KEY NOTES FOR FOREIGN INDIVIDUAL WHEN BUYING RESIDENTIAL HOUSE IN VIETNAM
Housing Law No. 65/2014/QH13 (“Housing Law 2014”) has further facilitated foreign individuals to own house in Vietnam. However, after more than 03 years of implementation, it seems that foreigner still does not really understand the core issues related to their rights and obligations when buying houses in Vietnam, thereby, it shall arise easily the unwanted risks, such as the housing investment is not profitable, or housing shall be revoked. In reality, not any foreigner who purchases the house can easily access the relevant law provisions and legal dossiers of the house from the beginning. The information that they receive from investors and brokers mostly relate to issues such as payment of housing price, the time of handover and the expected profit they receive if reselling the house after a certain period, from the time of buying the house, etc. Most investors and brokers do not provide foreigners the information related to limitations, notices when performing their rights or the information regarding legal regulations relating to the ownership of houses of these subjects.
This article mentions five basic contents that foreigner should be noted and carefully considered before purchasing house in Vietnam.
First of all, foreigners have to prove that they are eligible to own house in Vietnam in accordance with the applicable housing laws. Pursuant to the Housing Law 2014 and the Article 74 of Decree 99/2015/ND-CP guiding this Law (“Decree 99”), foreigners who have a valid passport bearing the entry mark affixed by the Vietnamese immigration Agency and is not entitled to diplomatic privileges and immunities prescribed by the Ordinance on Privileges and Immunities for Diplomatic Missions, Consulates and Representative Agencies of International Organizations in Vietnam shall have the right to own the house.
Under this provision, foreigners who enter into Vietnam with a separate visa (as in the case of a Chinese individual holding a passport featuring the nine-dash line), not having the passport with the entry mark affixed by the Vietnamese immigration Agency, cannot own the residential house in Vietnam due to failure to satisfy the regulations on the papers proving eligibility to own house as stated in the Article 74 of Decree 99 as above. In this case, if the foreigners still wish to own a house, the investor shall usually request to conclude the long-term lease agreement and the tenant shall pay a one-off rent for the entire lease term, this method is a form of “dodging law” for the foreigner who is not eligible to own house under the form of signing a sale and purchase agreement. By which, before signing the lease contract, foreigners should recognize their right in such contract, especially the rights of subleasing house, transferring the right of leasing house, requesting the investor to refund all paid rent, paying the penalty and compensating all damages incurred by foreigners.
Secondly, foreigners need to find out which project they can own house, and under which form they can own houses to avoid future risks. According to the prevailing laws on residential housing, foreigners are only allowed to own commercial residential housing through buying or renting from investors or buying from foreign organizations or individuals or receiving inheritance or giving from Vietnamese individual, households at the allowed quantity of house and in the project in which foreigners are permitted to own houses. Accordingly, foreigners should pay attention to check on the portal of the Department of Construction of the province (city) to check the list of projects that foreigners can own houses. Because, under the Article 63 of Decree 139/2017/ND-CP stipulating the sanctioning of administrative violations in the field of housing and real estate, with respect to the purchase of houses at the project in which foreigners are not permitted to own houses, foreigners will be considered a breach of regulation and the State will recover such house. In this case, the investor will have to return the entire amount received under the purchase contract and compensate the buyer for the damage.
Thirdly, regarding the payment for house purchase price, foreigners should pay attention to opening a bank account at an authorized bank in Vietnam to pay the house purchase price. Accordingly, if the foreigners sell a house, the receipt of the payment from the sale of the house must also be made through such account to transfer the house purchase price to their overseas bank account. Regarding this issue, according to the Clause 8, Article 79 of Decree 99, the applicable laws on residential house prohibit foreigners from buying houses for resale under business purpose for earning profit. According to a common understanding, reselling under business purpose for earning profit is the case that a seller resells the goods at a price higher than the purchase price so that such party receives the difference called “profit”. However, the prevailing laws still do not have any specific regulations on definition of “business purpose for earning a profit”, so foreigners should update regularly legal regulation on this issue through lawyers and consultant, brokers, to perform properly once such guiding document issued by the competent authority.
Fourthly, according to the Housing Law 2014, foreigners have the right to own house within 50 years after being granted a certificate of land use rights, ownership of houses and other assets attached to the land (“Certificate”) and may apply for a one-time extension up to 50 years in the form of filing a dossier with the provincial People's Committee where the house is located. In addition, foreigners also have the right to sell, mortgage, donate, inherit and lease houses when they have a Certificate. Accordingly, with respect to the implementation of the right to lease, foreigners should note that before leasing house, they must notify to the district housing management agency (Department of Urban Management) and must declare and pay tax with respect to the rent, then the remaining income is considered as a legal income and can transfer the income from this lease to their overseas bank account.
Besides, with respect to the cases that foreigners marry Vietnamese citizens, they will be able to own a house on stable and long-term basis (not limited to 50-year ownership period as other individual). However, they should also note that they are only allowed to own houses in the area where they can own and still have to comply with the prescribed quantity limits.
Fifthly, if the foreigners do not want to own the house any more after buying, how will they do? Pursuant to the provisions of the Housing Law 2014 and Decree 99, when they do not need to own house anymore, they can resell to other foreign organizations or domestic organizations, Vietnamese households and individual. Accordingly, in case of selling to domestic organizations, Vietnamese households and individual, these entities have the right to own house on stable and long-term basis and if the foreigner sold it to other foreign organizations and individuals, such organizations and individuals shall own house during the remaining term.
From the above analysis, the author wishes to help foreign individuals wishing to own houses in Vietnam can better understand the limitations, necessary notes as well as their rights when buying a house in Vietnam. Since then, it is possible to minimize the risks or unexpected disputes for them when buying houses in Vietnam.