The Law on Real Estate Business 2023 was passed by the National Assembly on 28 November 2023 after several rounds of consultation and adjustment. The adjustment of the law on real estate business aims not only to overcome the shortcomings of the Law on Real Estate Business 2014, but also to ensure consistency with other overlapping regulations such as the Law on Housing and the Land Law.
The new law focuses on 04 main issues: real estate business activities, real estate put into business, rights and obligations of entities in real estate business activities, and state management in real estate business activities. Each of these issues has been carefully considered and more detailed regulations compared to the old law.
1. Types of real estate put into business:
The types of real estate put into business under the current Law on Real Estate Business are houses, construction works or types of land allowed for business according to land law. The Law on Real Estate Business 2023 stipulates 05 types of real estate put into business including:
(i) Existing houses and future-formed houses.
(ii) Existing construction works, future-formed construction works.
(iii) Floor area in construction works.
(iv) The right to use land with technical infrastructure in real estate projects.
(v) Real estate project.
The business of land use rights has just been added to the Law on Real Estate Business 2023, while the Law on Real Estate Business 2014 refers to the corresponding regulations of land law.
For each type, the Law on Real Estate Business 2023 specifically regulates the conditions for business entry as well as the rights and obligations of the parties when participating in transactions.
2. Deposit to buy Off the Plan House is no more than 5% of the selling price, reduce the first payment amount when leasing/purchasing Off the Plan House and manage the transaction using non-cash payment method
The current law does not recognize the need to make a deposit for Off the Plan House, but only strictly regulates the period when the advance payment can be collected, and the amount of money collected by the Investor. Accordingly, the Investor can receive no more than 30% of the contract value on the first payment.
However, the Law on Real Estate Business 2023 clearly stipulates that real estate investors can only collect a deposit of no more than 5% of the lease/purchase price of houses, construction works, and gross floor area in a construction project from the deposit party to buy/lease when the house or construction project has met all conditions for being put into business according to the law and the deposit agreement must clearly state the selling/leasing price for houses, construction projects, gross floor area in construction projects. Accordingly, the new law also stipulates that the first payment must not exceed 30% of the contract value, including the deposit.
To manage real estate sales and real estate brokerage, the Law on Real Estate Business 2023 stipulates that the State has policies for organizations and individuals to make non-cash payments in real estate transactions. Although payment method and deadline are one of the main contents of contracts in real estate business, the parties are not completely free to agree on payment methods. Project investors and real estate businesses receive payments from customers through accounts opened at domestic credit institutions or active foreign bank branches operating legally in Vietnam.
The current Law on Real Estate Business does not have regulations on a non-cash policy in real estate business.
It can be said that the new regulations clearly reflect the legal perspective in ensuring the nature of the deposit, payment method and minimizing risks for the buyer, who is often the weaker party in the real estate business.
3. A real estate brokerage business only needs 01 person to have a practice certificate
As for the conditions for an organization to have the right to conduct real estate brokerage services, the current Law on Real Estate Business stipulates that a real estate brokerage service enterprise must have at least 02 persons with real estate brokerage practice certificate. However, the new Law on Real Estate Business only requires businesses to have at least one individual with a real estate brokerage practice certificate. This regulation has also loosened and created favorable conditions for businesses wishing to register and conduct this service.
4. Tighten the conditions for dividing lots for sale in real estate projects
There are 02 forms of transferring the usage right of real estate that has technical infrastructure in real estate projects according to the Law on Real Estate Business 2023. This classification is based on the subject of the transfer: (i) for individuals to self-build and (ii) for organizations to invest in building houses, construction works.
The form of transferring the right to use real estate that has technical infrastructure in real estate projects for individuals to self-build houses is the form of dividing lots for sale. The Law on Real Estate Business 2023 details the business conditions for the right to use land that has technical infrastructure in real estate projects. The conditions for land that has technical infrastructure in real estate projects for individuals to self-build houses are stricter than the conditions when transferring to organizations. In addition to the common conditions, when dividing lots for sale, the investor must meet:
(i) The land does not belong to the ward, district, city of special type, type I, type II and type III urban areas; not in the case of auctioning land use rights to invest in housing construction projects as prescribed by the Land Law. For the remaining areas, the provincial People’s Committee bases on the conditions of the locality to determine the areas where real estate project investors are allowed to transfer the right to use land that has technical infrastructure for individuals to self-build houses.
(ii) Before transferring the right to use land that has technical infrastructure in real estate projects, the project investor must have a written notice sent to the state management agency on real estate business at the provincial level about the right to use land meets the conditions to be transferred.
The Law on Real Estate Business 2023 has also tightened the conditions for dividing lots for sale compared to current law. According to the regulations of land law, Article 41 of Decree No. 43/2014/ND-CP amended by Decree No. 148/2020/ND-CP, project investors are only restricted to dividing lots, selling plots in the wards of special urban types and type I urban areas under the Central Government; area with high requirements for landscape architecture, downtown area and around architectural highlight works in the city; or the front of regional level roads and main landscape roads in the city.
Thus, with the new regulation, the activity of dividing lots for sale has been tightened to the wards, districts, cities of type II and type III urban areas.
5. Disclosure of information about real estate put into business
The Law on Real Estate Business 2023 specifies more responsibility to disclose information about real estate put into business compared to current regulations. Current law does not regulate the time of information disclosure. However, according to the new law, the obligation to disclose information must be performed before putting the project into business. In other words, disclosing information becomes one of the conditions to put real estate into business.
Depending on the type of real estate put into business as stated in Point 1 above, the information that real estate business enterprises must disclose will differ. Real estate businesses must fully, honestly, accurately disclose information as prescribed by law. When there is a change, the disclosed information must be updated.
Places to disclose information include:
- Information system about housing and real estate market; and
- E-portal of real estate enterprise(s).
6. Use of template contract in real estate business
Decree No. 02/2022/ND-CP provides 08 real estate business contract templates related to the sale, transfer, lease, lease purchase, sublease of real estate, transfer of real estate projects effective from 01 March 2022. According to current regulations, real estate business activities must make a contract according to the template prescribed by the government.
The Law on Real Estate Business 2023 stipulates 11 types of real estate business contracts including:
(i) Purchase, lease-purchase contract of houses;
(ii) House rental contract;
(iii) Contracts for sale, lease purchase of construction works, floor area in construction works serving tourism, accommodation purposes;
(iv) Lease contract for construction works, floor area in construction works serving tourism, accommodation purposes;
(v) Contracts for sale, lease purchase of construction works, floor area in construction works serving education, healthcare, sports, culture, office, commerce, services, industry and mixed-use construction works;
(vi) Lease contract for construction works, floor area in construction works serving education, healthcare, sports, culture, office, commerce, services, industry and mixed-use construction works;
(vii) Contract for the transfer of the right to use land that has technical infrastructure in real estate projects;
(viii) Lease, sublease contract of the right to use land that has technical infrastructure in real estate projects;
(ix) Contract for the transfer of the entire real estate project;
(x) Contract for the transfer of a part of a real estate project; and
(xi) Contract for the transfer of a purchase, lease purchase contract of houses, construction works.
The National Assembly delegates the Government to regulate types of template contracts in real estate business. Template contracts apply to project investors and real estate businesses. These entities are responsible for disclosing real estate business contracts as prescribed for disclosing information about real estate projects as analyzed above.
In addition to 11 types of real estate business contracts, the Law on Real Estate Business 2023 stipulates 04 types of real estate service business contracts. There is no regulation on template contracts in real estate service business. However, the main content of each type of contract in real estate business is stipulated in Article 46 of the Law on Real Estate Business 2023. Organizations and individuals when establishing real estate business contracts, real estate service business contracts must comply with the law on real estate business and the Civil Code. This ensures the freedom of agreement of the parties compared to imposing the use of template contracts according to Decree No. 02/2022/ND-CP.
7. Regulations on Vietnamese people residing abroad
Unlike the Law on Real Estate Business 2014, the new Law separates Vietnamese people residing abroad between people who are Vietnamese citizens (people who still have Vietnamese nationality) and people who are not Vietnamese citizens (people without Vietnamese nationality). Accordingly, people residing abroad who still have Vietnamese nationality are allowed to do real estate business like domestic organizations and individuals.
8. Responsibility for recording transaction prices
The contract value plays a very important role in determining the payment obligations between the parties and the financial obligations to the state. If the transfer value of assets recorded on the contract is lower than or equal to the price according to the land price list, the house price list prescribed by the provincial People's Committee, the transfer value of assets to calculate tax will be determined as the price prescribed by the provincial People's Committee. On the contrary, if the transfer value of assets recorded on the contract is higher than the price according to the land price list, the house price list prescribed by the provincial People's Committee, the transfer value of assets to calculate tax will be the price recorded on the contract. To reduce tax responsibilities to the state, the parties often tend to write the price in the contract lower than the actual value of the transaction.
In order to limit the situation where the price in the contract does not match the actual transaction price, the Law on Real Estate Business 2023 stipulates that organizations and individuals doing real estate business are responsible for recording transaction prices in the contract. The specific determination of the subject with responsibility helps to raise the awareness of the parties and the effectiveness of law enforcement.
9. Detailing the conditions for each type of real estate to be put into business
Depending on the type of real estate put into business, the Law on Real Estate Business 2023 stipulates in detail the principle and corresponding business conditions of each type.
In which, the gross floor area in construction works is a new type of the Law on Real Estate Business 2023. The business conditions of this type are also of particular concern. This type is subject to many specific conditions on construction and investment. To align with land law, the transaction of gross floor area of the construction only applies to structures on land where the State has allocated land with a one-time land use or rental fee for the entire lease period.
Furthermore, any financial obligations related to the land, which the seller, leaser, buyer, or lease-purchaser of the construction floor area is required to pay, must be clearly defined, and recorded in the purchase or lease-purchase contract.
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