Transfer of projects especially real estate projects is no longer a strange matter for investors. Due to the impact of the Covid pandemic, many investors have to look for measures to solve difficulties, especially financial difficulties. Once investors could seek support from banks and credit institutions, but now this support is being “tightened” due to inflation control policies from the Government as well as real estate is considered a high-risk industry. To address the said difficulties, many investors have looked to the option of transferring all or part of the project to other investors. This transfer gives the investment project the opportunity to be “active” instead of “pending” causing damage to relevant parties. Real estate projects are special and touchy subjects, so the transferor, as well as the project transferee, need to thoroughly understand not only the legal regulations but also local policies before conducting the transaction.
If the Law on Real Estate Business 2006 requests investors to transfer the entire project, the Law on Real Estate Business 2014 gives the investor the right to transfer all of part of the project. This is considered more feasible than the previous regulations since it meets the intention of the project investor. It is also considered more suitable since in practice the value of projects to build commercial centers, apartments, adjacent apartments, and resorts is quite large, and finding an investor to receive the transfer of the whole project can be very challenging.
In both cases of transfer – a whole or part of project, the parties involved in the transfer transaction need to ensure that the transfer will:
The transfer of a partial or whole real estate project must be approved by the competent authority in written document. Besides, since this is a real estate project, the rights of the transferee should be recognized by the issuance of the new Certificate of Land Use Right, ownership of houses and other properties attached to land or registered for change in the issued certificates in accordance with the law on land.
On the administrative side, the transferee of the real estate project does not have to resubmit the whole project dossier, construction planning and construction permit of the project if there is no change in the content of the Approval for the investment policy, Investment Decision of the project.
Before confirming any documents noting the will of the parties in the transfer transaction such as Memorandum of Understanding, Deposit, Transfer Contract … the parties should take their own internal review as well as the current status of the project, to ensure that the transfer process does not encounter any legal issues.
For the project, the parties need to determine whether the transfer has met the mandatory conditions to be conducted, specifically:
For the transferor, it is necessary to comply with the provisions of the land law, to determine whether the investor has legal documents recognizing their legal rights for all or part of the project,.
For transferee, the investor must be a real estate business enterprise, have sufficient financial capacity and commit to continue the implementation of construction and business investment in accordance with the provisions of law, ensuring the progress and content of the project.
After determining the participants and making sure that the project has met the conditions prescribed by law, the authority approving the project must be specified to estimate the timeline of the transfer transaction. Currently, the People’s Committees of provinces have power to allow the transfer of all or part of real estate projects which was approved by them. The Prime Minister shall decide to allow the transfer of all or part of real estate projects to the project approved for operation by the Prime Minister.
Making a project transfer contract, the contract required to record the main contents including detailed information about the transferred project, transfer price, method – payment time, progress of implementation, and responsibility of each party in the transfer process, and other related terms.
Besides, the change of land is to be registered to record the legal status of the transferee on the legal documents. In case the real estate is type whose lease is paid annual or allocated without land use levy, the transferor submits a dossier of registration of change in land at the competent authority. They will carry out procedures to allow the transferee to pay the land rent annually, issue a decision to recover the land from the transferor, hand over the land to the transferee and change the information of the land leasing party. Therefore, a new lease contract will be signed between either the provincial-level People’s Committee or the Department of Natural Resources and Environment and the transferee. Finally, the land use right registration agency updates the information of the transferee on the Certificates of land use rights, housing, and other assets that are attached to the land and national land data.
In case the transferred real estate is type whose the entire lease amount is paid once, the transfer process is prompter because the approval of provincial-level People’s Committee is not requested. Accordingly, after the transferor has submitted a dossier of registration of change in land and all tax obligations have been fulfilled, Department of Natural Resources and Environment shall confirm the contents of change into the issued Certificates of land use rights, housing and other assets that are attached to the land and grant it to the transferee. Currently, some localities will apply in the form of issuing decisions, new leases, and granting Certificates of land use rights, housing, and other assets that are attached to the land.
Transfer of real estate projects, either in part or in whole, is deemed one of the most complex transactions, so investors should consider carefully the legal status of the parties, the authority of investors allowed to exercise according to relevant regulations on investment, land, real estate and all international treaties to which Vietnam is a member. The said transfer requires support and opinions not only from land management agencies but also from relevant agencies such as the Department of Planning and Investment, Tax Authorities, People’s Committees, etc. Accordingly, at each stage of its process, the parties must work with the management agency to receive approval or guidance. Investors participating in the transaction should consider the whole legality related to the status of the involving parties and the project before taking any action in the transfer process.
The article is based on applicable law at the time noted as above and may no longer be appropriate at the time the reader approaches this article as the applicable law has changed and the specific case that the reader wishes to apply. Therefore, the article is only for reference.