Lawyer Nguyen Thuy Hanh, Vietthink Law Firm
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| A condotel in Phan Rang- Thap Cham (Ninh Thuan povince)__Photo: VNA |
The 2023 Law on Real Estate Business (the Law) has specific provisions aimed at enhancing the management of the real estate market in general and condotel projects in particular. This holds significant implications for real estate investors, particularly those involved in building condotels. Effective as of January 1, 2025, the Law is expected to help the condotel market become lively again and stimulate the tourism demand nationwide in areas where condotel investment projects are developed.
This article focuses on examining legal issues regarding condotels and certain regulations governing condotel business activities in Vietnam under the Law.
Overview of the current condotel market in Vietnam
The term “condotel” is a combination of two English words “condominium” - referring to apartments, and “hotel” - referring to lodging establishments. It means a hybrid property type that combines features of condominiums with the amenities typically associated with hotels. The primary sources of profit from condotel business come from rental and appreciation of real estate value. Typically, condotels are constructed in strategic tourist destinations or large resort areas. In Vietnam, the term “condotel” has become quite familiar in the condotel business circle and was first experimented with in Ho Chi Minh City during the 2005-07 period. Subsequently, a series of condotel investment projects emerged in such locations as Da Nang, Ho Chi Minh City, Sa Pa town, Phu Quoc island, and Nha Trang city.
Article 21.3 of Government Decree 168/2017/ND-CP dated December 31, 2017, as amended under Decree 142/2018/ND-CP dated October 9, 2018, which provides guidance on the Law on Tourism, states: “Tourist apartments are those having necessary equipment and services to serve tourists. Guests may serve themselves during their stay.” At the same time, Article 24.1 of Decree 168 also stipulates essential requirements on technical infrastructure and services for tourist apartments.
Therefore, it can be seen that condotels constitute a type of apartment equipped with all the necessary household equipment like a residential apartment, but intended for short-term stays for tourism and leisure purposes, and often constructed in tourist destinations.
The Law’s provisions on condotel business conditions
The current legal framework governing condotel investment projects can be viewed from various perspectives.
Firstly, regarding the approach to land acquisition for implementation of tourism real-estate investment projects, Article 3.10 of the 2014 Law on Construction defines condotel investment projects as construction investment projects. The land use rights applicable to condotels are the rights to use commercial and service land areas with a land use term not exceeding 50 years and extendable for up to 70 years. Upon the expiration of this land use term, land users that wish to continue using land may apply for an extension subject to consideration by the State.
Secondly, regarding the principles applicable to operation of investment projects on construction of condotel units, Article 4 of the Law requires investors engaged in real estate business activities to ensure transparency, openness and freedom of negotiations based on respect for the lawful rights and interests of all contracting parties and refrain from taking prohibited acts specified in the Law. Furthermore, real estate projects brought into business operation must meet all the conditions specified in the Law to ensure their legality.
Thirdly, regarding the conditions for conducting real estate business activities related to tourist apartments/condotels brought into operation, Article 5.2 of the Law provides specific provisions on construction projects involving condotels, which are defined as buildings with mixed-use functions for tourism and accommodation purposes, which may be officially recognized as satisfying the criteria for business operation and are subject to the Law’s regulation. This notable provision indirectly acknowledges the qualification of condotel types for business activities, thereby providing a basis for issuance of additional decrees and regulations guiding the management and commercial operation of this real estate type.
Regarding the transfer and sale of condotel units, when establishing transactions for purchase and transfer of condotel units (including ready-built and future condotel units), developers usually apply similar regulations as those governing the purchase and sale of future houses provided in the Law and the Housing Law. However, these transactions often encounter numerous obstacles and risks due to the lack of a comprehensive legal framework, especially provisions on the grant of ownership certificates to buyers.
Under the guidance provided in Article 1.4 of Decree 10/2023/ND-CP, effective as of May 20, 2023, and Article 32 of Decree 43/2014/ND-CP, owners of construction projects for tourist accommodation purposes that satisfy the criteria specified in the land law, construction law and law on real estate business may be granted house ownership and land-use rights certificates. The land use term for these projects is provided in Article 126.3 and Article 128.1 of the 2013 Land Law.
Construction project owners are responsible for ensuring satisfaction of the law-specified requirements for construction and real estate business and for the accuracy of land information shown on their certificates according to the purpose and land use term specified by law. Thus, starting from May 20, 2023, the effective date of Decree 10/2023/ND-CP, condotel projects meeting the law-specified criteria for land use, construction and real estate business will be granted ownership certificates as outlined above.
Fourthly, regarding entities participating in the condotel market, the Law introduces some new provisions concerning the participation of foreign organizations and foreign-invested economic organizations in purchasing, leasing or lease-purchasing houses and existing construction works of real estate businesses. Accordingly, during their lawful operation in Vietnam, foreign-invested economic organizations are entitled to purchase, lease or lease-purchase houses, construction works, or part of the floor area within construction works for use or business purposes. Foreign organizations are allowed to purchase or lease-purchase houses in accordance with the housing law and rent construction works for appropriate functions serving their activities under Article 15 of the Law.
In conclusion, the Law contains provisions that are more closely aligned with the condotel market in Vietnam, laying the ground for further development of legal documents to regulate and help the condotel market revive. However, the current legal framework regulating condotel business in Vietnam still needs to be more consistent and systematic in order to facilitate easier and more transparent entry for investors and customers in this market.-
