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Official Gazette

Tuesday, February 18, 2020

Legislation on land use right transfer in Vietnam

Updated: 10:35’ - 01/04/2011

Pham Diem      
State and Law Institute of Vietnam

Since the 1980 Constitution, land in Vietnam has been under the ownership of the entire population and the State’s unified management. The transfer of land use rights constitutes a unique legal institution in Vietnam, arising out of the process of forming and developing a market economy in general and a real estate market in particular.

The land use right transfer is governed principally by the Land Law and the Civil Code.

As land is owned by the entire population, there can be no transfer of a land ownership right per se, and, therefore, the transfer of land use rights is restricted and subject to conditions set by the State.

For the first time, the 1993 Land Law (Articles 73 thru 78) recognized the right to transfer land use rights but failed to prescribe transfer conditions, forms and procedures. Only in 1995 were these matters touched upon by the Civil Code.

Regarding the form of transfer of land use rights, Article 691 of the Civil Code states: The exchange, transfer, lease and mortgage of land use rights shall be performed under contracts. The contracts for the transfer of land use rights must be made in writing and certified by competent People’s Committees.

On the conditions for transfer of land use rights, Article 693 of the Code stipulates that land users are entitled to transfer land use rights when satisfying all of the following conditions:

1. Possession of certificates of land use rights, issued by competent state bodies in accordance with the provisions of land legislation;

2. Within the land use term, which, according to Articles 26 and 27 of the Land Law, is 20 years for agricultural land assigned for cultivation of annual crops and/or aquaculture, 50 years for land assigned for cultivation of perennial trees or 50 years for forestry land;

3. The land is free of disputes; and,

4. The land use right transfer is permitted under the provisions of land legislation and civil legislation.

A. Exchange of land use rights

A contract for the exchange of land use rights is a civil contract. It is an agreement between the parties under which they transfer to each other land and land use rights.

The objects of transfer are rights to only three categories of land: agricultural land, forestry land for afforestation, and residential land. The subjects of contracts for exchange of land use rights can only be individuals and households. In contracts for exchange of land use rights, the land use right transferors are also the transferees of other persons’ land use rights.

Under Article 74 of the Land Law, households and individuals using agricultural land, forestry land for afforestation and/or residential land, may, due to their production and daily-life demands, exchange the land use rights in strict accordance with the purposes and terms of land assignment.

The Civil Code specifies in Article 700 the conditions for exchange of land use rights: Households or individuals using agricultural land or forestry land for afforestation and residential land are allowed to exchange land use rights if they meet the following conditions:

1. Convenience for production and livelihood;

2. After the exchange of land use rights, the land must be used for the stated purpose within the duration and the area limit allowed for each land category; and,

3. The exchange must be performed within the prescribed land use duration when the land is allocated by the State.

To prevent land from being divided into small pieces, especially agricultural land, and to create favorable conditions for land users to organize production and daily life, the law permits the exchange of land use rights. However, exchanged land must be used for the allowed purposes. For instance, agricultural land must be used for agricultural production and may not be turned into residential land. The change of land use purposes, if any, must be decided by competent state bodies; otherwise, land shall be recovered by the State in accordance with the provisions of the Land Law. Land users must use the land within the prescribed land use duration and the area limit for each category of land after the exchange of land use rights.

Under Article 704 of the Civil Code, the parties to an exchange of land use rights have the following rights:

1. To request the other party to transfer the land strictly in accordance with the category, type, location and condition of the land as agreed upon in the contract;

2. To request the other party to hand over all legal papers related to the land use rights;

3. To be issued a land use right certificate with regard to the exchanged land; and,

4. To use land for the right purposes and within the prescribed duration.

Meanwhile, Article 703 of the Civil Code prescribes the obligations of the parties:

The parties to an exchange of land use rights shall have the following obligations:

1. To transfer land to each other in suitability with the area, category, type, location and condition of the land as agreed upon in the contract;

2. To use the land for the right purposes and within the prescribed duration;

3. To pay fees for the exchange of land use rights;

4. To pay the difference if the value of exchanged land use rights of one party is higher than that of the other, unless otherwise agreed; and,

5. The party who is paid the difference must pay tax on the transfer of land use rights for the higher portion of the value in accordance with the provisions of legislation on the land use right assignment tax.

B. Assignment of land use rights

According to Article 705 of the Civil Code, a contract for the assignment of land use rights is an agreement between the parties pursuant to the conditions, contents and forms of the assignment of land use rights stipulated in the Code and land legislation, whereby the land user (the assignor of the land use rights) transfers the land and land use rights to another person (the assignee of the land use rights), and the assignee shall pay a given sum of money to the assignor.

The objects of assignment may only include three categories of land: agricultural land, forestry land for afforestation, and residential land. The subjects of contracts for land use right assignment can only be individuals and households.

Article 706 of the Civil Code specifies the conditions for assignment of land use rights.

For the assignors, the Code prescribed different conditions for different categories of land. For agricultural land and forestry land for afforestation, the assignors must satisfy one of the following conditions:

- Moving to other places of residence to live or to take up production or business activities;

- Changing to other occupations; or,

- No longer capable of working by themselves or having no capacity to work drectly.

For residential land, households and individuals using residential land, when moving to other places or no longer having a need for land use, shall be allowed to assign their land use rights. Thus, the conditions for assignment of residential land use rights are much easier than those for assignment of agricultural land or forestry land use rights, enabling land users to assign them at any time they deem necessary.

Meanwhile, land use right assignees must satisfy three conditions:

- Having the need for use of the land;

- Having no land or currently using land below the limits prescribed by land legislation, and, after receiving the land use rights, the total area of land, including old land and new land, must not exceed the land area limit for each land category; and,

- Having the capability to raise the efficiency of land use.

On the obligations and interests of land use right assignors, Articles 709 and 710 of the Civil Code stipulate:

The land use right assignors shall have the following obligations:

1. To request permission to assign the land use rights from competent State agencies in accordance with land legislation;

2. To assign land to assignees within the term of land allocation;

3. To assign land to assignees in accordance with the proscribed area, category, land type, location and condition of the land as agreed in the contracts and documents related to the land use rights;

4. To inform the assignees of the rights of a third party with respect to the assigned land use rights, if any; and,

5. To pay taxes on assignment of land use rights, unless otherwise prescribed by law.

Land use right assignors have the following rights:

1. To receive payment for assignment of land use rights;

2. To cancel contracts and demand compensation for damage if assignees do not pay for the assignment on time or sufficiently.

Meanwhile, under Articles 712 and 713 of the Code, land use right assignees have the following obligations and rights:

Regarding their obligations:

1. To pay assignors fully, on time and in accordance with agreements;

2. To register the land use rights with competent People’s Committees in accordance with the provisions of Articles 707 of the Code;

3. To perform other obligations in accordance with Article 79 of the Land Law; and,

4. To ensure the rights of a third pary concerning the use of the land.

Regarding their rights:

1. To request assignors to hand over all legal papers regarding the land use rights;

2. To request assignors to assign the land with the prescribed area, category, type, location and conditions of the land as agreed upon in the contracts;

3. To be issued land use right certificates for the assigned land; and,

4. To use land for the allowed purposes and according to the prescribed duration.

C. Lease of land use rights

Contracts for lease of land use rights are the agreements between the parties whereby lessors transfer the land to lessees for use within given periods while lessees must use the leased land for the allowed purposes, pay land rentals and return the land upon the expiration of the lease terms.

The subjects of land lease contracts are also individuals and households while the only allowed object is agricultural land.

According to Article 715 of the Civil Code, conditions for lease of land use rights include:

1. Households and individuals using agricultural land for cultivation of annual crops and/or aquaculture and having the right to lease land use rights shall be entitled to lease land use rights in the following cases:

a/ The households are in poverty or facing difficulties due to shortage of labor and capital; or

b/ Have taken up other occupations but not yet firmly settled therein.

2. The lease term shall be agreed upon by the parties but it must not exceed three years; in cases of exceptional difficulties, the lease term may be extended in accordance with regulations of the Government.

Under Articles 718 and 719, lessors of land use rights have the following obligations and rights:

a/ The obligations:

- To register the lease of land use rights;

- To transfer land to the lessee in accordance with the prescribed area, location, category, type and condition of the land as agreed upon in the contract;

- To lease the land use rights within the term of land allocation;

- To check and remind the lessee to protect, preserve and use the land for the right purpose;

- To pay tax on land use, unless otherwise agreed upon; and,

- To inform the lessee of the rights of a third party with regard to the leased land, if any.

b/ The rights:

- To request the lessee to make full rental payment;

- To request the lessee to immediately stop any use of the land which is not for the right purpose or causes any destruction of the land or any reduction of its value (if the lessee fails to immediately stop such violations, the lessor shall be entitled to unilaterally suspend performance of the contract and request the lessee to return the land and compensate for damage); and,

- To request the lessee to return the land upon expiration of the lease term.

Lessees under Articles 720 and 721 of the Civil Code have the following obligations and rights:

a/ The obligations:

- To use the land in accordance with the agreed purposes, within the boundary and lease term;

- Not to destroy the land or reduce its value and to fulfill other requirements as agreed upon in the lease contracts;

- To make full rental payment on time and in accordance with the place and mode of payment as agreed upon whether or not use of land yields profits, unless otherwise agreed;

- To comply with regulations on environmental protection and not cause damage to the legitimate rights and interests of surrounding land users;

- To return the land in the condition it was received upon expiration of the lease term, unless otherwise agreed upon; and,

- Not to sublease the land use rights to other person(s), unless otherwise allowed by law.

b/ The rights:

- To request the lessor to transfer the land as agreed upon;

- To use the leased land in a stable manner and within the duration as agreed upon;

- To enjoy the yields and profits from use of the land;

- To unilaterally suspend performance of the contract as specified in Article 420 of the Code; and,

- To demand a rental reduction or exemption from the lessor in cases of force majeure causing the loss or decrease of yields and/or profits.

D. Mortgage of land use rights    

A contract for the mortgage of land use rights is an agreement between the parties whereby the land user uses his/her land use rights to secure the performance of civil obligations.

Contracts for mortgage of land use rights create conditions for land-using households and individuals to borrow capital for investment in production, satisfying their essential needs.

Mortgage of land use rights differs from other forms of transfer of land use rights in that, during the mortgage contract terms, the mortgagors are still allowed to continue using the land and enjoying the yields and profits from the land, but may not exchange, assign or lease the mortgaged land.

Contracts for mortgage of land use rights also cover three categories of land that may be mortgaged: agricultural land, forestry land for afforestation, and residential land. The subjects of contracts for mortgage of land use rights are households and individuals and the mortgagees must be Vietnamese banks and credit institutions or, particularly in the case of residential land, possibly also Vietnamese economic organizations and individuals in the country.

According to Articles 733 and 734 of the Civil Code, land use right mortgagors have the following obligations and rights:

a/ The obligations:

- To hand over the certificate of land use rights to the mortgagees;

- To comply with mortgage registration procedures and cancel the mortgage registration when the mortgage contracts terminate;

- Not to exchange, assign or lease land use rights that have been mortgaged;

- To use the land for allowed purposes and not destroy or reduce the value of the mortgaged land; and,

- To repay loans in time and in accordance with the mode agreed upon in the contracts.

b/ Rights:

- To use the land within the mortgage terms;

- To receive loans from the mortgage of land use rights in accordance with agreements;

- To enjoy the yields of the land, except in cases where the yields also belong to the mortgaged property; and,

- To receive back the certificates of land use rights after the mortgage obligations have been fulfilled.

Meanwhile, mortgagees have the following obligations (Article 735) and rights (Article 736):

a/ Obligations:

- To register the mortgage together with the mortgagors; and,

- To return the certificates of land use rights when the mortgagors have fulfilled the obligations secured by the mortgage.

b/ Rights:

- To inspect and request the mortgagors to protect and preserve the land and use it for the allowed purposes; and,

- To enjoy priority in debt settlement in cases where the land use rights under mortgage are put to auction, after deduction of auction fees.

Under latter condition, if the mortgagors fail to fulfill their obligations, the mortgagees shall be entitled to request State agencies to auction the land use rights in order to recover loan principal and interest.

E. Inheritance of land use rights

The inheritance of land use rights is the transfer of the land use rights from the deceased to his/her heir(s) under a testament or by law in accordance with the provisions of the Civil Code and land legislation.

Yet, according to Article 739 of the Civil Code, not all persons who hold land use rights can bequeath their land use rights. Only the following subjects may transfer the land use rights by this means:

- Individuals who are allotted agricultural land by the State for cultivation of annual crops and/or for aquaculture;

-  Individuals or members of households who are allotted agricultural land for cultivation of perennial trees and/or forestry land for afforestation, or residential land; and,

- Individuals who have acquired the land use rights through the transfer of land use rights from other persons.

Under Articles 646 and 740 thru 743 of the Civil Code, only the following persons are entitled to enjoy the inheritance of land use rights:

- Heirs who are not deprived by courts of the rights to enjoy an inheritance;

- Persons who have a need to use land and the conditions to directly use the land for the right purposes; and,

- Persons who have no land or are using land below the limits proscribed by land legislation.

In sum, the transfer of land use rights is a unique legal institution in Vietnam, contributing to efficient land management and use compatible with the market economy, increasing production and protecting citizens’ legitimate interests.

However, as the Vietnamese economy is in the process of shifting from a centrally planned economy to a market economy, the real estate market is taking shape, and, as managerial capabilities of state agencies are poor, the current legislation on management of land is still riddled with loopholes. Legal documents on land use and management are numerous (some 600 in all), inconsistent, and even contradictory and overlapping. The administrative procedures for registering, granting certificates, and transferring land use rights are complicated and cause much trouble and expense for people while creating conditions for corruption among state officials in the field of land management.

For such reasons, land legislation in Vietnam is in the process of being further amended and revised.-

VNL_KH1 

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