Regulations on selling land lease rights to other enterprises in Vietnam

In the context of the modern economy, the transfer of land lease rights to enterprises is becoming an urgent issue. Especially with the latest regulations of the Land Law  2024 applied from August 1, 2024, understanding this regulation is extremely important. The following article by Viet An Law will help you learn about the regulations on selling land lease rights to other enterprises in Vietnam. Note: the regulations apply from August 1, 2024.

Overview of land lease rights

Pursuant to Clause 37, Article 3 of the Land Law 2024, the lease right in a land lease contract is defined as follows:

“Rights to lease in a land lease contract means the land user’s rights established when the State leases out with annual land rent payments. The land user is entitled to convey his/her rights to lease in the land lease contract; the conveyee is entitled to inherit the land user’s rights and obligations according to this Law and other relevant laws.”

If in the Civil Code 2015, “lease right” can be considered a property right that can be valued in money, the Land Law 2024 considers “lease right” as a property right arising from a land lease contract with the State (Article 46 of the Land Law 2024).

Pursuant to the new Land Law effective from August 1, 2024, land users have the right to:

• Transferring the lease right, and the transferee will inherit the rights and obligations of the land user according to the Land Law and related laws.
• To inherit, donate, and sublease the lease right in the land lease contract like other assets (Article 37.2(c), (d) Land Law 2024).

New points of regulations on selling land lease rights to other enterprises in Vietnam

The Land Law 2024 marks an important step forward in perfecting the land law system in Vietnam, with many bright spots including the provision on “lease rights” in land lease contracts. This is a new concept, specifically regulated in Article 46 of the Land Law 2024, bringing many benefits to the parties involved.

Pursuant to Article 46 of the Land Law 2024, “lease rights” include the following basic contents:

• Land use rights: Land users have the right to use the land for the purposes specified in the land lease contract, including the right to possession, the right to use, the right to dispose of, and the right to transfer.
• Land use obligations: Land users are obliged to fulfill financial obligations to the State pursuant to the provisions of the land lease contract and the law, use the land for the right purpose, under approved land use planning and plans, and protect land and environmental resources.

Compared with the Land Law 2013, the Land Law 2024 has the following new points on “lease rights” in land lease contracts in which the State leases land and collects annual land rent:

Subjects eligible for land lease transfer

Pursuant to Article 46.2 of the Land Law 2024:

“A business organization, individual, person of Vietnamese descent residing overseas or foreign-invested business organization that is leased out land by the State with annual land rent payments may sell property affixed to the leased land and the right to lease in the land lease contract…”

Compared with the provisions of Article 189 of the Land Law 2013, the subjects with the right to transfer assets attached to leased land have been eliminated from the subject of “households” (essentially personal responsibility), narrowing the subject of Vietnamese people residing abroad to “people of Vietnamese origin residing abroad”.

However, the Land Law 2024 also restricts the case of leased land being production forest land pursuant to Article 184.3 as follows:

“People who are leased out natural production forest land are not permitted to convey, sublease, mortgage land use rights and rights to lease land in land lease contracts with annual land rent payments or contribute land use rights/ rights to lease as capital.”

Allows transfer of lease rights

• Land Law 2013: Does not allow transfer of land lease rights, only allows transfer of assets attached to land.
• Land Law 2024: Allows the transfer of land lease rights, contributing to creating liquidity for the real estate market.

More detailed regulations on transfer conditions

Conditions of transferred property

The right to lease land attached to the leased land to be transferred must be legally established and registered in accordance with the provisions of law.

In case the State leases land and pays annual land rent to carry out infrastructure construction and business projects, the property attached to the land may be sold when other conditions are met pursuant to the provisions of the Law on Real Estate Business and the following basic conditions:

Conditions on the transferor

Economic organizations, individuals, people of Vietnamese origin residing abroad, and economic organizations with foreign investment capital that are leased land by the State and pay annual land rent are allowed to sell land lease rights when they have performed:

• Complete construction under the detailed construction plan and approved investment project (if any), except in cases where it must be implemented following a court judgment or decision that has come into force, an enforcement decision of a civil enforcement agency, or a conclusion of a competent state agency on inspection and examination.
• Advance compensation, support, and resettlement money that has not been fully deducted from the land rent payable.

For the transferee, the current Land Law has removed the conditions as stipulated in Article 189 of the Land Law 2013, including:

• Have the financial capacity to implement the investment project;
• Have a business line suitable for the investment project;
• Do not violate the provisions of the law on land in cases where the State has previously allocated or leased land to implement the project.

The transferee of the lease right in the land lease contract is entitled to continue to use the land for the correct purpose during the remaining land use term. Vietnam Land Law 2024 adds the right of the transferee of the land lease rights to continue to deduct the compensation, support, and resettlement money that has been advanced but not yet deducted above, and also adds the obligation to carry out the land change registration procedure as prescribed (to be carried out after the transfer).

More specific regulations on transfer procedures

Land Law 2013: There are no specific regulations on procedures for transferring assets attached to land.

Land Law 2024: More clearly stipulates procedures for transferring land lease rights, including:

• The land user and the transferee of the land lease right shall make a document transferring the land lease right.
• The document transferring the land lease right must clearly state the contents as prescribed.
• The document transferring the land lease right must be notarized or certified as prescribed.
• After the document transferring the land lease right is notarized or certified, the land user and the transferee of the land lease right shall submit it to the competent state agency as prescribed.

Difficulties of enterprises wishing sell land lease rights to other enterprises in Vietnam

Regarding administrative procedures

• Complicated procedures: Enterprises need to prepare many types of documents and records according to legal regulations; Procedures are cumbersome, time-consuming, and costly.
• Procedure implementation process lacks transparency: Procedure implementation instructions are not specific and clear; Enterprises easily encounter difficulties during the implementation process.

Regarding legal issues

• Incomplete legal regulations: selling lease rights in land lease contracts is a new point of the Land Law 2024, which will take effect from August 1, 2024. Therefore, some regulations on transferring land lease rights are still unclear when implemented in practice and there are no precedents to guide officials to apply when requested by enterprises.
• High legal risks: Land lease transfer transactions may encounter many legal risks such as disputes over land use rights and contract disputes if not fully and accurately guided.

If there is any unclear content, need specific advice related to the new land law applied from 2024, please contact Viet An Law for the fastest answers and support.