Can land use rights be used to secure obligation fulfillment with off-plan properties in Vietnam?

Can land use rights be used to secure obligation fulfillment with off-plan properties in Vietnam?

In Article 8 of Decree 21/2021/ND-CP on collateral for security for obligation fulfillment as follows:

Collateral for security for obligation fulfillment includes:

1. Current properties or off-plan properties, except for cases where the Civil Code or other relevant laws forbid sale, transfer or other change of ownership at the time of establishing security contracts, security measures;

2. Properties sold under property sale agreements with retention of ownership;

3. Properties considered as subjects of obligations under infringed bilateral contracts in case of lien measures;

4. Properties under general public’s ownership if prescribed by relevant laws.

According to Article 10 of Decree 21/2021/ND-CP, land use right and assets attached to land are regulated as follows:

1. Employment of land use right to guarantee fulfillment of obligations may not occur simultaneously with employment of assets attached to land; employment of assets attached to land to guarantee fulfillment of obligations may not occur simultaneously with employment of land use right.

2. In case owners and secured parties employ assets attached to land that are not required by the law for registration and have not been registered at request as security for obligation fulfillment, rights and obligations of parties shall conform to agreements in security contracts.

In case owners and secured parties agree to employ assets attached to land that are perennial plants according to Law on Cultivation, temporary constructions according to Law on Construction as security for obligation fulfillment, comply with regulations and law on security for obligation fulfillment in form of movable properties that are not aircrafts or watercrafts.

3. In case land use right or assets attached to land that are immovable properties benefiting from adjacent immovable property rights is used as security for obligation fulfillment, rights for adjacent immovable properties shall remain effective for all individuals and juridical persons.

4. Security for obligation fulfillment in form of off-plan properties does not apply to land use right.

Thus, security for obligation fulfillment in form of off-plan properties does not apply to land use rights. However, you can still use land use rights as direct mortgage according to the law in Vietnam.

Is it necessary to notarize a mortgage contract?

Regulations in Clause 1, Article 122 of the 2014 Housing Law on notarization and authentication of agreements and effective date of housing agreements are as follows:

1. Regarding agreements on housing sale, giving, exchange, capital contribution, mortgage, or transfer of agreement on commercial housing sale, it is required to notarize or authenticate the agreement, except for cases prescribed in Clause 2 of this Article.

Regarding any agreement prescribed in this Clause, the effective date of the agreement shall be the date on which the agreement is notarized or authenticated.

2. Regarding transactions in giving houses of gratitude; sale or lease purchase of state-owned housing; sale or lease purchase of social housing, housing serving the relocation; contributed housing which one entity of contracting parties is an organization; housing lease, lending, permission for stay, or authorization of housing management, it is not required to notarize or authenticate the agreement, unless contracting parties wish to notarize or authenticate the agreement.

Regarding any agreement prescribed in this Clause, the effective date of the agreement shall be agreed by contracting parties; if the contracting parties do not agree, the effective date of agreement shall be the date on which the agreement is signed.

3. The documents on housing inheritance must be notarized or authenticated as prescribed in law on civil.

4. The notarization of housing agreement must be carried out at a notary; the authentication of housing agreement must be carried out at the People’s Committee of the commune where the house is located.

Pursuant to Clause 3, Article 167 of the Land Law 2013 on the right to exchange, transfer, lease, sublease, inherit, donate, mortgage land use rights and contribute land use rights as capital as follows:

3. The notarization and certification of contracts and documents on the exercise of the rights of land users shall be conducted as follows:

a/ Contracts on transfer, donation, mortgage or contribution of land use rights as capital or the rights to use land and land-attached assets must be notarized or certified, except the case of real estate business prescribed at Point b of this Clause;

b/ Contracts on lease or sublease of land use rights or the rights to use land and land-attached assets, a contract on exchange of agricultural land use rights, a contract on transfer of land use rights or the rights to use land and land-attached assets in which one party or all parties involved in the transaction is/are a real estate business organization or organizations must be notarized or certified at the request of the parties;

c/ The documents on inheritance of land use rights or the rights to use land and land-attached assets must be notarized or certified under the civil law;

d/ The notarization shall be conducted at notarization-practicing organizations and the certification shall be conducted at commune-level People’s Committees.

In addition, Article 54 of the Notary Law 2014 on notarization of real estate mortgage contracts:

1. Real estate mortgage contracts shall be notarized at a notarial practice organization located in the province or centrally run city where the real estate is located.

2. In case a real estate has been mortgaged to secure the performance of one obligation and the mortgage contract has been notarized but such real estate is then further mortgaged to secure the performance of another obligation as permitted by law, a subsequent mortgage contract shall be notarized at the notarial practice organization that has notarized the first mortgage contract. In case the notarial practice organization that conducted the notarization has terminated operation or been transformed, transferred or dissolved, a notary of the notarial practice organization that is keeping the notarial records shall notarize the subsequent mortgage contract.

According to this Article, there is no requirement that all property mortgage contracts must be notarized, but only real estate mortgage contracts and house mortgage contracts must be notarized at a notary practice organization in Vietnam.

Best regards!