Want to lease, rent or buy a new home in Vietnam? Here are the most important legal documents you need to know about your property rights in the country.
In recent years, Vietnam’s strong economic growth as an emerging country has fueled interest in the country’s real estate market. When entering this market, it can be daunting to know the difference between the different types of real estate ownership and the qualification process for each.
Here is a digestible overview of these documents to better prepare you for your foreign property trip in Vietnam. Let’s start!
Deposit Agreement
The down payment agreement is the most basic contract you sign when buying a home.
In the primary market
When you buy new apartments from developers, you have to go through a process that involves a series of installments over the next 1-5 years.
Depending on the type of projects and developers, you pay from 2% per six months to 10% per month. This is linked to the incremental progress of the project over time.
1. The first installment is usually the signing of a down payment agreement with the property developer after selecting your desired unit.
2. In order to establish your claim on the land, the developer will almost always want a payment of at least 10% of the value of the property.
*Please note that you may or may not be able to sell the device after signing the deposit agreement, depending on the developer’s policy.
On the secondary market
When you buy property from another seller, you often make a down payment and sign a down payment agreement as a statement of good faith and to “make your claim” on the property.
This is done to demonstrate that the transaction will take place between both parties and to ensure that the commitments of both parties are fulfilled.
Deposits normally range from 5% to 10% of the property’s value, with up to 50% in some cases.
1. Deposit agreements may be signed directly between the parties, drawn up by an agent or ratified by a notary.
2. The property’s remaining payment schedule (when the buyer must pay the remainder and close the purchase – usually within 30 days of signing the down payment agreement); or
3. If one of the parties wishes to withdraw, the following sanctions shall apply:
A. For the buyer, this usually means losing the money they put in as a deposit.
B. This usually involves a penalty equal to the buyer’s deposit for the seller.
*Note: this also applies to homes that are not apartments*
Long Term Lease Agreement (LTL)
A long-term lease is exactly what it sounds like: instead of buying the property, you rent it from the developer for 50 years.
After the first 50 years are up, the government says you can extend the agreement for another 50 years. However, the policy on this may be subject to change in the future.
The property is yours to use during this period, but because you are simply renting it, it is officially the property of the developer. For this reason, you can’t get a pink book – the government’s approval of property rights.
Who is eligible for a long-term lease?
Because quotas/supply are limited or purchase agreements (SPAs) have already expired, consumers often sign a long-term lease when buying a home.
Long-term leases are uncommon among Vietnamese residents; instead, they can buy an apartment through a SPA, which has fewer quotas and restrictions.
As a result, many of those signing this agreement are foreigners who want to invest in real estate as foreigners are only allowed to own 30% of the real estate. They may be able to buy an apartment for 8-15 percent less than buying one under a SPA due to the lesser legal status of LTL agreements.
Note: When a foreigner with a long-term lease sells his property to a local person, the developer will change the lease to a local SPA.
Conclusion
The process of obtaining a title for your home in Vietnam can be time consuming, but there is a shortcut to owning it.
Foreigners and Vietnamese citizens can easily buy real estate in Southeast Asia with Homebase. They offer alternative solutions to buy, own and sell your property without the hassle. The company is backed by prestigious funds around the world, including Y Combinator, VinaCapital and Partech Ventures.
This article is part of Homebase’s Resources series, which was co-created with their team. Homebase is a disruptive proptech company in Vietnam that offers foreigners a more flexible alternative to mortgages. Please visit http://homebase.com.vn/ for more information on how to buy or sell your property.
For more information about Homebase, call (+84) 964 245 404 or visit http://homebase.com.vn/.
