Vietnam: Can multiple real estate ownership certificates be used to secure the fulfillment of obligations for the purpose of borrowing money?
What is collateral?
According to Article 8 of Decree No. 21/2021/ND-CP, collateral for security for obligation fulfillment includes:
- Current properties or off-plan properties, except for cases where the 2015 Civil Code of Vietnam or other relevant laws forbid sale, transfer or other change of ownership at the time of establishing security contracts, security measures;
- Properties sold under property sale agreements with retention of ownership;
- Properties considered as subjects of obligations under infringed bilateral contracts in case of lien measures;
- Properties under general public’s ownership if prescribed by relevant laws.
Vietnam: Can multiple real estate ownership certificates be used to secure the fulfillment of obligations for the purpose of borrowing money?
What are the cases of fluctuation in collateral in Vietnam?
Fluctuation in collateral in Vietnam are specified in Article 21 of Decree No. 21/2021/ND-CP, specifically as follows:
(1) In case securing parties and secured parties agree on dividing, separating collateral into multiple properties according to relevant law provisions, proceed as follows:
- If division, separation of properties that does not alter ownership, properties that form as results of such division, separation shall remain collateral;
- If division, separation of properties that alters ownership, properties that form as results of such division, separation under new ownership shall no longer remain collateral.
(2) In case securing parties and secured parties agree on acquisition, merge or mix of collateral with other properties or collateral is processed into new properties, collateral shall be determined as follows:
- If new properties are formed as results of acquisition, merge or mix and cannot be separated, the collateral acquired, merged or mixed into the new properties shall become collateral;
- If new objects created as results of processing are owned by securing parties, the new objects shall remain collateral. In case new objects are not owned by securing parties, value of processed collateral shall become collateral.
(3) In case securing parties and secured parties agree on using collateral to contribute to commercial juridical persons, non-commercial juridical persons that are social enterprises, shares or stakes shall be collateral, except for cases where securing parties and contributed juridical persons agree on using contributed collateral as security for obligation fulfillment.
(4) In case securing parties and secured parties agree on using properties under insurance as security for obligation fulfillment or properties that are being used as security for obligation fulfillment are put under insurance and an insured event occurs, compensation or replacement properties that must be paid to insurance beneficiaries of insurance enterprises shall become collateral.
(5) In case collateral is perennial plants according to Law on Cultivation are harvested or auxiliary constructions according to Law on Construction are deconstructed, yield or other properties gained from the harvest or deconstruction shall become collateral.
(6) In case securing parties install, integrate software or software system for properties that are being used as security for obligation fulfillment as per relevant law provisions, property rights for the software and software system within the scope of this collateral shall be collateral.
(7) In case collateral is called because securing parties violate relevant laws, securing parties must pay damages for secured parties as agreed upon under security contracts. In case securing parties receive payment and/or compensation from the Government according to relevant law provisions, properties that are paid or compensated shall become collateral.
(8) In case collateral is recalled for national defense, security purposes, socio-economic development for national and public interest, compensation or replacement properties or exchanged properties according to relevant law provisions shall become collateral.
(9) In case collateral is disposed, damaged entirely or deconstructed, confiscated according to decisions of competent authorities, collateral shall be considered no longer available, except for cases under Clauses 4, 5, 7, and 8 of this Article.
(10) Other cases according to the Civil Code or relevant law provisions where collateral is unavailable or replaced and new properties arise or replacement properties are available, these properties shall become collateral.
Can multiple real estate ownership certificates be used to secure the fulfillment of obligations for the purpose of borrowing money?
Pursuant to Article 5 of Decree No. 21/2021/ND-CP stipulating security for fulfillment of obligations with multiple security measures, multiple properties as follows:
- Fulfillment of an obligation can be secured by multiple security measures. In case this obligation is breached and both securing parties, secured parties have no agreements on selecting and adopting security measures, secured parties shall select security measures for application or apply all security measures.
- Fulfillment of an obligation can be secured by multiple properties. Scope of security for obligation fulfillment of each property among collateral is determined according to agreement between securing parties and secured parties. In case no agreement is available, any property can be used to secure fulfillment of all obligations.
Thus, many real estate ownership certificates can be used to secure the fulfillment of obligations for the purpose of borrowing money.
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