LAW ON ACCESS RIGHTS TO LAND USE RIGHTS BY FOREIGN-INVESTED ECONOMIC ORGANIZATIONS RECEIVING TRANSFER OF REAL ESTATE PROJECTS
LAW ON ACCESS RIGHTS TO LAND USE RIGHTS BY FOREIGN-INVESTED ECONOMIC ORGANIZATIONS RECEIVING TRANSFER OF REAL ESTATE PROJECTS
Nguyễn Thái Đằng
Legal Advisor, Án Việt Law Company Limited
Abstract:
The issue related to land use rights when foreign-invested economic organizations receive the transfer of real estate projects, such as housing or future construction works, poses a legal risk affecting the interests of the buyer in the project and needs to be discussed. Within the scope of this article, the author focuses on analyzing the access rights to land use rights of foreign-invested economic organizations when receiving the transfer of real estate projects, such as housing or future construction works, and proposes recommendations to better protect the interests of the buyer in these real estate projects.
Keywords: transfer, real estate projects, foreign-invested economic organizations
I. INTRODUCTION
Previously, buyers of housing or future construction works within transferred real estate projects were always at a disadvantage. They did not have full access to relevant information about the transfer of the project from the investor, could not intervene in the transfer process, and did not achieve their expected ownership of housing or construction works (Võ & Trương, 2021). These issues arise from various legal problems, including those related to the transfer of real estate projects associated with the transfer of land use rights by the transferee, which is a Foreign-Invested Economic Organization (hereinafter referred to as “FIEO”).
According to Clause 3, Article 51 of the 2014 Law on Real Estate Business, when FIEOs (previously referred to as “Enterprises with Foreign Investment Capital”) receive the transfer of real estate projects, after receiving the approval for project transfer from the competent state authority, the transferor must complete the procedure of “returning land use rights” to the state.
The transferee then receives land use rights to implement the project through a decision by the competent state authority to allocate or lease land use rights. These legal procedures have extended the project implementation timeline and caused unnecessary complications for the parties involved (Vũ, 2022). The primary cause of these complications stems from the fact that FIEOs have more limited access to land use rights compared to domestic economic organizations.
Now, the 2023 Law on Real Estate Business and the 2024 Law on Land have several amendments and are expected to better address previous limitations. However, whether these newly issued legal regulations resolve the issues related to land use rights transfer when FIEOs receive the transfer of real estate projects in Vietnam remains a legal question that needs to be examined and clarified to protect the legitimate rights and interests of the related parties, especially the buyers of housing or future construction works within the real estate projects transferred to FIEOs.
Within the scope of this article, the author focuses on analyzing the access rights to land use rights of FIEOs when receiving the transfer of real estate projects, such as housing or future construction works, according to real estate business laws, and proposes recommendations to improve the legal framework to better protect the legitimate rights of buyers in these real estate projects.
II. OVERVIEW OF ACCESS RIGHTS TO LAND USE RIGHTS BY FOREIGN-INVESTED ECONOMIC ORGANIZATIONS
Access rights to land use rights can be understood as follows: Access rights to land use rights refer to the ability of an entity to establish ownership over land use rights or the ability to access and exploit land use rights of other land users (Ngô, 2017). An entity can access land use rights through two methods: accessing land use rights from the State and accessing land use rights from the market.
However, different groups of entities will have different access rights to land use rights. Therefore, to clarify the access rights to land use rights of Foreign-Invested Economic Organizations (FIEOs) when receiving the transfer of real estate projects, such as housing or future construction works, it is a prerequisite to define FIEOs according to legal regulations. Currently, the term “FIEOs” is used to replace the term “Enterprises with Foreign Investment Capital”. This change has helped to reduce the inconsistency in defining this group of entities across previous legal documents, specifically: the 2013 Law on Land, the 2014 Law on Real Estate Business, and the 2020 Law on Investment.
Clause 21 and 22, Article 3 of the 2020 Law on Investment defines FIEOs as economic organizations established and operating under Vietnamese law and having foreign investors as members or shareholders.
Clause 46, Article 3 and Clause 1, 7, Article 4 of the 2024 Law on Land defines FIEOs as economic organizations that meet the conditions and perform investment procedures stipulated for foreign investors as prescribed in Clause 1, Article 23 of the Law on Investment to implement projects using land, while other economic organizations are defined as domestic economic organizations.
The 2023 Law on Real Estate Business does not provide a specific definition of “FIEOs” but divides FIEOs into two groups:
The first group consists of FIEOs as defined in Clause 4, Article 10 of the 2023 Law on Real Estate Business. These are economic organizations that must meet the conditions and perform investment procedures like foreign investors establishing other economic organizations; contributing capital, purchasing shares, purchasing capital contributions, or investing according to business cooperation contracts (BCC) in Vietnam as stipulated in Clause 1, Article 23 of the 2020 Law on Investment.
Thus, FIEOs in the first group are identified as economic organizations with members, shareholders (foreign investors and/or FIEOs with 50% or more of their charter capital held by foreign investors) holding or jointly holding over 50% of the charter capital. Additionally, if an economic organization operates as a partnership company and has the majority of its general partners as foreign individuals, that economic organization is also identified as a first group FIEO.
The second group consists of FIEOs as defined in Clause 5, Article 10 of the 2023 Law on Real Estate Business. These are economic organizations with members, shareholders as foreign investors but only need to meet the conditions and perform investment procedures stipulated for domestic investors.
According to the author’s perspective, the division of FIEOs in the 2023 Law on Real Estate Business aims to create consistency with both the 2020 Law on Investment and the 2024 Law on Land in defining FIEOs participating in the real estate business in Vietnam.
However, when comparing the above legal provisions, it can be seen that the definition of FIEOs in the 2023 Law on Real Estate Business aligns with the 2020 Law on Investment but has a broader scope than the 2024 Law on Land. Specifically, FIEOs in the second group according to the 2023 Law on Real Estate Business are not identified as FIEOs by the 2024 Law on Land. Thus, real estate business laws and land laws are inconsistent in defining FIEOs, causing confusion in the application of laws in practice.
Overall, the access rights to land use rights of Foreign-Invested Economic Organizations (FIEOs) refer to the ability of FIEOs to establish ownership of land use rights, becoming land users with rights and obligations under land laws. However, to complete the regulation on access rights to land use rights of FIEOs, the author suggests that the 2023 Law on Real Estate Business and the 2024 Law on Land need to be consistent in defining FIEOs. This means that instead of dividing FIEOs into two groups with different real estate business scopes, the 2023 Law on Real Estate Business should define FIEOs similarly to the 2024 Law on Land.
III. INCONSISTENCIES IN REGULATIONS ON ACCESS RIGHTS TO LAND USE RIGHTS OF FOREIGN-INVESTED ECONOMIC ORGANIZATIONS WHEN RECEIVING TRANSFER OF REAL ESTATE PROJECTS IN VIETNAM
Compared to the 2014 Law on Real Estate Business, FIEOs under the 2023 Law on Real Estate Business are still allowed to receive the transfer of all or part of real estate projects to continue investment, construction, and business (Clause 4, Point c Clause 3, Point g Clause 1, and Clause 5, Point g Clause 1, Article 10 of the 2023 Law on Real Estate Business). However, the reception of land use rights by FIEOs when receiving the transfer of real estate projects under the 2023 Law on Real Estate Business has many changes, especially when the two groups of FIEOs have different approaches.
For cases where the transferee of the real estate project is an FIEO belonging to the second group, the land procedures are not addressed in Article 42 of the 2023 Law on Real Estate Business. This raises several issues that need to be resolved: What procedures or regulations should second group FIEOs follow when receiving the transfer of land use rights in real estate projects?; Are second group FIEOs allowed to receive the transfer of land use rights in real estate projects like domestic economic organizations?
As previously mentioned, second group FIEOs according to the 2023 Law on Real Estate Business are considered domestic economic organizations under the 2024 Law on Land. Therefore, under the 2024 Law on Land, second group FIEOs are allowed to access land use rights like domestic economic organizations. Hence, the author believes that the 2023 Law on Real Estate Business allows second group FIEOs to receive the transfer of land use rights in real estate projects like other domestic economic organizations. However, this legal issue needs to be clearly explained in real estate business laws, ensuring that the definition of FIEOs is consistent with the 2024 Law on Land to avoid various interpretations when applied in practice.
As for cases where the transferee of the real estate project is an FIEO belonging to the first group, it can be seen that according to Clause 3, Article 42 of the 2023 Law on Real Estate Business, when first group FIEOs receive the transfer of real estate projects as specified in
Clause 2, Article 41 of the 2023 Law on Real Estate Business (These are real estate projects not falling under the cases where the real estate project is approved by an investor or granted an Investment Registration Certificate as stipulated by the Law on Investment, the authority, and procedures for transferring the entire or part of a real estate project are performed according to the provisions of the Law on Investment), the land procedures are carried out according to the provisions of land laws.
Accordingly, after receiving the approval for the transfer from the competent state authority and the parties have signed the real estate project transfer contract, the first group FIEOs and the project transferor must carry out land procedures according to the provisions of land laws.
Thus, the 2023 Law on Real Estate Business does not stipulate procedures related to land use rights of FIEOs when receiving the transfer of real estate projects as the 2014 Law on Real Estate Business did. When first group FIEOs receive the transfer of real estate projects, the procedures related to land use rights are carried out according to the 2024 Law on Land. This regulation is reasonable as land use rights procedures fall within the scope of land laws, not the real estate business laws.
Referring to Article 117 of the 2024 Law on Land, in the case of transferring real estate projects, the competent state authority does not need to issue a land recovery decision and can still issue a decision on land allocation or land lease. Thus, when first group FIEOs receive the transfer of real estate projects, the competent state authority does not need to issue a land recovery decision before issuing a land allocation or land lease decision (for land use rights managed and used by the project investor) to first group FIEOs.
At the same time, according to Article 124 of the 2024 Law on Land, when FIEOs receive the transfer of real estate projects under real estate business laws, the State allocates or leases land without land use rights auction or tendering to select investors for land use projects.
Thus, based on the regulations on access to land use rights by FIEOs when receiving the transfer of real estate projects in the 2024 Law on Land, several legal issues arise: When the project investor transfers a real estate project without the need to return land use rights to the State and the competent state authority does not implement land recovery procedures (as stipulated in Article 51 of the 2014 Law on Real Estate Business), how will the State allocate or lease land use rights to FIEOs?;
If the land use rights associated with the real estate project remain under the ownership of the project transferor, on what legal basis will the State allocate or lease the land use rights associated with the real estate project?; Will first group FIEOs be allowed to receive the transfer of land use rights alongside the transfer of real estate projects?
To address these concerns, it is necessary to refer to the regulations on acquiring land use rights by FIEOs in Vietnam. According to Article 28 of the 2024 Law on Land, FIEOs are only permitted to access land use rights through transfer in two cases: (i) transfer of land use rights in industrial zones, clusters, high-tech parks, and (ii) transfer of investment capital in the value of land use rights. Thus, under this regulation, FIEOs are not allowed to receive the transfer of land use rights when receiving the transfer of real estate projects. The 2024 Law on Land has not clarified how first group FIEOs can access land use rights when receiving the transfer of real estate projects.
III. SOLUTIONS TO IMPROVE THE LEGAL FRAMEWORK FOR ACCESS RIGHTS TO LAND USE RIGHTS BY FOREIGN-INVESTED ECONOMIC ORGANIZATIONS WHEN RECEIVING TRANSFER OF REAL ESTATE PROJECTS SUCH AS HOUSING OR FUTURE CONSTRUCTION WORKS
To recommend and resolve issues regarding access rights to land use rights of FIEOs when receiving transfer of real estate projects such as housing or future construction works, several aspects need to be considered:
Firstly, regulations on procedures related to land use rights when transferring real estate projects have been referenced in the 2023 Law on Real Estate Business to the 2024 Law on Land to ensure consistency and uniformity among legal documents. However, the method of transferring land use rights to FIEOs receiving the transfer of real estate projects is not clear. Therefore, Article 28 of the 2024 Law on Land needs to expand the scope of receiving transfer of land use rights by FIEOs when receiving transfer of real estate projects to ensure consistency between Article 28, Article 117, and Article 124 of the 2024 Law on Land.
Secondly, according to civil law, “land” is defined as an asset owned by the entire population and classified as real estate under Article 105, 107, and 197 of the 2015 Civil Code. Along with that, land use rights are defined as an asset (property right) under Article 105 and 115 of the 2015 Civil Code, so land use rights are not ownership rights but the object of ownership. This is entirely consistent with the viewpoint:
“Land use rights are a special type of asset and goods but not ownership rights.” stated in Resolution No. 18/NQ-TW dated June 16, 2022, of the 13th Central Committee of the Communist Party and consistent with regulations on land ownership: Land is owned by the entire population with the State acting as the representative owner and unified manager… under Article 197 of the 2015 Civil Code, and Article 12 of the 2024 Law on Land.
According to the author’s perspective, based on the aforementioned regulations, it can be asserted that Vietnam has affirmed “land” and “land use rights” as two distinct types of assets, with separate ownership rights. “Land use rights” are a derivative asset from “land”. In this context, “land” is owned by the entire population, and “land use rights” are owned by land users.
“Land use rights” as a type of asset are always subject to certain ownership limitations under the 2015 Civil Code, ensuring they do not infringe upon national, ethnic, public interests, or the legitimate rights and interests of others (Articles 2, 3, 10, 163 of the 2015 Civil Code). Additionally, since “land use rights” are a derivative asset from “land”, they are further controlled by the land recovery regulations of the Land Law. Therefore, even when FIEOs receive the transfer of “land use rights”, their ownership of “land use rights” remains limited to some extent, ensuring no adverse effects on national interests or national defense and security.
Therefore, the author believes that the regulation of the Land Law regarding the rights of FIEOs to receive the transfer of land use rights is reasonable. It does not affect the system of public ownership of “land” while ensuring the circulation of a special type of asset and goods—”land use rights”—in the market, aligning with the current views, laws, and socio-economic conditions of Vietnam.
Thirdly, according to investment laws, when conducting real estate business activities in Vietnam, FIEOs with foreign investors as members or shareholders must always fully comply with market access conditions, national defense, national security, and social safety as detailed in Article 9 of the 2020 Law on Investment. Therefore, the author believes that investment laws can always control real estate business activities of FIEOs even when expanding their access rights to land use rights when receiving the transfer of real estate projects.
Fourthly, foreign investors always seek markets with suitable investment opportunities, fewer procedural constraints, and reduced investment costs. Expanding access rights to land use rights for FIEOs is a necessary legal reform to attract foreign investment into the Vietnamese market, especially the real estate market.
Fifthly, when the Land Law allows FIEOs to receive the transfer of land use rights alongside project transfers, the project transfer procedures will be simplified and clarified. Real estate projects will be able to access investment capital early and be completed on schedule. This particularly protects the interests of buyers in real estate projects such as housing and future construction works.
Based on the above arguments, the author proposes the following recommendation: The 2024 Law on Land should allow FIEOs to access land use rights through the method of receiving the transfer of land use rights when receiving the transfer of real estate projects.
IV. CONCLUSION
From the analysis of legal regulations related to the transfer of real estate projects under real estate business laws of FIEOs, it can be observed that the 2023 Law on Real Estate Business has made important amendments, gradually improving the legal environment for Vietnam’s real estate business market. However, alongside these amendments, some legal regulations still have limitations, directly and seriously affecting the rights of buyers in real estate projects.
Therefore, to facilitate the transfer of real estate projects, such as housing and future construction works, to align with Vietnam’s current socio-economic conditions, and to better protect the legitimate rights of buyers in these projects, the author has proposed two recommendations:
(i) Firstly, the 2023 Law on Real Estate Business should not divide FIEOs into two groups but should define FIEOs similarly to the 2024 Law on Land.
(ii) Secondly, the 2024 Law on Land should expand the access rights to land use rights of FIEOs through the method of receiving the transfer of land use rights when receiving the transfer of real estate projects.
REFERENCES
- National Assembly (2015). The 2015 Civil Code No. 91/2015/QH13, passed on November 24, 2015.
- National Assembly (2023). The 2023 Law on Real Estate Business No. 29/2023/QH15, passed on November 28, 2023.
- National Assembly (2024). The 2024 Law on Land No. 31/2024/QH15, passed on January 18, 2024.
- Ngô, G.H. (2017). Access Rights to Land of Foreign-Invested Enterprises Through Transactions Related to Land Use Rights. Master’s Thesis in Law, Hồ Chí Minh City University of Law, p.17.
- Võ, T.T. & Trương, V.Q. (2021). Improving the Law on Transfer of Real Estate Projects. Journal of Legislative Studies No. 03+04 (427+428), February 2021.
- Vũ, L.M. (2022). Key Issues in Amending the Law on Real Estate Business. Legal Electronic Journal. Retrieved from: https://phaply.net.vn/ky-7-nhung-van-de-trong-tam-trong-sua-doi-luat-kinh-doanh-bat-dong-san-a253961.html.
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“The article’s content refers to the regulations that were applicable at the time of its creation and is intended solely for reference purposes. To obtain accurate information, it is advisable to seek the guidance of a consulting lawyer.”
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