What are a Project’s Legal Requirements?

In the past 5 years, property investment has always been one of the best ways that bring good profit for investors. Especially in the apartment project segment, when the 2015 property law allows foreigners to own apartments in Vietnam, the market becomes more attractive.

Besides the factors affecting the profit of a project such as location, design, developer’s reputation…, the legal license of the project is the top topic that developers are now concerned.

Let’s go in details what legal documents a project needs to have:

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A. List of Legal Documents Provided by the State before Construction

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1. 1/500 Master Plan Approval
2. Land Use Right Certificate
3. Investment In-Principal Approval
4. Basic Design Approval
5. Firefighting Approval
6. Environment Impact Report Approval
7. Construction Permit (Foundation and Top)

For details about each document, please refer to the National Database of administrative procedures: See here

Among the above documents, the firefighting approval is one of the recent documents causing difficulties to the developers. The reason is that the Government requires the developers to adjust the design of the fire protection compared with the old design approved after the fire incident at the project in District 8, causing 13 deaths.

This adjustment affects the construction progress as well as the launch time. This is one of the indirect reasons why the project supply of the market has decreased sharply in the past 1 year.

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B. List of Legal Documents Prescribed by the State before the Launch

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1. Deposit Contract Sample
2. Sale and Purchase Agreement Sample
3. Minutes of Pre-acceptance of the Foundation 
4. Notice of Future Property Eligible for Sale/Lease Purchase

For details about each document, please refer to the National Database of administrative procedures: See here

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C. Compliance with Regulations

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In fact, due to the speed of infrastructure development and the growth of property price, coupled with the supply scarcity of the market, many projects often do not follow the legal administration regulations.

The most outstanding of which is the status of launching a project is when the foundation has not been completed and the Notice of future property eligible for Sale/Lease (issued by the Department of Construction with the minimum condition is the completion of the foundation construction).

This situation buyers can easily check when the Launch takes place but the actual construction at the project location is not according.

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C. The Pros and Cons

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Of course, when a project has not been legally completed in accordance with legal regulations developed / opened for sale, legal risk is quite possible, leading to:

• The State conducts project inspection
• Construction works are suspended
• Late hand-over of the project to the buyers

However, normally when the project is handed over behind schedule, the developers will have compensation options for buyers: Extension of payment time, penalty interest rate based on the amount paid, refunds, etc. (Depending on the policy of each developer).

The most influential buyers will be the ones who buy to live. This group is not big when most of the current buyers purchasing for investment. In general, the length of payment time help the investing buyers do not have to pay more while property price still increases steadily over the years.

The prolonged situation due to construction delays caused higher price gap between primary price and resale price, helping buyers have better profit. This is only good for buyers who buy projects that have reputable developers, and the interruption of construction progress is temporary and will be continued in the future.

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D. High-end Projects That Have a Strong Legal Administration

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Currently, Hongkong Land (Hong Kong) is probably the most “difficult” developer in the legal preparation of their projects.

In Ho Chi Minh City, Hongkong Land has been having 02 projects including The Nassim – District 2 (in collaboration with Quoc Loc Phat) and The MARQ – District 1 (with An Khang).

Both projects costed from 1-2 years for Hongkong Land to prepare legal documents, and only open for sale when eligible completely.

Specifically at The MARQ project:

• Introduced in 2017, but only in April 2019 did the official information begin;
• Completion of the foundation (Coteccon constructed) in April 2019;
• Notice of future property eligible for sale/lease purchase was issued in May 2019, open for sale in the same month and proceed to sign a Sale and Purhcase Agreement in September 2019.

Price: average 7,000 USD / m2 (VAT included)

The MARQ is being built to the 08-09 floor. Expected handover in February 2022

Currently, The MARQ payment schedule is quite good, when signing sale and purhcase agreement after paying 10%, then making average payment of 1% per month.

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