamese laws have allowed foreign organizations and individuals that meet the legal requirements to receive the transfer of an HPC in Vietnam.

... to difficulties upon notarization and authentication of the HPC

Although the 2014 Law on Residential Housing and Decree 99 contain a very specific stipulation on the transfer of the HPC, in practice, during the transfer of the HPC to foreign organizations or individuals from Vietnamese organizations or individuals, the parties still face many difficulties in notarizing and authenticating the transfer contract of the HPC (“Transfer Contract”).

qAccording to the prevailing laws, the parties must notarize or authenticate the Transfer Contract to validate such transaction. [6] However, due to the inconsistent viewpoint on law application, some notary offices refused to notarize or authenticate the Transfer Contract with the argument that when foreign organizations or individuals receive the transfer of the HPC from Vietnamese organizations or individuals, they have directly bought commercial houses from these organizations or individuals and not from the investor of the housing project. The above arguments are based on the provisions of Article 76.2 of Decree 99, whereby foreign organizations and individuals eligible for owning houses in Vietnam can only purchase or rent-purchase houses from housing project investors, purchase houses from other foreign organizations or individuals owning houses in Vietnam and still having the ownership duration. Therefore, some notary offices consider the receipt of transfer of the HPC not within the scope of these regulations and refuse to notarize or authenticate the Transfer Contract; as a consequence, the transfer of the HPC between the parties cannot be conducted.

However, in our opinion, the above arguments are not accurate, because the subject matter of the Transfer Agreement is the HPC not the commercial housing. In addition, Appendix 24 of Circular No. 19/2016/TT-BXD dated 30 June 2016 of the Ministry of Construction on the form of Transfer Contract stipulates that the contents of the transfer contract must include information on “The seller of the house: the investor...”. As such, it is understood that when the parties complete the transfer of the HPC, the transferee being a foreign organization or individual will directly purchase the house from the investor not from the Vietnamese organization or individual. Thus, the purchase of houses through receiving the transfer of the HPC completely complies with the provisions of Article 76.2 of Decree 99.

Practical solutions

From the management point of view, it is possible to understand that the refusal of notarization or authentication mentioned above is to prevent foreign organizations and individuals from owning houses in projects that are not permitted to them or exceeding the quota of houses they are allowed to own. However, this refusal has no legal basis and is not an appropriate management solution when it has obstructed the legitimate rights and interests of the parties to the Transfer Agreement.

To solve this problem, we have some suggestions as follows:

(i) The competent State management authority should issue a formal guiding document on the interpretation of Article 76.2 of Decree 99, asserting that the transfer of the HPC between foreign organizations or individuals and Vietnamese organizations and individuals that meet the conditions for transferring the HPC fully comply with the laws and are allowed to do so; and

(ii) Instead of rejecting the notarization or authentication of all cases of receiving transfer of HPC of foreign organizations or individuals from the transferor being Vietnamese organizations or individuals, the notary offices should uniformly request the involved parties to prove that the transfer is in accordance with the regulations on the ownership of residential houses in Vietnam by foreigners.

 


[1] Article 119.1(b) and Article 119.3 of the 2014 Law on Residential Housing

[2] Article 159.1(c) and Article 160.3 of the 2014 Law on Residential Housing

[3] Article 159.1(b) of the 2014 Law on Residential Housing

[4] Article 160.2 of the 2014 Law on Residential Housing

[5] Article 76.1 (b) of Decree 99

[6] Article 122.1 of the 2014 Law on Residential Housing