Risks you need to know when contributing capital to purchase land in Vietnam

The capital contribution to purchase land is fully recognized by Vietnamese law. The purchasers of the same land are legally recognized for their ownership of that land through being named in the Land Use Right Certificate.

Specifically, Clause 2, Article 98 of Vietnam's Land Law 2013 stipulates as follows:

"For a land parcel which is used by several land users or for the houses and other land-attached assets which are owned by several owners, the names of all involved persons shall be recorded in the certificate, and each person shall be granted one certificate. At the request of the land users or owners, only one certificate may be granted to all of them and delivered to the representative. "

Most people who contribute capital to buy land are usually people who have mutual trust, such as friends and relatives. Therefore, in order to avoid disputes and break the relationship between the two parties, people need to understand and anticipate the following risks:

1. Risks of disposal land use rights

Article 218 of the Civil Code 2015 stipulates the right to dispose of common property as follows:

- Each owner in common has the right to dispose of its share of the ownership rights.

2. Disposal of joint property shall be implemented as agreed by the owners of the property or as provided by law.

3. Where an owner of multiple ownership property sells its share of the ownership rights, the other owners of the property have the right of first refusal to purchase such share..

Because the land is a common property, therefore, each person does not have the right to arbitrarily dispose of that land, which means that any land transaction needs the consent of the entire co-owner.

However, each owner has the right to dispose of his/her share of the common property, so if each person wants to exercise his/her right, he/she needs to carry out the procedures for division of the parcel as prescribed in point b, clause 2 of this Article 167, Land Law 2013.

"For a group of land users sharing land use rights which can be split into portions for each member in the group, if every member wants to exercise his/her land use rights over such portion, they shall carry out the prescribed procedures to have the common land parcel split into different parcels of their own and apply for the certificates of land use rights and ownership of houses and other land-attached assets. Those members will then have the rights and obligations of land users in accordance with this Law."

Another problem is that in order to carry out the procedure for splitting a parcel of land, that piece of land needs to meet the conditions prescribed by law, one of which is the minimum area and size requirements as prescribed for each locality. In addition, the consent of other owners is also needed to make the separation procedure more convenient.

Therefore, before buying common land, buyers need to understand the conditions of the procedure for separating the land parcel, consider the actual conditions of that land, and consider their long-term goals.

2. Risks when exploiting land use rights

One solution to this is to have a written agreement on the division of each person's rights to the common land from the outset, the share of which can be based on that person's proportion of capital contribution to the total value of the land. The written agreement needs to be signed by the co-owners and notarized in accordance with the law. This helps to clearly define the rights of each person, limiting future disputes.

3. Measures to limit risks

To limit the above risks, capital contributors should pay attention to the following:

If each person's capital contribution is different, it is best to make a contract to contribute money to buy land, signed by the parties and notarized in accordance with the law. In which the capital contribution and rights of each person are clearly stated.

In addition to the written form, the parties can still choose another form, such as an audio or video recording, and each person keeps one copy. When a dispute occurs, this will be the evidence for the Court to base its decision on to protect the rights of the parties.

A certificate of land use rights and ownership of houses and other land-attached assets must fully state the names of the people who share the land use rights and issue one certificate to each person. A written agreement is required to demonstrate that the person is authorized to represent the other co-owners listed on the certificate.

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