2:06:08 PM | 3/5/2020
“Until now, we are still dealing with the terminology but have yet to add condotel into the legal system. I think it is not necessary to do this because we cannot add other names to the law if new names appear as a matter of development. Most importantly, the use of land and the function of a construction work described in the Land Law remain unclear.”
This is the viewpoint of Prof. Dang Hung Vo, Former Deputy Minister of Natural Resources and Environment, expressed at a recent webinar on troubleshooting solutions to difficulties in the condotel market held by Business Forum Newspaper in Hanoi.
We should not pay too much attention to what it is called, condotel or whatever, but to the nature of vacation property, shophouse or officetel, he said, adding that these are multifunction, multipurpose real estate. A condotel, a mixture of condominium and hotel, will consist of part for hotel and the rest for apartment.
“In Vietnam, it is called condotel - a residential land that does not formulate a residential unit and, in fact, some investors have applied to seek local projects for approval,” he said.
The recent Official Document 703 issued by the Ministry of Natural Resources and Environment (MONRE) states that, under tourism laws, condotels are a vacation home for business. If it is a business, its land must be treated as non-agricultural land for business. That is one way of understanding. Condotel can be mixed, partly for living and partly for business. Like the current apartment model, lower floors can be used for business and upper floors are for living.
In fact, the excessive diversity of those models leads to a need for flexible management while the current legal framework is “too tight”.
“Document 703 systemized relevant laws. However, we need some further-guided articles and certification for construction, not certification for land-use rights. In case investors sell their land-use rights, how will secondary investors handle it? This needs further guidance when current laws are not enough to apply to these cases,” Mr. Vo said.
Vietnam needs to expand the legal “cover” to accommodate and develop tourism. The goal of a law is to stabilize politics and develop tourism into a key economic sector, rather than tightly manage it, he added.
Mr. Vu Van Thanh, Director of the Hotel Department under the Vietnam National Administration of Tourism (VNAT), the Ministry of Culture, Sports and Tourism, also said that the condotel has not been included into the law system. Condotel is a type of accommodation facility. The tourism industry counts and has data of all types of accommodation facilities but there is no clear legal framework for it because this is a new type.
Therefore, related questions such as terminology and usage lack clear definitions. So, currently we have statistical data for this type of accommodation facility, this type of business travel calendar, but not statistics for condotel.
According to Prof. Dang Hung Vo, for condotel development, it is necessary to remove two main bottlenecks. The first is to link condotel development to land development policy.
In developed countries like the United States, condotel investors will not be confused because it has a clear legal framework for land use. There, if businesses want to rent land for a short time, they will enjoy low tax rates, and if they want to rent for a long-term, tax rates will be higher.
However, in Vietnam, land policies may no longer be suitable for a market economy. Therefore, when investing in condotels, businesses are facing some obstacles. From the land use policy, in many places, when an enterprise invests in a condotel, it has an authoritative pledge for leasing land for a long term. However, when the business is completed, many emerging legal issues unnerve it.
In addition, taking property investment mindset into account, many secondary investors are waiting for real estate prices to go up over time. This is a very bad mindset formed from Vietnam's unstable land policy. This should be addressed. However, the question is how to solve it.
“Vietnam should associate land policy with tax policy. Accordingly, when businesses want to rent land for a long time, they can still sublease but the land tax will be higher. In contrast, if they want to rent land for a short time, the land tax will be lower. Such a policy will change their perception of real estate,” Mr. Vo said.
Secondly, it is necessary to pay attention to the condotel business method, according to Mr. Vo. Why did they take a profit pledge as a gauge for condotel business? Vietnam can completely do condotel business in many other ways, not just with the profit commitment.
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Mr. Bui Xuan Hien, General Director of Vietnam Southern Homes JSC Businesses need regulatory agencies to listen to their voices to clear difficulties against them. Condotel is a new product and there are thus many matters to solve. For a long time, the legal framework has failed to catch up with the overheating real estate market. There are two things we need to understand clearly and have an appropriate legal framework in place. The first thing is the registration and certification of condotel land ownership. For a long time, we have a lot of information that condotel investors have not yet applied for condotel land ownership licenses, which bothers investors. But, in fact, this is not a problem. By market, we must follow a market and sharing economy. If a project is located on a given land plot, the ownership certificate will be issued as the land is, no matter how a project is operated because its operation relates to licensing and lies within the authority of tourism agencies. Therefore, we must not confuse this issue. Second, when an investor fails to fulfill its commitment to customers, this is a civil agreement issue between them. This is normal in investment and business relations, even in common real estate, because disputes are frequent. When we remove obstacles for the condotel market, we must work together to do this, not by the Department of Culture, Sports and Tourism or the Ministry of Natural Resources and Environment alone. In terms of financial investment or from the perspective of socioeconomic development, condotel is the type that needs to be encouraged for development. Some types of homestay investments are similar, even doing business on agricultural land. Therefore, it is necessary to facilitate condotel development, and, at the same time, support investors. Mr. Nguyen Chi Thanh, Vice Chairman of the Vietnam Association of Realtors Indeed, Vietnam’s condotel market is still growing and enticing investors. Vietnam has favorable and potential natural conditions, not only for marine tourism but also for mountain tourism. Therefore, with existing potential for tourism development, the potential for condotel development in the next 10-20 years is very good. It is important to learn from similar successful models in the world. In particular, building a new condotel infrastructure is the first step. The important matter is how to effectively manage and operate it. About five years after coming into being, with gradually perfected laws and existing market needs, we believe in the future success of the condotel model in Vietnam. Ms. Pham Thi Thinh, Deputy Director of Land Registration Bureau, the Ministry of Natural Resources and Environment Document 703 states localities review and consider specific conditions and planning factors. Therefore, property ownership, shared area and private area should be discussed by relevant ministries. In order to support investors and avoid disputes, we advised the Ministry of Construction to standardize construction requirements, clearly define shared area and private area which essentially describe in details in condotel purchase contracts similar to apartment purchase contracts: How much the used area is, what are the shared area, balconies or pathways. Certification is the last stage. Starting from project launch, land use planning, land allocation, construction permit, construction completion records, apartment purchase contracts are governed by the Law on Real Estate Business and the Civil Code. The last stage is certification, the final product of all other industries. Authorities always want to go hand in hand with enterprises to promote a healthy real estate market as a way to increase fiscal revenue. Lawyer Nguyen Danh Hue, Chairman of the Board of Members of Hung Dong Law Firm Without doubt, condotel, whether or not it has an ownership certificate, is also a commercial condo, not a residential condo. The ownership certificate requirement as per Document 703 will cause short-term investors to go to the wall because a condotel is sold to many people. Therefore, issuing the ownership certificate for a condotel must be transparent. At the same time, when the real estate market shows signs of slowing down, momentum is needed. So, issuing an ownership certificate for condotel can clear hardships for investors. However, issuing the ownership certificate also raises two things. Firstly, granting the property ownership certificate to the primary investor will pose risks to secondary investors. Secondly, if the ownership certificate is granted to secondary investors, it relates to the property ownership of the primary investor - the land use right granted to the latter but the property ownership is granted to the former. Therefore, if the land-use right expires in 50-70 years later, how will the property rights be handled? Their assets cannot suddenly disappear. This matter cannot be solved by only the Ministry of Natural Resources and Environment or the Ministry of Labor, Invalids and Social Affairs. Furthermore, when buying a property, secondary investors borrow money from banks. After having the property handed, they continue to borrow money from banks. There will be a case that an apartment is used to borrow money from many different banks. We already have apartment management regulations and we can issue specific regulations for condotel. Investors can set up their own management bodies or secondary investors can operate and pay management costs. What is important today is that we are lacking detailed guidelines. As for the legal framework, our current legal system basically meets practical requirements. |
By Anh Mai, Vietnam Business Forum
Vietnamese
