Ownership Certification for Tourism Properties - Leverage for Hospitality Industry

10:18:00 AM | 5/4/2022

Inconsistency in policy enforcement and delayed implementation of procedures for granting ownership certificates are major barriers to vacation home development, especially in the context of post-COVID-19 recovery. What is the solution to thoroughly tackle these legal setbacks?

Policy drags vacation home development

At the Seminar on “Legal bottlenecks and solutions to unlock vacation home resources” hosted by the Vietnam Real Estate Association (VNREA), Mr. Nguyen Van Dinh, Vice Chairman of VNREA, said, policies and laws on vacation homes are still incomplete and inconsistent, causing difficulties and risks for business investment and discouraging secondary investors. And in fact, it has reduced investment in recreational property in the past three years.

The legal bottleneck is also noted by economic expert Can Van Luc. Recreational property investment and business is subject to laws on real estate business, tourism and other aspects. This leads to inconsistency and disparity, which not only causes difficulties and complications in enforcement for both authorities and investors but also poses risks to credit institutions in financing and bad debt handling.

The problem most mentioned by the press is ownership certification granted to buyers of vacation homes (secondary investors). For example, at Bai Dai - Cam Ranh, Khanh Hoa, inconsistency exists in implementation among projects in the same locality.

In this regard, Dr. Doan Hong Nhung, lecturer at Law Faculty, Vietnam National University of Hanoi, said, to draw investment funds into vacation homes in Bai Dai, Bac Cam Ranh Peninsula in 2013 - 2017, Khanh Hoa province advocated non-housing land allocation to facilitate real estate developers to raise funds from secondary investors through long-term ownership commitments.

However, to date, many projects have yet to issue ownership certificates for recreational properties such as condos and villas. The inconsistency from investment attraction mechanism to policy enactment has resulted in various consequences for developers and secondary investors of projects in Bac Cam Ranh Peninsula. At the same time, it has also exposed the “cloak” of laws is “narrower” than actual market development, said Nhung.

Notably, obstacles and deadlocks in vacation home ownership certification have caused many consequences such as disputes, prolonged lawsuits, and damage. This is a big deal for developers and retail investors, and also caused the real estate market to suffer heavy aftermath, specifically when this has been almost “frozen” since 2018.

According to data from the Vietnam Association of Realtors, in the past few years, up to two-thirds of condotel projects with products being offered for sale on the market have no transactions.

According to Mr. Bui Van Doanh, Director of the Vietnam Real Estate Research Institute, localities do not dare to license new projects for this type but even if they are accepted and put into use, investors cannot have ownership certificates of their property. If buyers are unsure of legality and tradability, their property will not be traded, resulting in trapped capital. Developers will lose their credibility and face lawsuits while ownership certification is the authority of the local government. That vicious cycle will fall into a dead end, an unresolvable deadlock.

Besides, Khanh Hoa People's Committee put a stop to a series of projects for adjustment. This not only obstructed growing investment flows but also risked damaging the interests of developers and investors. Projects built on rural land have long-term use and fulfill high financial obligations for land, but their use time is changed to definite. This will certainly cause irreparable damage to investors and developers.

How to troubleshoot the difficulties?

Remarking on the concept of “non-housing land”, Professor Hoang Van Cuong, Member of the Committee on Finance - Budget, Vice Rector of the National Economics University, said that “non-housing land” is a good concept and should be acknowledged as a solution to facilitate market development. “In short, we should issue ownership certificates for these types. And this is simply the right to own property and this right is lawful. The land can be legally transformed into residential land to ensure the interests of stakeholders,” he said.

Many experts, lawyers and leaders of Khanh Hoa Provincial People's Committee also agreed to propose solutions to harmonize the interests of localities, businesses and customers (secondary investors). Mr. Nguyen Tan Tuan, Chairman of Khanh Hoa Provincial People's Committee, said, to remove obstacles to recreational property projects in Bac Cam Ranh Peninsula, the province divided projects into two groups for troubleshooting. For unexecuted projects, the province agreed to transfer all to commercial service land for project implementation. For ongoing projects, the Provincial People’s Committee asked the Government for permission to license projects in the form of rural land of long-term ownership for continued implementation.

Supporting ownership certification of recreational property, Mr. Bui Van Doanh, Director of the Vietnam Real Estate Research Institute, affirmed, “Issuing ownership certificates to buyers of apartments in “non-housing land” projects is helpful not harmful. With the concept of “non-housing land”, local authorities in these places have stood with social interests for action because the nature of this type of “residential land” and “already residential land” (either urban or rural land) is naturally granted ownership certificates in the long term. Granting ownership certificates is limited to completed, licensed and operated projects, leaving no precedent or pressure on authorities after the proposal of the Inspectorate of Government. This type of project has been temporarily suspended while new projects are not licensed.

Doanh further analyzed that, if issuing ownership certificates for completed projects, the interests of local authorities, investors and customers are ensured. That not only preserves the prestige of the government, the reputation of businesses and the interests of customers, especially, while opening up the market, stimulating capital flows and removing potential detonators that can destabilize local disorder caused by the frustration of customers. The most important guaranteed benefit for customers is the right to ownership when they purchase products built on long-term residential land, which is protected by the Constitution.

Agreeing with the above opinions, Lawyer Nguyen Thanh Ha from SBLaw Firm pointed out that it is time for lawmakers to legislate the type of residential land in rural areas (non-housing land) into law to provide legal grounds for authorities and enterprises to take action, leave no bad impact on the investment environment, businesses and buyers as well. In the long term, it is necessary to further improve mechanisms and policies on real estate, including recreational property.

In order to solve difficulties in relation to ownership certification of recreational property in the past time, the Ministry of Natural Resources and Environment added this content to the draft decree on instructions of the Land Law (granting ownership certificates of hotels, condotels, officetels, recreational property, second homes, vacation motels and other works that function as both accommodation and recreation on commercial and service land.

If regulations on issuing ownership certificates of recreational property are enacted, hundreds of recreational property projects in major tourist centers such as Quang Ninh, Da Nang, Nha Trang, and Phu Quoc will be legally solved.

By Huong Giang, Vietnam Business Forum