One of the major bottlenecks in handling assets for enforcing judgments is that the auctioned asset is only the land, while the project’s legal status disappears. The winning bidder does not inherit the full legal rights necessary to implement the project.
In the newest article published in Phap Luat TP.HCM, Dr. Le Minh Phieu proposed:
A legal mechanism should be added to allow the auction winner to fully inherit all legal rights and obligations of the project, so that the asset is not only “released from judgment” but also is used effectively.
You can read the full article here
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[English version by LMP Lawyers]
Title: Auction winners should be permitted to inherit the full legal documents of the project
(PLO) – It should be stipulated that the assets for enforcing judgments to be auctioned are the entire real estate project, not only the land use rights, but also all approvals, consents, and licenses associated with those land use rights.
Through experience in consulting on mergers and acquisitions, I frequently work with foreign investors in the acquisition transactions of real estate projects in Vietnam.
From that practical experience, it can be affirmed that the legal conditions of the project are a vital factor in the investment decision, even more important than the location or commercial potential of real estate.
Mô tả ảnh: Lawyer Le Minh Phieu (far right, Managing Partner at LMP Lawyer) attending the seminar “Comments on Amendments to the Law on Enforcement of Civil Judgments – Solutions for Handling Enforcement Assets in Economic Cases,” organized by Phap Luat TP.HCM newspaper on the morning of May 14. Photo: THUAN VAN.
Without legal documents for the project, the auctioned assets lose a significant portion of their value.
A project that does not have a construction permit, lacks a detailed plan of 1/500, or at least does not have an investment policy decision, will not be able to be transferred to foreign investors. Conversely, the more complete the approvals and permits are, the more interested the investors will be, and the higher the project’s value will be.
“The auctions for land use rights for real estate projects will continue to be less attractive (especially for foreign investors), with low selling prices, and assets will remain “covered” if there are no mechanisms to facilitate the winning bidders.”
Dr. Lawyer. LE MINH PHIEU
However, the major issue currently lies in the fact that in enforcement cases, when selling auctioning assets which are real estate projects, the assets put up for auction only consist of land use rights and separate from the entire system of accompanying legal documents. There is currently no legal mechanism that allows the winning bidder to inherit the approvals, consents, or permits that the previous developer company had.
First of all, the auctioned assets lose most of their real value because they do not come with the project’s legal documents. The participants in the auction are significantly narrowed, especially for foreign investors. In fact, we can see very few foreign investors participating in the auctions for this reason. The winning bidder still has to start over with the legal procedures – which are costly, time-consuming, and risky. The approvals granted by the State are completely wasted, and the previous investors must sacrifice costs and time to obtain them. More seriously, the land – a national resource – continues to be “frozen” for a long time, causing waste both economically and in terms of development opportunities.
This paradox highlights a significant gap in the current Law on Enforcement of Civil Judgments, as it enforces judgments related to real estate with associated projects by considering only the land value while neglecting the legal ‘soul’ of the project.
The asset to be auctioned should be the entire real estate project.
Therefore, I propose that the amended Law on Enforcement of Civil Judgments should be clearly stipulated:
Firstly, the assets that are auctioned should be the entire real estate project – not just the land use rights, but also all approvals, consents, and permits associated with those land use rights.
Next, in order to enforce this, bidders must meet the financial and legal conditions corresponding to the status of the investor. The conditions for participants in real estate auctions should include these regulations and should only consist of basic requirements such as appropriate business sectors and sufficient financial capacity. Granting them approval to participate in the auction means confirming their eligibility to inherit the entire project (if they win the auction). There is no need to further assess their status as investors after they have successfully bid.
Finally, after winning the auction, the licensing authorities only need to issue the corresponding document (changing the name of the entity) without requiring the buyer to resubmit the application or start over. The procedures and documentation for this process must be streamlined and quick, avoiding demands for the transferee to supplement documents or meet other conditions (because, as stated, this process is considered complete once they are approved to participate in the auction).
This is not just a technical issue; it is a lever to unlock capital flow, restore asset value, and ensure the legal property rights of the buyer in enforcement proceedings. At the same time, it also protects the rights of the judgment debtor when the project is transferred at its actual value. Without this mechanism, the auctions for land use rights of real estate projects will continue to be unattractive (especially to foreign investors), with low selling prices, and the assets will remain “under wraps.”
In the context of the State revising the Law on Enforcement of Civil Judgments, this is a necessary time to add this reform-oriented regulation.
Dr. Lawyer LE MINH PHIEU
