Thinking of buying property in Vietnam?

I’m American. I’ve lived here for six years, and am thinking of buying some property in Vietnam. But I’ve been told that foreigners are not allowed to own land. I have some very good Vietnamese friends who I trust enough to put the property under their name, but since we’re talking about a large sum of money, I feel I need some kind of legal protection. Is there some type of contract I could get drawn up to make sure that property will remain mine even if it’s under someone else’s name?

According to the Vietnamese land law, the land in Vietnam “belongs to the people and is managed by the State on behalf of the people”. What you have been told is therefore not entirely correct – technically, no one can own land: foreigners or Vietnamese! However, although the State owns the land of the entire territory, it gives rights to use the land to individuals and entities under specific conditions, commonly called “land use rights,” as evidenced by the issuance of a land use right certificate.

Land use rights can be so extended that the resulting legal framework may be qualified as quasi-ownership. On the other hand, Vietnamese law allows full ownership of real estate attached to the land under a distinct legal regime. So while it’s true that foreign individuals cannot be granted land use rights, they are allowed to own real estate attached to the land under very strict conditions.

The practice that you are describing, which aims to circumvent the legal limitations regarding land use rights, has a foreigner engaging a nominee (in this case your friend) to hold the land use rights on your behalf. The land use right certificate would be issued under the name of the nominee with a private side contract between the two of you. The validity of this side contract under Vietnamese law is extremely doubtful to say the least… I am personally sure that any Vietnamese judge tasked with settling a dispute related to such a nominee contract would consider that contract invalid.

If your friend broke the side contract, you would not have any legal recourse to enforce your rights under that contract. Instead the rights of the nominee of the real estate property would be unconditionally recognized, since that person’s name is recorded on the land use right certificate.

Consequently, even though you may trust your friend a great deal, I would be very wary of using such a nominee scheme, as it does not provide you with the minimum level of legal comfort that is required when investing substantial amounts of money.

You might know of people who have successfully implemented nominee schemes throughout the years, as do I. But I’d caution you to view it as you would gambling: only invest what you are ready to lose!

If your ultimate purpose is to own an apartment you may consider an alternative legal option which is way more comfortable, namely the circular issued in 2009 allowing the following categories of foreign individuals to purchase and own one residential house in Vietnam:

1) Those who make direct investment in Vietnam or are managers of enterprises operating in Vietnam, whether domestic and foreign-invested enterprises.

2) Those who have made contributions to Vietnam as recognized by the Prime Minister or have been conferred orders or medals by the President of the Socialist Republic of Vietnam.

3) Those who are working in socio-economic domains and hold university or higher degrees, and specialists in fields which Vietnam has demand for.

4) Those who are married to a Vietnamese citizen.

To be entitled to own a residential house in Vietnam, the foreign individuals meeting the above criteria, must be legally residing in Vietnam for at least one year and must not be subject to diplomatic or consular privileges and immunities under Vietnamese laws.

Since you have been residing in Vietnam for more than one year (and assuming that your immigration has been continuously compliant with Vietnamese law), if you fall within one of the above listed categories, you have the right to purchase and own one residential house in Vietnam.

However, please note that Vietnamese law only allows foreigners to own a residential house for a maximum of 50 years from the date of issuance of the residential house ownership certificate. Foreign owners must transfer ownership of the property within 12 months after the end of the term of the certificate.

Happy house hunting!

If you have any legal questions you want answered, send them to legal@oivietnam.com.

Bio: A member of the Paris Bar, Hadrien Wolff has been practicing law in Vietnam for six years, currently as a partner of Audier & Partners. He specializes in banking and corporate law, regularly advising major foreign banks and assisting foreign investors in setting up joint venture companies with Vietnamese partners in sensitive sectors such as media, power and natural resources