Reading the fine print on foreign ownership of real estate in Vietnam

Dear Marijn,

I hope you can shed some light on this. A few months ago, I found the apartment of my dreams in Nha Trang. I paid for it, moved in and went to the local notary office to get the paperwork sorted. Everything was ready for my name to go on the “pink paper” to make the apartment legally mine—at least that’s what I thought. After being pushed from pillar to post for some time, my agent finally told me that the only way for a foreigner like me to acquire ownership of the apartment would be to accept it as a “donation.” I’m not sure what to do now. I already live in the apartment and I hold the signed version of the purchase contract but I don’t know if the apartment is legally mine? How important is it to have the official “pink paper” under my name?

I understand that you must find this situation confusing. It’s important to realize that even though Vietnam’s real estate market is slowly opening up to foreign investment, foreigners are still only allowed to buy a residential house or apartment under limited situations, and at limited locations. The fairly-new Vietnamese Law on Residential Housing (effective July 1, 2015) is a good starting point to learn more about these limitations.

For example, the law states that foreigners are only permitted to own residential houses (meaning apartments in apartment buildings and individual residential houses) belonging to “investment projects for the construction of residential housing” which are not located in areas affecting national defense and security. So it would be a good idea to check with the Department of Construction first to see which apartments are “suitable” for you to buy.

Furthermore, foreigners are not permitted to own more than 30 percent of the total number of apartments in an apartment building. Under the law, the Department of Construction is responsible for publishing the relevant information on its website. Also important to know, foreigners can only purchase or hire-purchase an apartment from a developer, or purchase it (in certain cases) from another foreigner or organization. I don’t know what you have exactly discussed with your agent, but the fact that he mentioned that you can only acquire the ownership of the apartment via a donation could be an indication that one or more of the aforementioned conditions cannot be satisfied.

I understand that you already live in the apartment and that you are in possession of the signed purchase contract. In order to determine the exact moment the ownership of the apartment changed we will need to look at the Law on Residential Housing once again. The law states that in a sale and purchase transaction of a residential house, the ownership is transferred from the time the purchaser has fully paid the purchase price and has been handed over the residential house, except when otherwise agreed between the parties. In case of a donation, on the other hand, the ownership is transferred with the handing over and the receipt of the residential house. In both cases, the transaction must satisfy all the conditions for residential housing transactions, and the documents (the sale and purchase contract) must be in accordance with the Law on Residential Housing.

While the “pink book” (the certificate of ownership and land use right) is not a legal requirement to become the owner of a residential house in Vietnam, the book is probably the best document to have to prove your ownership rights. It puts you in a relatively strong position if someone else claims to be the owner of the apartment. Also, without it, selling the apartment will be very difficult.

As mentioned before, any transaction involving a residential house or apartment in Vietnam should be in strict compliance with the Law on Residential Housing. Additional conditions and restrictions apply to foreigners and it is advisable to have a careful look at those before buying.

If you decide to go forward with the purchase, keep in mind there is a risk that your apartment was in fact not “suitable” to be sold to a foreigner. In such case, the seller could argue at a later stage that the sale and purchase contract that you signed is invalid and that ownership has not been transferred to you at all. I would recommend sitting down together with the seller and your agent to find a solution that is acceptable to all parties.

Every month, Marijn Sprokkereef answers legal questions from Oi readers. If you have any legal questions you want answered, send them to legal@oivietnam.com.

BIO: Marijn Sprokkereef is an associate of Audier & Partners, an international law firm with offices in Vietnam (Ho Chi Minh City and Hanoi), Myanmar and Mongolia. Audier & Partners provides advice to foreign investors on a broad range of legal issues.