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Transfer of residential housing sale contracts – why do the parties at all times put difficulties in each other’s way?

The article titled: “Transfer of residential housing sale contracts – why do the parties at all times put difficulties in each other’s way?” from Lawyer Nguyen Van Quynh, is published on Sai Gon economic times, dated 3 May 2018.

Those who provide support and consulting services for transferring residential housing sale contracts to foreigners will see that public notary offices are maintaining different views about the regulation on transfer of residential housing sale contracts. Some public notary offices refuse to notarize the transfer of residential housing sale contracts for the reason that foreigners are only allowed to buy residential housings from commercial residential housing project owners as prescribed in Article 76.2 of Decree 99/2015/NĐ-CP on detailing and guiding the implementation of the Residential Housing Law. Others still agree to notarize those transfer documents as they think it is unforbidden by the law. Some public notary offices will notarize the transfer documents with the warning that the likely non-issuance of  the certificate of residential housing ownership to any transferee might be attributed to Article 76.2 of Decree 99.

The common answer to the question why there exists such a difference is due to no guidelines from the Ministry of Construction, so it depends on the notary’s interpretation and evaluation.

When the guidelines are already provided

In early 2018, with the same question that if foreigners can receive the transfer of apartments from individuals, the Ministry of Construction replied on their e-portal and the website baochinhphu.vn that, by reference to Article 76.2 of Decree 99, foreigners are not allowed to receive the transfer of residential housing sale contracts. Although the said answers are just for reference and not yet codified or at least in form of official letters, it is evident that the Ministry of Construction’s opinion has suffocated the transfer of residential housing sale contracts to foreigners, which happened before and was not against the law.

It is asked whether the law is unclear

Obviously, the residential housing law specifies purchasing and selling residential housings with regard to foreigners and transferring residential housing sale contracts.  When it comes to the foreigner’s right to buy and own residential housings, besides his/her personal conditions including approved immigration in Vietnam and residential housing location (outside the areas of security and national defense), one more condition is that foreigners can only buy residential housings from commercial residential housing projects (Article 159.2 of the Residential Housing Law), that is to say, they cannot buy residential housings in existing residential areas outside commercial residential housing projects. Therefore, Article 76.2 of Decree 99 reiterates a principle of the Residential Housing Law stating that if foreigners are eligible to own residential housings in Vietnam, they will not be free to buy residential housings anywhere in Vietnam like Vietnamese citizens, but can only buy residential housings from the residential housing project owners.

Furthermore, Articles 117 and 119.2 of the Residential Housing Law also allow foreigners to make residential housing transactions including transfer of residential housing sale contracts; specifically, foreigners can play the role of a transferer or transferee of residential housing sale contracts, as long as they have full capacity for civil acts and fall into the category of the objects eligible to own residential housings in Vietnam.

As a matter of law, sale transactions and sale contract transfer transactions are completely different in nature. In a sale transaction, the seller is an owner of the property for sale, while in a sale contract transfer transaction, the transferor has not yet had the ownership right to the property as subject of the sale contract, but only has the rights and obligations related to the property and will transfer the arising rights and obligations from the sale contract to a third party. In other words, the transferee will replace and succeed the transferor, being entiled to the rights and concurrently fulfilling the obligations which have previously been established under the sale contract.

The outcome of residential housing sale contract transfer transaction is that the transferee will continue to execute the contract with the commercial residential housing project owner. Therefore, foreigners as transferee of sale contracts are actually the ones who buy commercial residential housings from project owners. After the transfer of residential housing sale contracts, if the number of residential housings owned by foreigners does not exceed the ceiling limit set by the State, the transferors will have to pay personal income tax upon transferring the contracts, thereby increasing the revenue sources for the state budget, and the transfer or receipt of transfer of residential housing sale contracts by foreigners does not jeopardize or potentially undermine the principle of the Residential Housing Law.

Handling what already happened

Is the Ministry of Construction equating residential residential housing sale transactions in respect of foreigners with those where foreigners act as transferee of residential housing sale contracts? The insistent and incomprehensible view of the Ministry of Construction has completely frozen the transfer market of residential housing sale contracts in respect of foreigners, which has long been recognized by project owners and transacting parties. Nevertheless, this is not worse than the way they deal with the transactions that have been made before.

May foreigners as transferee of residential housing sale contracts obtain residential housing ownership certificates?  How to deal with the residential housing sale contract transfer transactions which have been made in noncompliance with the opinion of the Ministry of Construction? The transfer transactions of residential housing sale contracts by foreigners will not become invalid under the civil law, so it is asked whether the transferor and the transferee must return what they have received from each other and restore the contract to the original status. If the contract must be restored, will the transfer tax already paid to the State be refunded to the transferor? If the transferor has died or no longer lives in Vietnam, how can we handle the residential housing sale contract transfer transactions that are not recognized by the Ministry of Construction? Who will be responsible for executing the transactions which do not match the view of the Ministry of Construction, transferors, transferees, public notary offices, notaries who have notarized the transfer documents or project owners who have verified the transfer of residential housing sale contracts?

Perhaps, the Ministry of Construction shall think over the relevant regulations to reasonably settle the issues in question in the days ahead.