On 6 January 2022, the Government issued Decree 2/2022 on implementation of the Law on Real Estate Business 2014. Decree 2/2022 will take effect from 1 March 2022 and replace Decree 76/2015. This post will summarize some notable new regulations introduced by Decree 2/2022.

This post is written by Nguyen Hoang Duong and edited by Nguyen Quang Vu.

New definitions

Decree 2/2022 introduces definitions for various vague legal terms which are frequently used in the Law on Real Estate Business 2014, such as real properties made available for sale (bất động sản đưa vào kinh doanh), real estate project (dự án bất động sản), or contracts for real estate trading (hợp đồng kinh doanh bất động sản). The new definitions could facilitate a more consistent of the interpretation of various regulations of the Law on Real Estate Business 2014 and Decree 76/2015.

Disclosure requirement by a real estate developer

Under Decree 2/2022, a real estate developer will have to make various public disclosure about its real estate projects. In particular, the following information must be made available on website of the developer, at headquarter of project management board (in case of investment project of doing real estate business), or at real estate trading floor (in case of doing real estate business via trading floor):

• information as to real properties made available for sale;

• information as to mortgage of house, construction works, and real properties made available for sale (if any); and

• information as to quantity, type of (1) real properties available for sale, (2) real properties that have been sold, transferred, leased, and remaining real properties available for trading; and

• any change to the above information.

New thin capital rule for real estate developers

Under Decree 2/2022, the real estate developer must have its own capital for implementation of the real estate project equal to at least 20% of the total investment in case of project using less than 20 hectares of land; or to at least 15% of the total investment in case of project using 20 hectares of land or more.

This requirement seems to expand the requirement of Decree 43 implementing the Land Law 2013 on financial capacity of investors being selected as developer of real estate project and leasing land from the Government. This is because the requirement under Decree 2/2022 seems to apply to all types of real estate developers regardless of the sources of land use rights of such developers. For example, a real estate developer who subleases land from another developer (e.g., an industrial zone developer) will also have to comply with this requirement.

Decree 2/2022 also introduces methods for determining the investors’ satisfaction of financial capacity requirement. In particular,

• with respect to the developer being existing enterprise, the minimum threshold of investment capital owned by the developer will be determined based on result of its latest audited financial statements or result of latest independent audit report which was formulated in the current year or previous year; and

• with respect to the developer being newly incorporated enterprise, the minimum threshold of investment capital owned by the investor will be the actual charter capital contributed by the founding stakeholder(s) in accordance with law.

Model contracts for transaction involving real properties

Decree 2/2022 now requires the transactions involving real properties must be established in accordance with the model contracts scheduled to Decree 2/2022. Decree 2/2022 provides for the following types of model contracts:

• Apartment sale and purchase contracts;

• Private house sale and purchase contracts;

• Condotel, and officetel apartment sale and purchase contracts;

• Residential house or construction work leasing contracts;

• Land lease/sub-lease contracts; and

• Real estate project transfer contract.

Previously, under Decree 76/2015, use of regulated model contracts for real estate transaction is only optional and the contracting parties may amend the model contracts as long as the signed transaction documents contain all crucial contents required by law. While Decree 2/2022 allows real estate contracts signed before 1 March 2022 to remain valid, it is not clear if amendments to such contracts must follow the model contracts attached to Decree 2/2022.

In the absence of such a similar regulation under Decree 2/2022, it is not clear if an agreement which fails to follow the regulated model contract could be held invalid under law. This is because under the Civil Code 2015, regulated model contract is not a condition for a civil transaction to take effect. That said, Decree 2/2022 seems to suggest that in case the parties are required to submit the signed contracts for completion of legal procedures, the competent authorities may reject the transaction documents which are not drafted in accordance with the regulated forms.

Unless the model contracts allow for modification and variation by the parties, the new requirements on model real estate contracts could impose significant restrictions on how a real estate developer conducts its business.

Conditions of transferring contract for sale and purchase/lease and purchase of real properties

Decree 2/2022 imposes some new conditions for transfer of contract for sale and purchase/lease and purchase of off-plan residential house (nhà ở hình thành trong tương lai) and contract for lease and purchase of existing construction works. In particular,

• the transferring party must have a contract for sale and purchase/lease and purchase which is established in accordance with the regulated model contract, unless the contract was signed before 1 March 2022;

• there is no dispute, claim arising from the contract for sale and purchase/lease and purchase; and

• the house or building under the contract is not seized or is the subject of a mortgage to secure performance of obligations in accordance with law, unless the mortgagor agrees otherwise.

If the purchaser of the contracts discussed above is another real estate developer, then the purchaser being another real estate developer must notify such transfer of contracts in writing to local housing authority. The notice must include the information about name, address of real estate project, the transferor of contract, the number of contracts being transferred and the number of houses, buildings under such transferred contracts. This is a new requirement which seems to allow the authorities to get more information about sale of real estate products in the market.

Procedures for transfer of real estate project

Under Decree 2/2022, transfer of a part or entire of real estate projects may need to follow two separate set of legal procedures. In particular,

• with respect to real estate projects of which (1) the developers have been approved, or (2) the investment registration certificates (IRC) have been issued in accordance the Investment Law 2020, the transfer of such real estate projects will follow the procedures for transferring investment project of the Investment Law 2020; and

• with respect to real estate projects which are not fall within the cases mentioned above, the transfer of such real estate project will follow the procedures contemplated under Decree 2/2022.

Regarding the transfer of real estate projects under Decree 2/2022, Decree 2/2022 requires the transferring investor to submit the following additional documents to competent authorities when it applies for such transfer of the real estate project:

• a draft of contract for transferring a part or whole of the real estate which is established in accordance with the prescribed form under Decree 2/2022;

• documents evidencing completion of land clearance work; and

• documents evidencing completion of construction of infrastructure works in accordance with the schedule of the project in case of transferring entire infrastructure construction projects.