DRAFT OF THE NEW LAW ON HOUSING

LEGAL UPDATE

On 9 September 2022, the Ministry of Construction (MOC) published a draft of the new law on housing (Draft Law) for public consultation. In comparison to the existing 2014 Law on Housing (Current LOH), the Draft Law proposes to:

• Eliminate seven existing articles from the Current LOH;

• Modify and enhance 104 articles of the Current LOH;

• Establish 34 new articles which are not present in the Current LOH; and

• Incorporate 11 key provisions from relevant guiding decrees into the Draft Law.

Upon final adoption, the Draft Law will supersede and replace the Current LOH.

In this legal update, we aim to highlight the key takeaways from the aforementioned developments.

1. Scope

The Draft Law maintains the same scope of regulation as the Current LOH. Accordingly, the Draft Law governs the ownership, development, management, use, housing transactions, and state management of housing in Vietnam. However, to prevent redundancy, housing transactions conducted by real estate businesses and transfer transactions of the future-formed house sale and purchase agreements will be regulated by the law on real estate business.

2. Term of Apartment Ownership

According to the report of MOC to the National Assembly, the Current LOH does not provide for the term of apartment ownership (except for the ownership of foreign organisations and individuals). This has resulted in apartment owners refusing relocation for reconstruction or major renovation of seriously damaged or substandard buildings. To address the Draft Law proposes two options for amending apartment ownership terms:

• Regulating terms according to the estimated useful life of the building's structures as determined in its design documentation and approved by competent government agencies. This could limit ownership rights to promote timely redevelopment.

• Non-regulating terms to avoid objections from owners or negative impacts on the real estate market or policy encouraging people to buy and live in apartments rather than houses on a piece of land.

Accordingly, the regulations and the process for renovating and reconstructing apartment buildings will be amended and supplemented as necessary to overcome existing difficulties.

3. Use of Non-residential Land for Commercial Housing Projects

Under the Current LOH, investors can develop commercial housing projects on residential land they legally own. Amendments in the 2020 Law on Investment also allow investors to use land of other types approved by a competent authority for residential conversion.

The Draft Law now proposes to clarify additional land types including:

• Land compensated for clearance or acquisition approved by competent authorities;

• Land allocated/leased by the state with one-time payment via auction, bidding, or converted from other uses; and

• Land leased commercially, for services or non-agricultural use with annual or one-time payments approved for conversion to residential housing purposes.

These amendments aim to increase the supply of commercial housing by enabling more land repurposing and alternatives for development.

4. Blocking Period for Resale of Social Residential Houses

MOC proposes two options for amending and supplementing the principles of resale of social residential houses under the Draft Law:

• Maintaining a five-year blocking period on resales as prescribed in the Current LOH; and

• Removing the blocking period entirely.

It is important to note that in both options, only individuals eligible to purchase social residential houses as prescribed by law may purchase the resold social residential houses.

Furthermore, the Draft Law proposes adding a new provision stating that sellers are not required to pay land use levy and personal income tax when reselling social residential houses. Currently, the sellers shall pay 50% of the land-use levy allocated for apartments or 100% for row houses based on land prices imposed by the provincial people’s committee at the time of the resale. Sellers have to pay personal income tax in other cases of residential house transfer.

For more information, please contact:

Phuong Huynh / Senior Associate

phuong.huynh@acsvlegal.com

Phuong Nguyen / Associate

phuong.nguyen@acsvlegal.com

Kim Nguyen / Junior Associate

kim.nguyen@acsvlegal.com

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This legal update is not an advice and should not be treated as such.

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