Issue of May, 2024 – Update on Decree No. 02/2022/ND-CP dated January 6, 2022 on elaboration of certain articles of the Law on Real Estate Trading

Dear Valued Clients,

On January 6, 2022, the Government issued Decree No. 22/2022/ND-CP (“Decree 02”) detailing the implementation of a number of articles of the Law on Real Estate Trading. Decree 02 takes effect from March 1, 2022, replacing Decree 76/2015/ND-CP (“Decree 76”) detailing the implementation of the Law on Real Estate Trading no. 66/2014/QH13 November 25, 2014 (“Law on Real Estate Trading 2014”).

In this Legal Update, we would like to summarize and clarify some notable amendments and supplements of Decree 02 that investors should pay attention.

1. Conditions of organizations and individuals doing real estate trading

 Decree 02 updated, amended and detailed the conditions of organizations and individuals doing real estate trading to comply with current legal provisions on land, investment, construction, etc. as follows [1]:

(i) Conditions on legal capital of real estate enterprises:

Previously, Decree 76 stipulated the legal capital of real estate enterprises to be at least VND 20 billion and the basis for determining this legal capital. However, in order to comply with the provisions of the Law on Investment No. 61/2020/QH14 dated June 17, 06, 2020 (“Law on Investment 2020”), Article 4 of Decree 02 has officially abolished the provision of legal capital in Decree 76, and added regulations on the level of equity capital of real estate project investors based on the scale of land use as well as the method of determination equity norms. To specific:

In case an investor is selected as an investor of a real estate project in accordance with the provisions of law, such investor must have an equity capital of not less than 20% of the total investment capital for a project with a land use scale of less than 20 hectares, not less than 15% of the total investment capital for projects with a land use scale of 20 hectares or more. When conducting real estate trading, the project investor must satisfy the conditions specified in Article 4.1 of Decree 02.

The determination of equity specified in this Clause is based on the results of the most recent audited financial statements or the results of independent audit reports of the operating enterprise (made in the year or preceding year); in case it is a newly established enterprise, the equity capital shall be determined according to the actual charter capital contributed in accordance with the provisions of law.

Thus, Decree 02 has clarified the conditions on the financial capacity of real estate project investors, ensuring the synchronization between the Law on Real estate trading and the Law on land as well as the new regulations of the Law on Investment 2020.

(ii)  Conditions for disclosure:

Compared to Decree 76, Decree 02 has concretized the provisions of Article 6 of the Law on Real Estate Trading 2014 on the disclosure of information on real estate put into business, as well as expressing the spirit of the Government on information transparency in real estate trading activities. Accordingly, enterprise information must be disclosed on the website of the enterprise, at the headquarters of the Project Management Board (for real estate investment projects), at the real estate trading floor (for business through real estate exchanges) information about the enterprise (including name, head office address, contact phone number, name of the legal representative), information on real estate put into business as prescribed in Article 6.2 of the Law on Real Estate Trading 2014, information on mortgage of houses, construction works, real estate projects put into business (if any), information on the quantity and type of real estate products being traded, quantity, types of real estate products sold, transferred, leased and purchased and the quantity and types of remaining products that are continuing to do business.

For public information specified at that point that subsequently changes, it must be promptly updated immediately after the change.

(iii) Conditions on real estate to be put into business:

Decree 02 supplemented regulations on organizations and individuals only trading in eligible real estate as prescribed in Articles 9 and 55 of the Law on Real Estate Trading 2014. This new regulation is synchronous, systematic, uniform in regulations and guidelines between the Law and elaboration documents, as well as clearer and stricter for organizations and individuals conducting real estate business activities.

2. Some model contracts applied in the field of real estate trading

 Decree 02, the sale, transfer, lease, lease, purchase lease, sublease of real estate and transfer of real estate projects must be made into contracts according to the forms according to the Appendix promulgated together with Decree 02[2]:

(i) Contract for sale, lease and purchase of an apartment specified in Form No. 01.

(ii) Contracts for sale, lease and purchase of tourist apartments, office apartments combined with accommodation specified in Form No. 02.

(iii) Contracts for sale, lease and purchase of individual houses specified in Form No. 03.

(iv) Contracts for sale, lease and purchase of houses or other construction works other than those specified in Article 6.1, Article 6.2, Article 6.3 specified in Form No. 04.

(v) Lease contracts for houses and construction works specified in Form No. 05.

(vi) Contract for transfer of land use rights specified in Form No. 06.

(vii) Contracts for lease or sublease of land use rights specified in Form No. 07.

(viii) Contract for transfer of all (or part) of a real estate project specified in Form No. 08.

3. Conditions for assignment of contracts for sale, lease and purchase of houses formed in the future and transfer of lease contracts for purchase of existing houses and construction works

 Decree 02 has a number of important points in the regulations on conditions for assignment of contracts for sale, lease and purchase of houses formed in the future and transfer of lease contracts for purchase of houses and construction works available as follows[3]:

First, the assignment of contracts for sale, lease and purchase of houses formed in the future and the transfer of lease contracts for purchase of existing houses and construction works do not apply to contracts for sale and lease purchase of social housing.

Second, detailing and supplementing specific conditions for cases in which it is permissible to transfer contracts for sale, lease and purchase of houses or construction works, including:

(i) Having a contract of sale, hire and purchase made according to the provisions of Article 6 of Decree 02; in case the parties have signed a contract before the effective date of this Decree, the signed contract must be made;

(ii) Those who have not yet submitted a dossier of request to a competent state agency for a Certificate of land use right, ownership of houses and other assets attached to land;

(iii) Contracts for sale, lease and purchase of houses or construction works must be free from disputes or lawsuits;

(iv) Houses and constructions subject to contracts of sale or lease purchase are not subject to disclosure or mortgage as security for the performance of obligations prescribed by law, unless otherwise agreed by the mortgagee.

Third, the assignment of contracts for sale, lease and purchase of houses and construction works shall be made for the entire contract. In case of sale, lease and purchase of many houses or construction works in the same contract where the parties wish to transfer each house or construction work, the transferor must agree with the investor to amend the contract of sale, lease and purchase of houses or construction works or sign an annex to the contract before transferring the contract as prescribed in Decree 02.

Comparing with previous provisions, Decree 76 separately stipulates conditions for transfer of contracts for sale, lease and purchase of houses formed in the future and conditions for transfer of lease contracts for purchase of existing houses and construction works. In particular, there are no specific regulations on conditions as in Decree 02 above.

4. The principles of carrying out the transfer of all or part of a real estate projects

Decree 02, the transfer of all or part of a real estate project must comply with the following principles^[4]:

(i) The transfer of all or part of a real estate project shall be made when meeting the conditions specified in Article 49 of the Law on Real estate trading 2014 and applied in case the project is being implemented according to the approved project schedule and contents.

(ii) For real estate projects specified below, the transfer shall be carried out in accordance with the provisions of the law on investment:

• Real estate projects are approved by investors in accordance with the Law on Investment 2020.
• Real estate projects shall be granted Investment Registration Certificates in accordance with the Law on Investment 2020.

(iii)    For real estate projects not specified in Clause (ii) of this Section, the transfer shall comply with the provisions of the Law on Real Estate Trading 2014 and Decree 02.

Thus, it can be seen that this regulation is fully in accordance and consistent with Article 46 of the Law on Investment 2020, ensuring the separation and clarity of the cases of project transfer that will apply according to the provisions of the Law on Investment 2020; and the cases will apply according to the provisions of the Law on Real estate trading 2014.

ENT Law LLC

The full version of this Legal Update can be found here.

[1] Article 4 of Decree 02

[2] Article 6 of Decree 02

[3] Article 7 of Decree 02.

[4] Article 9 of Decree 02