Vietnam: What you need to know about off-plan property

Vietnam: What you need to know about off-plan property (Illustration)

1. The concept of off-plan property

The provisions in Clause 2, Article 108 of Vietnam's Civil Code 2015 on off-plan property are listed as follows:

"2. Off-plan property includes:

a) Non-formed property;

b) Formed property that the entity has established his/her ownership rights after the time of transaction establishment."

Thus, off-plan property is understood as assets that do not actually exist, exist in material terms and will be formed in the future, or assets that have been formed but have to be transacted. ownership is established.

In addition, the Consolidated Document 8019/VBHN-BTP on security transactions, in Clause 2, Article 4, provides for this type of asset as follows:

"2. Off-plan property includes:

a) Property acquired from loans;

b) Property which is in the process of forming or being lawfully constituted at the time of entering into the secured transaction;

c) Property which has been formed and are subject to ownership registration but is solely registered in accordance with law after the time of entering into the secured transaction.

Off-plan property does not include land use rights."

For example,

- Property acquired from loans: buying phones and motorbikes on installment payments; buying a house with bank loans...

- Property which is in the process of forming: apartments under construction, cars being installed

- Property which has been formed: property for inheritance that has not yet transferred ownership

2. Mortgage of off-plan property in Vietnam

The provisions of Clause 3, Article 295 of the Civil Code 2015 are as follows:

Collateral may be existing property or off-plan property.

Thus, when taking out a mortgage, the borrower can use off-plan property as a security in the contract.

However, it is necessary to note a number of requirements specified in Article 295 of the Civil Code as follows:

- Collateral must be under the ownership rights of the securing party, except for the cases of lien on property or title retention.

- Collateral may be described generally but must be identified.

- The value of collateral may be greater, equal or smaller than the value of the secured obligation.

Notably, collateral does not include off-plan land use rights as guided in Clause 2, Article 4 of Consolidation Document 8019/VBHN-BTP.

3. Documents required to mortgage off-plan property in Vietnam

For common assets (telephones, machinery, vehicles, etc.):

- Legal purchase and sale contract

- Payment invoice

For real estate (houses, housing investment projects):

Article 148 of the Law on Housing 2014 stipulates as follows:

- -In case the investor is in the position of an investment project, he/she must have: a project dossier, a project's technical design, and a certificate or decision on land allocation or land lease. At the same time, the mortgaged house must be in the category of completed foundation construction.

- In order to mortgage houses or apartments, organizations or individuals must have the following documents: papers certifying lawful residential land use rights; construction permits; and, if required, house purchase and sale contracts signed with the investor.

Duc Dung

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