UPDATE ON GRANTING OWNERSHIP CERTIFICATES FOR CONDOTEL, OFFICETEL AND SHOPHOUSE

On 15 May 2023, Ministry of Natural Resources and Environment issued Official Dispatch No. 3382/BTNMT-DD to provincial People’s Committees regarding the implementation of some?provisions on land laws (“Official Dispatch 3382”). Official Dispatch 3382 guides to implement Decree 10/2023/ND-CP, which amends and supplements decrees guiding the implementation of the Land Law and implementing the government's direction in Resolution No. 74/NQ-CP dated 07 May 2023 ("Decree 10/2023"). In particular, the most notable breakthrough is the guidance on the issuance of certificates of land use rights, ownership of houses and other land-attached assets (“Certificates”) for tourist apartments or tourist villas (“Condotel”), apartments combining office and accommodation (“Officetel”) and commercial service apartments (“Shophouse”).

?According to Official Dispatch 3382, there are two (02) types of Condotel, Officetel, and Shophouse, including:

(i) Group 1 is the type of Condotel, Officetel and Shophouse in specialized construction projects developed on non-agricultural land which is not residential land (usually commercial and service land); and

(ii) Group 2 is the type of Condotel, Officetel and Shophouse in mixed-purpose apartment buildings on residential land.

According to Point 3.1 of Official Dispatch 3382, for the type of Condotel, Officetel and Shophouse in Group 1, Certificates will be issued to the owner of the construction with the purpose of land use and the land use term as recorded in the decision on land allocation or land lease to the investor (i.e. the term of commercial service land usually not exceeding 50 years). The form of land use is "common use" in case the investor has transferred parts of the construction to different owners. Accordingly, customers who buy such type of Condotel, Officetel and Shophouse shall have the joint land use rights with other owners.

For the type of Condotel, Officetel and Shophouse in Group 2, Article 3.2 of Official Dispatch 3382 guiding the issuance of Certificates to owners of construction with the purpose of using land is "residential land in rural areas" or "residential land in urban areas", the form of "common use" and the term of land use is "long-term".

Thus, the type of Condotel, Officetel and Shophouse in constructions on commercial and service land will be granted Certificates with a limited land use term (usually no more than 50 years). Meanwhile, the type of Condotel, Officetel and Shophouse in a mixed-use apartment building on residential land will be granted Certificates with a long-term land use term, similar to residential apartments in the same building.

Please note that Article 126.3 of the Land Law 2013 only stipulates the case where the buyer of a house in a housing project can use the land stably and long-term, but does not stipulate the land use term for the other non-residential areas in mixed-use apartment buildings. Official Dispatch 3382 with the above guidance seems to extend the scope of recognition of the "freehold" land use right under the Land Law 2013 to areas used for other purposes other than housing in mixed-use apartment buildings. Although the "breakthrough" of Official Dispatch 3382 cannot be denied, we believe that it is necessary to apply it cautiously and evaluate the suitability of this guideline in comparison with the provisions of the Land Law 2013 and relevant laws such as the Law on Real Estate Business, the Law on Housing and the Law on Tourism to complete the legal framework for typical types of real estate like Condotel, Officetel and Shophouse.

In addition, although Decree 10/2023 has set a foundation for the issuance of Certificates for the above types of real estate, this Decree only provides general provisions and requires to qualify provisions of relevant laws to be granted Certificates, without setting out specific requirements and conditions for ease of implementation. This may remain an obstacle and make it difficult for licensing authorities and stakeholders over the issuance of Certificates for Condotel, Officetel and Shophouse.

By Than Trong Ly and Tran Thi Nhu Quy