On 25 November 2019, the Ministry of Justice (MOJ) issued Circular 7 guiding some contents of mortgage of land use right and asset attached to land (Circular 7/2019). Circular 7/2019 will take effect from 10 January 2020 and replace Joint Circular 9 of the MOJ and Ministry of Natural Resources and Environment (MONRE) dated 23 June 2016 (Joint Circular 9/2016) on the same subject matter. In general, Circular 7/2019 only provides some guiding and supplementing provisions for Decree 102 of the Government dated 1 September 2017 (Decree 102/2017) rather than providing detailed guidance as Joint Circular 9/2016.
Competent authority managing the registration of mortgage
Previously, the document detailing the registration of mortgage over land use right and asset attached to land is usually a joint circular of the MOJ and MONRE. However, since joint circular is no longer legislative document (văn bản quy phạm pháp luật) under Law on Laws 2015. Accordingly, the unified authority to manage the security interest registration is vested in MOJ. Under Decree 102/2017, the MOJ now has the authority to issue or to submit for the Government to issue legislative documents on the registration of security interest, which includes Circular 7/2019.
Registration of mortgage of project
Compared to Joint Circular 9/2016, Circular 7/2019 no longer classifies housing construction investment project and non-housing construction investment project as future assets attached to land (tài sản gắn liền với đất hình thành trong tương lai). The registration of the mortgage of construction investment projects is recognized as a separate case of mortgage registration. However, procedures to register the mortgage of construction investment projects are similar to the registration of mortgage of land use right or future asset attached to land being house and construction.
Circular 7/2019 provides a new principle as follows: if the investor mortgages and registers a mortgage of (i) non-housing construction investment projects, (ii) other construction investment projects, or (iii) future construction in the projects mentioned in (i) and (ii), then before selling a construction in the relevant project, the investor must amend the registered mortgage to remove such construction from the scope of mortgaged assets. Such principle is similar to which applies to the case of housing construction investment project, where to sell a house in such project, the developer must amend the registered mortgage to remove such house from the scope of the mortgaged project. However, the principle applicable to residential houses allows the developer, the buyer and the mortgagee to agree otherwise while the principle applied to non-housing project is silent on such issue. On the other hand, Circular 7/2019 fails to clarify if the developer must apply such process if the developer only sells a part of such construction, for example: a suite or a floor of a building.
Mortgage of land use right and asset attached to land under common ownership
Circular 7/2019 provides new provisions on the registration of mortgage of land use right and asset attached to land under common ownership in its Article 12. However, due to bad drafting, it is unclear if such Article is intended to provide (i) limited cases where a real-estate mortgage can be registered or (ii) exceptions where a real-estate mortgage with unusual trait can still be registered.
We are of the view that (ii) is more logical, since the basic case of mortgage of land use right and asset attached to land under common ownership is absent from Article 12. The basic case is where a couple mortgages their land use right while they are both recognized on the certificate of land use right, ownership of house and asset attached to land (LURC) and both signed the mortgage agreement.
Circular 7/2019 provides that the land office will undertake the registration of mortgage of land use right and/or asset attached to land in the following cases:
(i) if the mortgaged asset is the common asset of the wife and the husband, where the LURC only lawfully records the wife or the husband as the land user or asset owner but the mortgagors in the mortgage agreement are both the wife and the husband;
(ii) if the mortgaged asset is the common asset of the household, where the LURC only records the name of the head of the household, but the mortgagors in the notarized/certified mortgage agreement also include other members of the household who have the common ownership towards the mortgaged asset; and
(iii) the LURC only records the name of the private enterprise but the mortgagors in the mortgage agreement are the owner of the private enterprise or the owner and the owner’s spouse.
Circular 7/2019 regulates that a co-owner/co-user of the land use right or asset attached to land wants to register the mortgage of his/her part in the common land use right or asset attached to land, he/she must first conduct the split procedure to get a separate LURC. This is in line with the principle of the Land Law 2013 on the implementation of right of a group of co-owners/users.
Written By Nguyen Hoang Duy and edited by Nguyen Quang Vu.
