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In recent years, the rise of resort real estate, particularly the Condotel (condominium hotel) model, has reshaped Vietnam’s tourism and real estate markets. Combining residential apartments with hotel services, Condotels offer dual benefits to investors and customers while meeting the growing demand for leisure accommodations. However, the rapid development of this model has also posed significant legal challenges.
Due to gaps in existing legal frameworks, Condotel investors and owners face substantial risks regarding their rights and ownership. Formalizing the Condotel model has become a pressing issue to safeguard stakeholders’ legitimate interests and promote sustainable development.
This article will analyze the concept of Condotels, the current legal landscape in Vietnam, and the associated benefits and challenges. Additionally, it will propose solutions to formalize Condotels in Vietnam — a crucial step toward stability and growth in the resort real estate market.
The Concept of Condotels in Vietnam
A Condotel, or “condominium hotel,” is a type of real estate that combines elements of residential apartments and hotels. It allows individual ownership for personal use or rental purposes. Designed like an apartment but offering full hotel services such as reservations, housekeeping, and dining, Condotels primarily cater to short-term stays, particularly in tourist destinations.
Condotels differ from residential apartments primarily in their business-oriented purpose, generating income through rentals. Owners can share profits with operating companies responsible for maintaining and managing the units when not in use. These profits depend on rental prices, occupancy rates, and operating costs, as agreed between the parties.
In most cases, Condotel tenants interact with management and operating companies rather than directly with the owners. These companies ensure property maintenance and generate rental income. Essentially, purchasing a Condotel is akin to an investment, similar to stocks, bonds, or gold, rather than directly managing the asset.
The Condotel model has increasingly proliferated in Vietnam, covering most major tourist destinations and contributing significantly to the economy by creating jobs and income for Vietnamese workers. However, Condotels currently lack specific legal provisions under key laws such as the Land Law or Housing Law in Vietnam. This regulatory void has led to legal uncertainties, prompting many investors to sell at a loss. For instance, numerous Condotels in FLC Grand Hotel Ha Long were resold at prices 300–800 million VND lower than their original purchase prices.
Current Legal Landscape of the Condotel Model in Vietnam
The Condotel model in Vietnam currently occupies a legal “gray area,” with no explicit regulatory framework governing its operations. Although the government has issued some general provisions for resort real estate through decrees like Decree No. 10/2023/ND-CP, which amends and supplements regulations under the Land Law, specific terminology and legal guidelines for Condotels remain absent.
Key laws governing real estate, such as the Land Law, Construction Law, and Real Estate Business Law, primarily address traditional ownership forms, such as residential and commercial real estate.
Ownership Issues
There is no clear mechanism in Vietnamese law for registering ownership, issuing certificates of long-term ownership, or recognizing Condotels as assets attached to land. Most Condotels are built on commercial and service land, which has limited-use terms. This creates significant challenges and risks for investors in establishing ownership rights.
Currently, apart from sales contracts, most Condotel transactions in Vietnam do not provide buyers with any legal documentation verifying their ownership of the Condotel’s surface area. The legal system lacks detailed procedures and regulations for establishing surface rights for real estate, leaving buyers in a precarious position.
Legal Challenges and Limitations
- Lack of Legal Definition
As analyzed above, Vietnamese law does not provide any official definition or explanation of the Condotel concept. This term is borrowed from foreign jurisdictions where the model is legally recognized. Vietnamese businesses have adopted this model but continue to operate within a fragmented legal framework that draws upon general land, real estate, and resort apartment regulations. - Distinctive Characteristics
Despite being classified as a type of real estate, Condotels possess unique features that cannot be fully addressed by general real estate regulations. Internationally, Condotels are viewed as short-term rental apartments, akin to hotels, yet in Vietnam, they also serve residential and commercial purposes. This duality complicates their legal categorization. - Growth and Complexity
Initially, Condotels were a niche market concentrated in hotspots like Khanh Hoa and Da Nang. From 2013 onward, legal issues surrounding the model were relatively manageable due to its small scale. However, after a decade of growth and integration, Condotels have proliferated, with over 100,000 units nationwide, based on the 2020 report by the Vietnam Real Estate Association, which identified 82,900 Condotel units. A substantial portion of these units remains unsold. Applying general real estate laws to resolve disputes is no longer adequate for this rapidly evolving sector. - Ownership Documentation Issues
The absence of specific regulations for multifunctional models like Condotels leaves investors and owners with unclear legal protections. Ownership certificates for Condotels are difficult to obtain, often limited to temporary terms rather than long-term ownership. This undermines the attractiveness of Condotels as an investment asset. - Investor Hesitation
Legal ambiguity surrounding ownership documentation further deters investors. Even when certificates are issued, they may not fully guarantee ownership rights, reducing confidence in the Condotel model as a viable investment option.
Benefits of Legalizing Condotels
In Vietnam, while there are no specific regulations prohibiting investors from engaging in the Condotel model for business purposes, the country’s general policies prioritize using land for residential purposes. Currently, Condotels are primarily utilized for “short-term accommodation,” but investors often use them for business purposes, which, while not illegal, conflicts with Vietnam’s overarching land-use policies.
When addressing violations, authorities can only apply regulations concerning limited land-use terms. These regulations do not fully account for the hybrid nature of Condotels, resulting in incomplete solutions. Legalizing Condotels could provide clear guidance to resolve these issues comprehensively, along with other aforementioned challenges.
For Investors and Owners
Legalizing the Condotel model would provide investors and owners with clear legal rights, including well-defined ownership rights protected under the law. This would minimize legal risks and disputes, encouraging both domestic and international investment to expand the model further.
A robust legal framework would instill confidence among investors, fostering sustainable development in the Condotel market and the broader resort real estate sector.
For the Vietnamese Government
Recognizing Condotels legally would enable the government to collect taxes on transactions and asset usage, as well as fees related to ownership and utilization rights, contributing to state revenue.
Addressing Broader Real Estate Challenges
Over the years, legal challenges in Vietnam’s real estate sector have led to housing shortages, escalating prices, real estate bubbles, and project stagnation. These issues deter foreign investors, resulting in frozen projects due to capital shortages, and increasing unemployment rates.
Resolving legal ambiguities in the real estate sector—accounting for approximately 20% of the economy in a developing country like Vietnam—would act as a catalyst for economic growth. A well-regulated sector could function smoothly, contributing significantly to national development.
Conclusion
To protect the interests of investors and owners and ensure a healthy Condotel market, implementing a clear and transparent legal framework is essential. Regulations should address ownership rights, transfers, and management of Condotels, specifying the duration of ownership certificates and detailing the rights and obligations of involved parties.
Additionally, as with other real estate models in Vietnam, the government should establish stringent oversight and management mechanisms. This would ensure compliance with laws, mitigate speculative behavior, and prevent real estate bubbles that artificially inflate housing prices.
Enhanced monitoring and enforcement would reduce risks, ensure adherence to regulations, and prevent disputes or abuses of ownership rights among stakeholders.
With a comprehensive legal framework, the Condotel model could thrive and contribute positively to the economy, particularly in the tourism and real estate sectors. Transparency and legal assurance would not only bolster investor confidence but also integrate Condotels as an indispensable part of Vietnam’s real estate and tourism ecosystem in the long term.
ASL Law is a leading full-service and independent Vietnamese law firm made up of experienced and talented lawyers. ASL Law is ranked as the top tier Law Firm in Vietnam by Legal500, Asia Law, WTR, and Asia Business Law Journal. Based in both Hanoi and Ho Chi Minh City in Vietnam, the firm’s main purpose is to provide the most practical, efficient and lawful advice to its domestic and international clients. If we can be of assistance, please email to [email protected].
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