Started from 1st August 2024, a transfer of a real estate project is governed by the LoERB 2023 and its guidelines. The new legal framework establishes a legal process applicable to a transfer of partial or an entire real estate project from a developer to another developer. The legal update summarizes few key points of the said legal frameworks which developers should be aware of when engaging in project transfers under the updated legal framework. The legal brief aims to cover (1) the concept of transferring a real estate project, (2) the applicable principles, (3) the requirements imposable for transferor and transferee, and (4) the transfer procedures.

1. Transfer of real estate project[1]

Transfer of real estate projects is one of the real estate business forms.[2] It refers to an entire project or a portion as well as any pertinent rights, duties, responsibilities legitimate interests and obligations to related parties over the project or any its portion that will be transferred from a transferor to the transferee under a contract.

Of note, transferees who continue constructing and trading the project after taking the transfer may be either economic organizations or foreign-invested business organizations[3].

2. Principles to transfer a real estate project[4]

A partial or an entire project may be transferred from its transferor to a transferee provided that the project period retains within the timeframe approved by a competent authority; such a transfer does not cause any change to the planning or project objectives approved; and legitimate rights and interests of relevant parties shall be ensured. Following the transfer, the transferee will become an investor in the project or a portion of it, inheriting all rights and responsibilities of the project investor who transferred the project.

3. Project transfer requirements[5]

For the feasibility to transfer a project or its portion, both transferor and transferee shall meet conditions on project transfer under the regulations of real estate business; comply with the Land Law provisions regarding forms, purposes and duration of land use, and land registration; and satisfy conditions set out in Investment Law and relevant laws. Below are the out – of - critical conditions

3.1   Requirements which a transferor shall meet

a.   To comply with investment regulations, the transferor has obtained the decision regarding investment guidelines or investment approval or project investor recognition. The project period has not expired yet and the project has not been banned from operation under a decision given by a competent authority.

b.  To ensure adherence to planning and construction regulations, the detailed planning of the project has been approved in accordance with the Construction Law and the Law on Urban Planning.

In case the entire infrastructure facilities construction project is transferred, corresponding technical infrastructure facilities have to be built completely in alignment with its approved schedule, design and detailed planning as well as Construction Law, the Law on Urban Planning.

In case a portion of project is transferred, the transferor is required to ensure that work products or the business objectives of that portion are separate from those of the remaining portions of the project.

c.   To ensure adherence to land regulations, firstly the project land is not subject to a decision on land revocation given by a competent authority. Secondly, the project or its portion to be transferred has been clear from compensation and support for resettlement. Thirdly, its transferor has been granted a decision on land lease or land allocation or land repurposing for implementing the project and has fulfilled land-related financial obligations. Fourthly, the related land use right is not disputed or banned or suspended from trading and other requirements shall be met by the transferor.

3.2  Requirements which a transferee shall meet

A transferee of a project or a portion shall meet certain requirements, including

a.   Transferee maintains safe ratios of existing loan balances and bonds to owner equity.[6]

b.   The transferee has its equity capital being at least 20% of the total investment of that project if the project land area is less than 20 hectares or 15% if the project land area is 20 hectares or more. The transferee is capable of raising capital for implementing that project.[7]

d.    Most importantly, the transferee is required to commit to completing and operating the project or its portion after transferred as approved. If there are any changes in such approved contents of the project, the transferee is required to seek approval for such changes in accordance with law beforehand.[8]

4. Process of real estate project transfer[9]

Firstly, the transferor is required to obtain the decision on transfer of a project or its portion under the jurisdiction of either the Prime Minister or the provincial People Committee as applicable. Next, both transferor and transferee execute a transfer contract which remarkably, shall rely on a model contract annexed to Decree 96[10]. Unless otherwise indicated therein, both parties are obliged to comply with and not change the contents of the model contract. Then, they carry out the handover of the transferred project or its transferred portion and relevant dossier; such a handover must be recorded in writing. Once it has taken over and fulfilled any levy responsibilities, the transferee can proceed with the development of the project or its transferred.

The LoREB 2023 and its guiding decrees establishes a streamlined and transparent framework for transfers of real estate projects or their portions. With clear conditions applicable to the project and the parties involved, these regulations facilitate smoother transactions while safeguarding market stability and growth. Following these rules not only guarantees legal compliance but also encourages a "healthy" project transfer market in the real estate industry.

[1] Art 3.7, LoREB 2023

[2] Art 3.1, LoREB 2023

[3] Art 10, LoREB 2023

[4] Art 39.1, LoREB 2023

[5] Art 39.4, Art 40, LoREB 2023

[6] Art 9.2b, LoREB 2023

[7] Art 9.2c, LoREB 2023

[8] Art 40.2, LoREB 2023

[9] Art 41, Art 42, LoREB 2023; Art 11, Decree 96

[10] Decree 96/2024/ND-CP issued on 24th July 2024, elaborating certain articles of the law on real estate business