In the context of economic development and increasing urbanization, land management has become one of the major challenges for many countries, including Vietnam. Mastering the legal provisions related to land use rights is not only essential when participating in the real estate market but also a crucial condition for protecting one’s interests. This article provides an overview of land use rights in Vietnam, covering the distinction between land ownership and land use, the nature of land use rights, and legal considerations regarding land transactions in Vietnam.
Land use rights, while not explicitly defined in the 2013 Land Law No. 45/2013/QH13 (“Land Law 2013“), can be understood as the right or ability to access a specific area of land granted by the state to a specific entity for legal use based on their needs.
Land use rights in Vietnam play a crucial role in shaping and managing land resources, influencing various aspects of social and economic life. The significance of land use rights cannot be denied in the context of comprehensive national development, especially for developing countries like Vietnam. Understanding the factors related to this right helps us confront the challenges and opportunities arising in land-related issues and disputes.
However, in Vietnam, most people involved in land transactions, such as transfers or purchases, often use the term ‘land ownership rights’ instead of ‘land use rights.’ This creates a fundamental misconception between the two concepts, significantly affecting the perception of Vietnamese people regarding land.
Before delving into a detailed analysis of land use rights in Vietnam, it is crucial to understand the difference between two important concepts: land ownership and land use. In the legal context of Vietnam, owning land does not equate to having the right to use it, and this distinction has led to a complex and multidimensional legal system.
The Difference Between Land Ownership and Land Use Rights in Vietnam
Article 53 of the 2013 Constitution stipulates: “Land, water resources, mineral resources, resources in the sea and airspace, other natural resources, and properties invested and managed by the State are public properties owned by the entire people, with the State representing ownership and unified management.”
Furthermore, Article 4 of the 2013 Land Law states: “Land is public property owned by the entire people, with the State representing ownership and unified management. The State grants land use rights to land users according to the provisions of this Law.”
From the above provisions, it can be seen that land use rights are a derivative of the public ownership rights over land. In Vietnam, land belongs to the ownership of the entire people. Land does not belong to the ownership of any legal or natural person, including the State. The State is merely the representative owner, responsible for the unified management of land.
Therefore, the concept of land ownership does not exist in Vietnam. This applies to all other countries worldwide as well. Selling the ownership rights to an individual or organization is not feasible, and no government has the authority to sell such rights. Selling land ownership rights would also contradict the legal interests of the country, as the government would lose all rights in that area, posing potential threats to national security and other issues.
As the representative owner of the entire people regarding land according to legal regulations in Vietnam, the State has the authority to allocate land to entities with land use needs through certain specified forms.
In parallel with land allocation, the State must grant land use rights to the entities to which the land is allocated. Granting land use rights is essential because without this right, the entities would be unable to carry out activities according to their needs, rendering the land they hold valueless.
However, to use the land, the entities granted rights must use it for the registered purpose, report to the State, and are not allowed to arbitrarily change the land use purpose. For example, a citizen granted land use rights for residential construction in an urban area cannot unilaterally turn that piece of land into a livestock farm, affecting the overall image and development direction of the urban area.
The State has full authority to use and allocate land resources in Vietnam within the national territory through detailed regulations on land management in legal documents.
Another difference between these two rights is the duration. While the ownership rights of the entire people over land are perpetual, belonging to the entire Vietnamese population, land use rights have a specific time limit.
According to the 2013 Land Law, the land use duration is the period during which the land user can exercise their rights. Depending on the type of land and specific cases, the land use duration can range from 50 to 99 years for stable and long-term land use.
For instance, the land use duration for the construction of foreign diplomatic missions’ headquarters is not more than 99 years. In 2021, the United States reached an agreement to lease 3.2 hectares near Cau Giay Park to build the U.S. Embassy in Hanoi for a lease term of 99 years.
According to the regulations in Article 1 of Article 21 of Decree No. 43/2014/ND-CP, stable and long-term land use is land that the law allows to be used continuously, indefinitely, without determining a specific termination period for land use rights. However, specific regulations about the types of land determined to fall into this category are still unclear in the 2013 Land Law, apart from forest protection land, specialized forest land, and production forest land.
In the Draft Law on Land, expected to be enacted in 2024, additional categories of land meeting the criteria for stable and long-term use will be included, such as production forest land allocated to communities, armed units, forest management boards, etc.
To establish a legal basis to protect the rights and legitimate interests of land users, the State will issue a Certificate of Land Use Rights to the entities using the land, commonly known in Vietnam as “red books” or “pink books” based on the color of these certificates.
The Certificate of Land Use Rights is the most secure legal basis for land users to prove their decision-making rights over the allocated land. This certificate is one of the most crucial assets of land users, serving as the basis for them to conduct land use right transfer transactions in the secondary real estate market.
Characteristics of the State’s Land Use Rights Transfer in Vietnam
To “own” land use rights in Vietnam, entities with the need to use land for personal purposes have two main methods: receiving land use rights from another land user in the secondary real estate market or directly obtaining land from the State, leasing land in the primary market.
The primary real estate market is where real estate products are first transacted or issued, such as land assets formed when the state allocates or leases land. Participants in the market include the State, representing the entire people, and project investors or individuals with land use needs.
The secondary real estate market is the dominant market in Vietnam where transactions occur between parties who have received land use rights from the State and other parties with needs.
In the primary market, the State can transfer land use rights to entities through land allocation or land leasing. Land allocation and leasing are activities to coordinate land use, fulfilling the State’s obligation as the representative owner of the entire people, managing land for the progress and development of the real estate market and the economy.
The State’s land allocation involves issuing a decision to allocate land to grant land use rights to entities with land use needs, as stipulated in Article 3(7) of the 2013 Land Law. Land allocation includes the transfer of land use rights, as analyzed above.
According to Article 3(8) of the 2013 Land Law, land leasing by the State involves issuing a decision to grant land use rights to entities with land use needs through a lease agreement.
As per Article 56(1) of the 2013 Land Law, State land leasing has two forms: annual land rent and one-time land rent for the entire lease period.
Rights to transfer land use rights
The secondary real estate market in Vietnam is a dynamic and complex market that has the potential for the country’s development but also poses risks of economic slowdown or recession. Real estate accounts for about 20% of the total assets in the Vietnamese economy.
According to Article 3(10) of the 2013 Land Law, transferring land use rights involves transferring land use rights from one party to another through various forms such as conversion, transfer, inheritance, gift, and contribution of capital using land use rights.
A legally valid land use rights transfer transaction terminates the land user status of the transferring party and creates land user status for the receiving party.
In Vietnam, even though specific measures are outlined for the legal transfer of land use rights, land use rights transactions in Vietnam still have a spontaneous nature. Transactions may not be transparent in registering real estate values at the land registration office. Parties involved in land use rights transactions may conduct transactions underground to avoid high taxes and fees, making it difficult for the State to control the real estate market through statistical work.
If a party owning land use rights allows other parties to lease the land, such as renting a house for students, this transaction is not considered a land use rights transfer in the secondary market, even though it may grant actual land use rights to the tenant with permission to directly exploit and use the land during the lease period.
The tenant from the party holding land use rights only temporarily holds land use rights for a specific period as per the agreement between the two parties. The tenant will not have land use rights or a Certificate of Land Use Rights.
Legal perspective on land in 2024
In November 2023, the National Assembly of Vietnam reached a consensus to adjust the timeline through the Land Law amendment project from the 6th session to the most recent session. At that time, the draft law had 14 issues with two proposed options for parliamentary consideration. The issue that received the most input and continuous adjustments from experts and National Assembly deputies was related to the state’s land reclamation and the reasonable compensation plan specified in Articles 79, 126, and 128 of the 2013 Land Law.
Currently, the latest draft of the amended Land Law has been finalized and presented to the National Assembly for approval during the extraordinary session that commenced on January 15, 2024. The latest draft contains several notable provisions, such as issuing certificates for households and individuals using land without proper documentation of land use rights without violating land laws; the rights and obligations of land use for Vietnamese residing abroad; the content, methods of land valuation, and conditions for the application of each method; abolishing the land price framework to determine land prices that align with the market; and more.
When passed, the amended Land Law is expected to have significant practical impacts on the real estate market in Vietnam and contribute positively to economic development. Beyond easing difficulties for real estate businesses in Vietnam, the draft Land Law amendment also has the potential to unlock stalled projects currently frozen since mid-2022, increasing the housing and land supply while reducing property prices.
This aligns with the Vietnamese government’s goal of constructing and developing a stable, sustainable real estate market in 2024 that ensures the living needs of the population.
To protect their interests, companies engaging in real estate activities should contact a Vietnam Real estate law firm to receive timely, specialized advices.
ASL LAW is the top tier Real Estate law firm in Vietnam. If you need any advice, please contact us for further information or collaboration.