Problems and shortcomings regarding regulations on compensation when the state recovers residential land in Vietnam

The Land Law 2013 has an important position and role and has deeply and institutionally embodied the Party's viewpoints, guidelines, and policies on land, contributing to establishing the ownership rights of households and individuals in the field of land based on the people's ownership of land. However, there are still some shortcomings in the current compensation system, leading to many complaints and lawsuits. In this article, the author analyzes the concept of compensation in the state's land recovery activities, analyzes the provisions of the current law, points out the shortcomings, and makes some recommendations.

1. The concept of compensation when the state recovers land for residential purposes in Vietnam

The concept of compensation for damages is a form of civil liability that obliges the party responsible for causing damages to rectify the consequences by compensating for material losses and losses in spirit for the affected party. According to the Civil Code 2015, individuals and legal entities whose civil rights are violated have the right to full compensation for damages, except when there are other agreements or different legal provisions.

The concept of residential land refers to land used for building houses and constructing facilities designated to serve the living needs of urban residents on the same plot of land within urban residential areas, in accordance with approved urban construction plans. Land recovery is the act of the state deciding to reclaim the land use rights of individuals or reclaim land from individuals who violate land laws.

According to the provisions of Article 16, Clause 1 of the Land Law 2013: "The state decides to recover land in the following cases: land recovery for national defense and security purposes; economic and social development for national and public interests; land recovery due to violations of land laws; land recovery due to the termination of land use according to laws, voluntary land return, or posing a threat to human life." Among the three cases of land recovery, only land recovery for national defense and security purposes and economic and social development for national and public interests under Article 75 of the Land Law 2013 are subject to compensation.

Therefore, the concept of compensation when the state recovers residential land is the state's decision to reclaim land use rights and provide compensation, support, and resettlement.

2. Regulations on compensation when the state recovers residential land in Vietnam

Firstly, the regulations on compensation principles when the state recovers residential land. Land users who are individuals, organizations, or institutions are entitled to compensation according to the provisions of Article 75 of the Land Law 2013 if they meet the conditions. Compensation is carried out by providing land with the same intended use as the reclaimed land. If there is no land available for compensation, compensation shall be made in cash, based on the specific land price of the reclaimed land determined by the provincial People's Committee at the time of the decision to reclaim the land. Compensation when the state recovers land must ensure democracy, objectivity, fairness, transparency, timeliness, and compliance with legal regulations.

Secondly, the regulations on the beneficiaries of compensation when the state recovers residential land. Based on Article 5 of the Land Law 2013, the beneficiaries of compensation include: first, organizations, communities, religious establishments, households, individuals in the country, Vietnamese nationals residing abroad, and foreign organizations and individuals using land being reclaimed by the state. Second, individuals whose land is being reclaimed and whose land-attached assets are damaged shall be compensated with land and supported assets arranged at the resettlement site according to the decision of the state reclaiming the land.

Thirdly, regulations on compensation for residential land. According to Article 79 of the Land Law 2013 and Decree No. 47/2014/ND-CP on compensation for land when the State recovers residential land, households, individuals using residential land, and Vietnamese nationals residing abroad who own houses attached to land in Vietnam and meet the conditions are entitled to compensation as stipulated in Article 75 of this Law when the State recovers land. The compensation is as follows: "If there are no other residential land or houses in the commune, ward, or town where the reclaimed land is located, compensation shall be made in the form of residential land or houses; if there is no need for compensation with residential land or houses, the State shall compensate in cash. If there is residential land or houses in the commune, ward, or town where the reclaimed land is located, compensation shall be made in cash. For localities with conditions regarding residential land reserves, compensation can be considered in the form of residential land. For households, individuals whose residential land is being reclaimed and who need to relocate but are not eligible for compensation with residential land, if there is no other place to live, the State shall sell, lease, rent-purchase residential houses, or allocate residential land with land use fees. For economic organizations, Vietnamese nationals residing abroad, and foreign-invested enterprises using land for housing construction projects, if they meet the conditions for compensation as stipulated in Article 75 of this Law, they shall be compensated with land."

Forthly, regulations on compensation for damages to houses and construction works on land when the State recovers land. The regulations on compensation for damages to houses and construction works on land when the State recovers land are stipulated in Article 89 of the Land Law 2013 as follows: "First, for houses and land-attached residential construction facilities of households, individuals, or overseas Vietnamese that are wholly or partially dismantled upon land expropriation by the State while the remaining part does not meet technical standards as prescribed by law, their owners are entitled to compensation equivalent to the value of new houses and construction facilities with equivalent technical standards. If the remaining parts of the houses and construction facilities still meet the technical standards as prescribed by law, compensation must be made based on the actual damage. Second, for houses and other land-attached construction facilities not falling into the case specified in Clause 1 of this Article, which are wholly or partially dismantled upon land expropriation by the State while the remaining part does not meet technical standards as prescribed by law, their owners are entitled to compensation for the damage in accordance with the Government’s regulations. Third, for land-attached technical infrastructure and social infrastructure cuưently in use and not falling into the cases specified in Clauses 1 and 2 of this Article, the compensation amount is equivalent to the value of new construction facilities with equivalent technical standards prescribed by specialized law."

3. Current legal practices on compensation for property attached to land when the State recovers residential land in Vietnam

Compared to the Land Law 2003 and the guiding documents, the Land Law 2013 has many new provisions regarding the procedures and processes of land recovery. However, in practice, the Land Law 2013 also reveals some shortcomings in the land recovery work, particularly in the provisions regarding the procedures and processes of land recovery, and notably the issue of land compensation prices when the State carries out specific land recovery.

Firstly, the issue of land valuation when compensating for damages to property attached to land when the State recovers land is not in line with the prevailing market prices. According to the principle, land valuation should be "in line with the prevailing market prices,"  but in reality, the determined land compensation prices often differ significantly from the market prices. It is difficult to determine the prevailing market prices as there is no database recording the prevailing market prices of land. This is partly due to the fact that current real estate transactions have a significant difference between the actual value and the value at the time of notarizing the land use rights transfer contracts. The value at the time of notarizing the contract is often lower than the actual value, which helps the parties save on fees such as transfer tax, notarization fees, and personal income tax, which are obligations when transferring land use rights. Therefore, in cases where the value of the land is high, the parties to the contract will have to pay more. This is why determining land prices to establish land price lists for each province and locality based on the land valuation method does not reflect the value of land use rights.

This leads to the specific land prices used as a basis for compensation when the State recovers land, especially in cases where the land prices are much lower than the market prices, making it difficult to determine compensation prices. The landowners whose land is being recovered may disagree with the compensation prices and file complex complaints, affecting the rights of the landowners and delaying the land clearance progress. A typical example is the case of recovering residential land from households for the implementation of new urban areas or real estate projects. The compensation value for the land received by the households is determined based on the land value at that time, which is lower due to the lack of synchronized infrastructure. However, after the State decides to allocate the land to developers or conduct land use rights auctions with conditions suitable for planning, such as constructing urban areas or commercial complexes, the land value will increase rapidly, causing further regret for the residents. Especially in rural areas, if there are plans for construction and investment, the land value appreciation will be particularly high.

Secondly, the sequence and procedures for land recovery do not specify the step of recording the current status of the land at the time of the land recovery announcement. According to Article 92, Clause 2 of the Land Law 2013, assets attached to land must be established after the competent state authority announces the land recovery; otherwise, they will not be compensated. Therefore, recording the current status of the land being recovered at the time of the land recovery announcement is very important in compensating for assets attached to land, especially crops, livestock, and assets that do not require declaration or registration. This procedure helps prevent the intentional creation of assets prior to land recovery in order to be compensated, and provides a solid basis for resolving doubts and complaints during land clearance.

Thirdly, the issue of valuing assets attached to land when the State recovers land. According to Article 88 of the Land Law 2013: "When the State recovers land, owners of assets attached to the land that incur damage will be compensated." In principle, when the State recovers land, construction on the land that is legally owned and attached to the land will be compensated. The determination of compensation amounts is regulated in Article 89 of the Land Law 2013. However, in reality, the prices for residential buildings, temporary houses, and architectural structures set by provincial People's Committees as the basis for compensation and support are often much lower than the actual amount spent by those whose land is being recovered to build residential buildings, temporary houses, and new architectural structures with similar area, purpose, quality, and technical standards, especially in times of economic inflation. While deciding on the issuance of prices for new construction of houses, temporary houses, and architectural objects as a basis for determining the value of compensation and support when the state recovers land in the provinces, some places have not yet or are slow to adjust the construction unit price according to the time of compensation.

4. Some recommendations and solutions for improvement

Firstly, strengthening legal propaganda activities and monitoring of the actual construction situation. Through local legal propaganda activities, the understanding of the importance of land recovery for the purposes of economic development, national defense, security, and socio-economic development for national and public interests can be enhanced. In addition, it helps people understand the legal provisions on compensation, support, and resettlement, thereby increasing the agreement between the authorities conducting compensation and land clearance and the people. In the activity of monitoring the actual construction situation, this is the professional work of the Department of Construction. Through monitoring and inspection, the recording of the actual construction situation and the land situation will be more complete. For construction works on land, stricter management will be applied; for construction works on unpermitted land, permits must be obtained and adjustments must be made to update changes on the certificate of assets attached to the land. Updating changes is also a legal basis and evidence in the compensation work.

Secondly, there is a need for inspection and supervision related to the actual transfer value when it comes to real estate. Strict action should be taken against cases of price discrepancies between the actual transfer value and the notarized value of land use rights. This solution will help the state management agencies responsible for building land price lists to have market information and the actual value of land use rights when establishing land price lists for each locality and contribute to preventing the loss of tax revenue for the state budget.

Thirdly, adjusting the provincial land price lists annually. According to the current Land Law 2013, the provincial People's Committees are responsible for building and submitting land price lists to the same-level People's Councils for approval before issuance. The land price list is built every 5 years and publicly announced on January 1st of the first year. Therefore, it is necessary to adjust the land price list annually or adjust the coefficients so that the determination of the land price list is closely aligned with the market value. The 5-year period for adjustment is too long, and it does not reflect the supply and demand dynamics of the market accurately.

Forthly, there are specific regulations on the application of land valuation methods in the process of determining specific land prices, and the unified results of consulting organizations for specific land price determination. According to the current valuation standards (Vietnam Valuation Standard No. 11), to ensure the accuracy of land prices, at least two land valuation methods should be applied by the valuer to check, compare, and cross-reference when conducting land valuation and developing land price plans. The use of the land price adjustment coefficient method to determine specific land prices for compensation by the state should only be applied when the land being acquired within the project includes adjacent parcels of land with the same use purpose, the same profit and income potential from land use. At the same time, specific criteria should be developed to assess what constitutes the same profit and income potential from land use. There should be a uniform regulation on the results of consulting organizations for land price determination when hiring an independent consulting organization to develop land price plans.

Fifthly, the issuance of compensation rates for residential houses, architectural structures, and construction works when the state acquires land should be completed. The construction cost rate should be applied when compensating for property damage associated with land use rights, based on construction standards, material prices, construction components, labor costs, machinery and equipment prices, and other necessary costs that are appropriate to the market price level of construction works in the determined period and related regulations, or based on the construction cost rates announced by the provincial People's Committee or determined based on market prices or similar prices at completed projects. The decision to issue new construction rates for residential houses, temporary houses, and architectural structures as a basis for determining compensation values and support when the state acquires land in provinces should be announced by the provincial People's Committee as a basis for determination in compensation work.

To develop effective construction rates, the author proposes the following solutions: First, enhance the capacity of officials in the construction rate work. The human factor is the most important factor in success. Enhance the professional qualifications and expertise of officials through training, cooperation programs, and sharing experiences with domestic and international organizations. On the other hand, there should be an improvement in coordination and sharing of working experiences between provincial departments such as the Department of Natural Resources and Environment, the Department of Finance, the Department of Construction, the Land Fund Development Center, etc. After each land acquisition, a comprehensive review of activities should be conducted to identify any shortcomings and deficiencies and improve the construction rate in the decision to issue new construction rates for residential houses, temporary houses, and architectural structures as a basis for determining compensation values and support when the state acquires land in localities. Second, continuously update the fluctuations in construction material market prices. The provincial People's Committee should establish monitoring teams to collect information on construction material market prices, real estate, and urban infrastructure services to timely summarize and report evaluation of the price fluctuations of construction materials and forecast scenarios in case of material price fluctuations, serving as a basis for policy mechanisms and government management and operation, in general, and the provincial People's Committee, in particular. Accurate determination and strict control of the prices of construction materials help ensure that the construction process and adjustment of construction cost rates are accurate and closely follow market prices. This harmonizes the interests of land users being acquired and the state, partly facilitating compensation and land clearance work.

M.Sc. HOANG ANH TUAN (Lecturer, Faculty of Civil Law, Faculty of Law, Hue University)
Source: Court Magazine

Key word: land | compensation | in Vietnam | Vietnam | state |

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