NEW POINTS OF DECREE 10/2023/ND-CP AMENDING AND SUPPLEMENTING SOME ARTICLES OF DECREES GUIDING THE IMPLEMENTATION OF THE LAW ON LAND 2013
Decree 10/2023/ND-CP (“Decree 10”) amending, supplementing some articles of decrees guiding the implementation of the Law on Land 2013 was just issued by Deputy Prime Minister Tran Hong Ha on 03 April 2023 with many highlights. One of the most noteworthy points of this Decree is the regulation on granting the certification of ownership of land-attached construction (“LURC”) with respect to the constructions used for tourist accommodation purposes on service and commercial properties. That means, from 20 May 2023, investors who own Condotel will be able to obtain a LURC if they meet the conditions recognized by the law. This article will discuss some significant regulations that will help clarify the aforementioned matter.
1. Condotel and some legal setbacks before 20 May 2023
(a) Condotel is not yet specifically defined in Vietnamese laws
Condotel had yet to be formally defined in any specific legal instruments. Since there was no formal governing regulation, there were various definitions and points of view about Condotel.
Condotel, which stands for condominium and hotel, is a type of multi-purpose tourism real estate that may be used for both housingand tourist accommodation (such as a motel, hotel, or resort), and is referred to as tourist apartments, accommodation apartments, or tourist accommodation apartments. In practice, the phrase “tourist apartment” was mentioned in Decree 02/2022/ND-CP and Official Dispatch no. 703/BTNMT-TCQLDD of the Ministry of Natural Resources and Environment (”Official Dispatch 703“). Furthermore, according to the Tourism Law 2017, a tourist apartment is considered as one of tourism accommodation establishments.
In conclusion, while Condotel has been cited in several documents, its definition has yet to be formally legislated and merely ends at being mentioned. Based on the foregoing, Condotel is not only houses or offices, but a completely new product that requires official definition and its own legal corridor.
(b) There is no legal basis for establishing ownership rights to Condotel
Before 20 May 2023, there were no official documents that indicated the establishment of ownership rights to Condotel. In contrast to apartments which can be granted LURCs, the purchase and sale of Condotels are performed only through contracts, with no document proving the buyer’s ownership of these properties. As a result, the biggest issue with Condotel is the lack of a specific legal framework under Vietnamese laws that recognizes ownership rights for these products, resulting in rising concern for investors and customers who own Condotels.
Recent statistics report of Ho Chi Minh City Real Estate Association (HOREA) shows that, until the end of 2022, for Condotel only, there are over 83,000 units waiting to be granted LURCs nationwide, the most of which are owned by resorts, using commercial and service land funds for a limited duration from 50 – 70 years. Hence, perfecting the legal framework for Condotel products is a very urgent issue at the moment.
2. Starting from 20 May 2023, there are basis for granting LURCs for Condotels
The introduction of Decree 10 has partially untied the legal knot for Condotel products, especially the ownership rights for this type of property.
Particularly, Article 1.4 of Decree 10 supplements regulations for issuing LURC for Condotel as follow:
“For construction projects developed to serve travel accommodation purposes as prescribed in laws on tourism on commercial or service land, if any of them satisfies the conditions set forth in laws on land, construction and real estate business, the ownership of such construction project attached to land is certified according to the commercial or service purposes of land as prescribed in clause 3 of Article 126, and clause 1 of Article 128 in the Law on Land. Owners of these construction projects shall be held legally responsible for compliance with the conditions prescribed in law on construction and law on real estate business”
Correspondingly, properties used for tourist accommodation in compliance with the tourism laws on commercial and service land, if fulfilling all requirements, shall be granted the LURCs.
The issue that needs to be addressed in this new regulation is how the purpose of tourist accommodation is interpreted from the viewpoint of Vietnamese laws. Article 2.6 Residence Law 2020 prescribes “accommodation” means a citizen’s state of living at a location other than their permanent or temporary residence for less than 30 days. As for “tourism”, according to Article 3.1 of the Law on Tourism 2017, is defined as activities related to people’s travels outside their usual places of residence for no more than 01 consecutive year in order to satisfy the needs of sightseeing, leisure, recreation, study, and exploration of tourism resources or combine with other lawful purposes. According to the aforementioned legal basis, tourist accommodation purpose refers to the citizen’s living at a location which is not their permanent or temporary residence for less than 30 days to suit their sightseeing, leisure, recreation, study, and exploration and other legal needs. As a result, tourist accommodation under Article 48 Tourism Law such as Condotel, hotel, tourist villas, tourist motels, etc. will be granted the LURC.
3. There are some legal problems about the issuance of the LURC under Decree 10.
Even though Decree 10 has addressed the issue of granting LURCs for Condotels, some limitations are still in place:
(a) Complication with the term of ownership of Condotel
According to the content of Decree 10, Condotels built on commercial and service land shall be granted LURCs if they meet all requirements. Pursuant to Article 126.3 of Land Law 2013, the maximum term of commercial and service land use is 50 years. Article 126.3 of Land Law 2013 also stipulates that
“when the land use term expires, upon the land user’s request, the State may consider extending the land use term but not exceeding the time limit specified in this Clause”
This regulation gives the State the power to decide whether to extend land use or not, which means that project owners and Condotel owners may be denied the extension of land use. This could directly affect the interest of Condotel owners if the Condotel ownership term is longer than 50 years. Hence, the law should specify the duration of condotel ownership or establish a “preference” mechanism to prolong the use of commercial and service land when the Condotel ownership term exceeds 50 years.
(b) There are no specific regulations governing the “eligibility” for a Condotel to be granted a LURC
Moreover, Decree 10 has not defined what “eligible” means, particularly what criteria a Condotel must meet to get a LURC, but instead referred to other laws such as the land law, the construction law, and the real estate trading law. Also, there is no official authority responsible for assessing the “eligibility” of investors and constructions. Condotel is a new product, unlike earlier construction which was granted LURCs, the lack of clear guidance may cause licensing agencies to be “reluctant” to issue the LURC. Besides, Condotel has its own distinct characteristics. Hence, it is crucial to specify the conditions for granting the LURC to this type of establishment, which would help to apply the regulations more effectively in practice.
Note: To the extent of this article, we only focus on the issuance of LURCs for Condotels without analyzing other types of property relating to Decree 10.