Conditions for putting existing construction works into business under the law on real estate business

The 2023 Law on Real Estate Business sets out stringent conditions for putting construction works with completed construction (existing construction works) into business, with a view to protecting purchasers’ interests and ensuring market transparency. This article analyses the three groups of conditions under Article 14 of the Law on Real Estate Business that project developers and investors need to grasp before entering into transactions.

The Law on Real Estate Business No. 29/2023/QH15, adopted by the 15th National Assembly on 28 November 2023, taking effect as of 1 August 2024, together with its amending and supplementing documents (hereinafter referred to as the “LREB”), sets out stringent conditions for putting existing construction works into business. The principal purpose is to protect the rights and interests of purchasers and lease-purchasers and to ensure the transparency of the real estate market. The article below analyses the groups of conditions prescribed in Article 14 of the LREB, comprising general conditions, conditions relating to real estate projects, and specific conditions applicable to floor area portions within construction works.

1. General conditions

Article 14 of the LREB provides that existing construction works put into business must simultaneously satisfy the following general conditions:

• – No disputes: The construction works must not fall under circumstances where there is a dispute over land use rights attached to the construction works or a dispute over ownership of the construction works that is being notified, accepted or resolved by a competent authority. Where a dispute has been resolved by a competent authority through a legally effective judgment, decision or arbitral award, the works do not fall within this restriction.
• – Not subject to distraint: The construction works are not distrained to secure judgment enforcement.
• – Not prohibited from transaction by law: The construction works do not fall under circumstances in which transactions are prohibited by law.
• – Not suspended or temporarily suspended from transactions: The construction works are not within a period during which transactions are suspended or temporarily suspended in accordance with law.
• – Information already disclosed: Real estate and real estate projects put into business must have their information disclosed in accordance with Article 6 of the LREB.

Article 14 of the LREB does not apply to every type of real estate; it governs only the conditions for putting existing construction works into business. These conditions serve as the basis for determining the lawfulness of transactions and protecting the rights and interests of market participants.

2. Conditions relating to real estate projects

In addition to the general conditions, Article 11 and Clause 2 of Article 14 of the LREB prescribe further conditions relating to the real estate project and the legal status of the construction works. Accordingly, the project must satisfy the following elements:

Conditions for real estate projects

• – Conformity with planning and compliance with construction investment procedures: The real estate project must conform to the land use master plans and plans, construction planning and urban and rural planning approved in accordance with law. The order and procedures for investment in and construction of the project must comply with the laws on planning, investment, land, construction, housing and other relevant laws. For works subject to permitting requirements, the project developer must comply with the construction permit. The project must be constructed in accordance with the approved schedule, planning and design, and within the project implementation duration approved by the competent State authority.
• – Documents certifying acceptance for operation and use: The construction works must have documents certifying that they have been accepted for putting into operation and use in accordance with the law on construction.
• – Fulfilment of land-related financial obligations: The project developer must have fully discharged its land-related financial obligations to the State, including land use levies, land rents and land-related taxes, fees and charges (if any) in respect of the land attached to the construction works put into business.
• – Certificate of land use rights: There must be a certificate of land use rights in accordance with the land law in respect of the land attached to the construction works.

3. Specific conditions applicable to floor area portions

Beyond the above conditions, Clause 3 of Article 14 of the LREB further imposes specific requirements on the business of floor area portions within construction works, as follows:

• – Created under a lawful investment project and eligible for property registration: The construction works must be created under an investment project complying with the laws on investment and construction, and must satisfy the conditions prescribed by the law on property registration for the competent State authority to grant registration of property ownership to purchasers and lease-purchasers.
• – Specific use function and separate delineation: The floor area portion to be sold or lease-purchased must have a specific use function and be delineated separately from other areas within the works pursuant to the project approved by the competent authority, and must be clearly reflected in the design dossier, ensuring that the owner may manage and use such portion independently.
• – Compliance with specialised technical regulations and standards: The construction works and the floor area portion must be correctly designed in conformity with the specialised technical regulations and standards applicable to the type and function of such works.

Compliance with specialised technical regulations and standards

• – Determinable attached land use rights: The floor area portion to be sold must have determinable attached land use rights, including the form and duration of land use and the land area used in common or separately with other owners of the works and other land users, in accordance with the land law.
• – Clear determination of land-related financial obligations in the contract: The floor area portion must have clearly determined land-related financial obligations, including land use levies, land rents and related taxes, fees and charges (if any) payable by the seller, the lease-purchase provider or the purchaser or lease-purchaser, which must be clearly stated in the sale or lease-purchase contract.
• – Construction on land allocated with collection of land use levies or leased with one-off rental payment: The works must be constructed on land the form of use of which is allocation by the State with collection of land use levies or lease by the State with one-off payment of rent for the entire lease term.

Conclusion

The above conditions are structured in tiers, ranging from fundamental requirements concerning the legal status of the real estate (no disputes, no distraint, no prohibition on transactions), to specific requirements on the project’s legal dossier and the developer’s financial obligations, and further to particular conditions designed to ensure the independence and clarity of the function and ownership of each floor area portion.

In practice, the assessment of whether construction works are eligible to be put into business is not based solely on Article 14 of the LREB, but must also be considered concurrently with the provisions of the laws on land, construction, housing and investment. Before executing or performing a transaction, project developers, real estate business organisations and investors should thoroughly review the project’s legal dossier, the status of performance of financial obligations, the acceptance documents and the information disclosure conditions, in order to mitigate legal risks and ensure the lawfulness of the transaction and the lawful rights and interests of the parties.