Vietnam: Regulations on mortgage of property under the Civil Code 2015

Regarding this issue, LawNet would like to answer as follows:

1. What is mortgage of property?

According to Article 317 of the Civil Code 2015, mortgage of property means the use by one party (hereinafter referred to as the mortgagor) of property under the ownership of the obligor as security for the performance of an obligation to the other party (hereinafter referred to as the mortgagee) without transferring such property to the mortgagee.

The mortgaged property shall be held by the mortgagor. The parties may agree to deliver the mortgaged property to a third person to hold.

Vietnam: Regulations on mortgage of property under the Civil Code 2015 (Internet image)

2. Mortgaged property in Vietnam

Article 318 of the Civil Code 2015 stipulates mortgaged property as follows:

- Where entire immoveable property or moveable property having auxiliary objects is mortgaged, such auxiliary objects shall also form part of the mortgaged property, unless otherwise agreed.

- Where a portion of immoveable property or moveable property having auxiliary objects is mortgaged, such auxiliary objects shall also form part of the mortgaged property, unless otherwise agreed by the parties.

- With respect to mortgage on land use rights that property on land is owned by the mortgagor, such property shall also part of the mortgaged property, unless otherwise agreed.

- Where mortgaged property is insured, the mortgagee must notify the insurer that the insured property is being mortgaged. The insurer shall pay the insured sum directly to the mortgagee upon occurrence of an insured event.

If the mortgagee failed to notify the insurer that the insured property was mortgaged, the insurer shall pay the insured sum in accordance with the insurance contract and the mortgagor shall be obliged to make payment to the mortgagee.

3. Rights and obligations of the parties in mortgaging property in Vietnam

Pursuant to the provisions of Articles 320 to 324 of the Civil Code 2015, the parties, when mortgaging property, have the following rights and obligations:

3.1 Obligations of mortgagor in Vietnam

- Transfer documents related to the mortgaged property, unless otherwise agreed or prescribed by law.

- Take care of and preserve the mortgaged property.

- If the mortgaged property is in danger of losing its value or depreciating in value due to its exploitation, to take necessary remedial measures, including ceasing the exploitation of the mortgaged property.

- When the mortgaged property is damaged, the mortgagor is obligated to, within a reasonable period, repair or substitute another property with equivalent value, unless otherwise agreed.

- Provide information about the actual condition of the mortgaged property to for the mortgagee.

- Deliver the mortgaged property to the mortgagee for realization in one of the cases prescribed in Article 299 of the Civil Code 2015.

- Notify the mortgagee of any third person rights with respect to the mortgaged property (if any). In the case of failure to provide such notice, the mortgagee shall have the right to cancel the contract of mortgage of property and demand compensation for damage or the right to maintain the contract and agree on the rights of the third person with respect to the mortgaged property.

- Do not sell, exchange or give the mortgaged property, except in the cases provided in Clauses 4 and 5 of Article 321 of the Civil Code 2015.

3.2 Rights of mortgagor in Vietnam

- Exploit, and to enjoy the yield and income derived from, the property, except where the yield and income also form part of the mortgaged property as agreed.

- Invest in order to increase the value of the mortgaged property.

- Recover the mortgaged property and related documents held by a third person when the obligation secured by the mortgage is terminated or is substituted by other security.

- Sell or replace mortgaged property being goods rotating during the production and business process. In the case of a sale of mortgaged property being goods rotating during the production and business process, the right to require the purchaser to pay money, the proceeds received or the assets formed from the proceeds received shall form the mortgaged property in substitution for the property which was sold.

When a warehouse is mortgaged, the mortgagor may substitute goods in the warehouse but must ensure the value of the goods in the warehouse remains the value agreed.

- Sell, exchange or give mortgaged property not being goods rotating during the production and business process with the consent of the mortgagee or as prescribed by law.

- Lease or lend the mortgaged property provided that notice must be provided to the lessee and the borrower that the property is being mortgaged and that the mortgagee must also be notified that such notice has been provided.

3.3 Obligations of mortgagees in Vietnam

- Where the parties agree that the mortgagee will hold the documents relating to the mortgaged property, to return to the mortgagor such documents upon termination of the mortgage.

- Follow procedures for realization of mortgaged property in accordance with regulations of law.

3.4 Rights of mortgagees in Vietnam 

- Examine and inspect directly the mortgaged property provided that such examination and inspection does not hinder or cause difficulty to the use and exploitation of the mortgaged property.

- Require the mortgagor to provide information on the current status of the mortgaged property.

- Require the mortgagor to apply necessary measures to preserve the property and the value of the property if there is a danger that use and exploitation of the mortgaged property will cause loss of value or depreciation in value of the property.

- Conduct the registration of mortgage as prescribed by law.

- Require the mortgagor or a third person holding the mortgaged property to deliver it to the mortgagee for realization if, upon expiry of the term for fulfillment of the obligation, the obligor has failed to perform or performed incorrectly the obligation.

- Hold documents related to mortgaged property as agreed by parties, unless otherwise prescribed by law

- Follow procedures for realization of mortgaged property as prescribed in Article 299 of the Civil Code 2015.

3.5 Rights and obligations of third parties holding mortgaged property in Vietnam

- A third person holding mortgaged property has the following rights:

+ Exploit the property if so agreed;

+ Receive remuneration and be reimbursed for expenses incurred in taking care of and preserving the mortgaged property, unless otherwise agreed.

- A third person holding mortgaged property has the following obligations:

+ Take care of and preserve the mortgaged property, and to compensate for any damage if the third person loses the mortgaged property or causes the mortgaged property to lose its value or depreciate in value;

+ Cease the exploitation of the property if it is in danger of losing its value or depreciating in value;

+ Return the mortgaged property to the mortgagee or mortgagor as agreed or prescribed by law.

Nhu Mai

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