Legal regulations on dividing land parcels for sale – recognizing a “ghost project”

Recently, the real estate market has been disturbed by the appearance of dividing land parcels projects that are advertised as potential projects, but in fact the projects are not real – typically the case of Alibaba Real Estate Joint Stock Company with the value of “ghost project” up to more than 1,500 billion VND!

With many attractive advertisements such as “drawing for prizes, buying land for gold reward, committing to profitability, limited corner lots, …”, many clients rushed down to deposit, priority to buy without carefully researching, falling into traps, illegally misappropriating capital and falling into a dilemma.

As a law firm that has provided legal advice and resolved disputes for many clients in the above cases, LMP Lawyers analyzes the legal provisions on dividing land parcels for sale and signs to identify a “ghost project”.

A. Legal regulations on dividing land parcels for sale

The project of dividing land parcels for sale is an investment project to build and trade houses for sale or combine with leasing, and the land use rights are transferred in the form of dividing land parcels for sale.

Conditions for a project to transfer land use rights in the form of dividing land parcels for sale are specified in Clause 1, Article 194 of the Land Law 2013 and guided in Clause 17, Article 1 of Decree No. 148/2020/ND-CP dated December 18, 2020. Accordingly:

“1. In order to obtain permission for transfer or disposition of land use rights in the form of division of land into lots, sale of these divided lots, investment projects on construction of residential houses for sale or for combined sale and lease must satisfy the following conditions:

  1. a) Project investors must complete the construction of infrastructure facilities, including service, technical and social infrastructure facilities under the approved 1:500-ratio detailed master plans, ensuring the interconnection to the common infrastructure systems of the areas before transferring land use rights to people to build residential houses at their discretion; and ensuring essential utilities and amenities, such as electricity, water supply, water drainage and waste collection, must be provided;
  2. b) Project investors shall fulfill all of their financial obligations related to the projects’ land, such as land use levies, fees or land rents; land-related taxes, charges and fees (if any);
  3. c) The projects completed for such transactions must be located in areas or cities where land use rights may be transferred or disposed of in the form of division of land into lots and sale of these divided lots as provided in clause 2 of this Article;
  4. d) They must meet other conditions prescribed in laws on urban zoning, construction and development, real estate and residential house business activities.”

Thus, as long as one of the above conditions is not met, the project will not be legally eligible for sale.

B Recognizing “ghost project” and issues to check before buying land at subdivision project, land sale

The most important thing when buying project land is not to listen and believe completely what the realtors or the investor promises. After that, the project should be legally checked in the following order:

1. Documents proving project ownership

Before proceeding, all projects are required: Certificate of land use right, Written approval of investment policy, Decision on land allocation, etc.

This is the basis for determining who has the right to sell the land, who is the owner, whether it is legally recognized by the state or not. In case the realtor is the person signing the documents, it is necessary to request to be examined the authorization letter of the Investor.

2. Decision approving construction detailed planning map planning 1/500

The decision approving the 1/500 master plan is the most solid basis to affirm that the Investor has the right to build the project.

This decision will concretize the content of the zoning planning on the detailed arrangement of all construction on the land, land lot boundary. Accordingly, the Client can understand the location of the land plot in the project.

3. The acceptance document on the completion of the infrastructure by the competent state agency

The investor must complete the infrastructure before the sale. Therefore, the acceptance document needs to be exactly in accordance with the Decision approving the 1/500 planning and must be signed and accepted by the state agency.

4. Field inspection of the project

The Client should directly come to the land to determine where the land plot is located, whether the infrastructure has actually been completed or not, whether the planning is public at the project location or not. In case of necessity, the Client should ask the local people and the People’s Committee of the commune/ward about the project.

5. Checking documents proving that the investor has fulfilled financial obligations

Financial obligations of the Investor when building the project include land levy fee, rent, taxes, fees, site clearance and fees related to land (if any);

If the Investor has fully fulfilled the financial obligations for the land, usually with a very large amount, it proves that the Investor has enough financial capacity and reputation to carry out the project.

6. Check the project for distraint, mortgage, or disputes

Usually, after completing financial obligations, customers can be assured that the project is real, the Investor is reputable and the land transfer is legal.

However, in some cases, the project is eligible for sale, but the Investor is involved in disputes with partners, assets are being distrained to ensure judgment enforcement or the project has a dispute between shareholders, etc. Therefore, it is necessary to check the project’s distraint and mortgage information at the Land Registration Office or refer to information about the Investor in the magazine/ internet for consideration.

After going through the above 6 Steps, if the project satisfies the conditions, the customer can be assured of the legality of the project and care about other factors such as price, payment method, completion schedule, etc. benevolent…

Buying and selling land is very different from buying and selling apartments because the project has not yet formed but only vacant land, less liquidity, prices fluctuate according to the market and if there are legal issues, it is very difficult to process and recover the money.

Therefore, when buying and selling land, to avoid risks, you should consult a lawyer before the transaction to ensure legality, avoid capital misappropriation and more heavily than losing the money.

LMP Lawyers is proud to be a legal consultant in the real estate field for many real estate investors, buyers and a project implementation consultant for real estate businesses. We participate in the legal assessment of projects, advise on land purchase and sale procedures and represent customers to participate in legal proceedings in case of disputes.

Hopefully, with the above analysis, buyers will be able to prevent risks and make the right choices when participating in buying land at dividing land projects.

Note: The content presented above is for reference only. Depending on different times and audiences, the above content may no longer be relevant. For detailed advice, please contact LMP Lawyers.

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