CONTINUE TO LOOK FOR LEGAL "IDENTITY" OF CONDOTELS

According to Lawyer Le Cao, Lead Lawyer of FDVN Law Firm, when there are no clear rules but “shortcuts” in the form of condotel provided by decrees and circulars, obstacles and bottlenecks in the implementation stage shall arise.

 

Editor’s note:

 

Condotel, also known as hotel-apartment, is a combination of apartment and hotel. Appearing and developing in Vietnam in 2014, condotel reached the peak in the period of 2015 - 2018. The advantage as an attractive investment model has quickly put condotels on the priority investment list of connoisseurs of traders.

 

Accordingly, the supply of this product also massively appeared on the market. According to statistics of the Vietnam Real Estate Brokers Association, in the period of 2015 - 2018, there were about 30,000 condotel products launched in the market in many areas with tourism advantages such as Nha Trang (Khanh Hoa), Phu Quoc. (Kien Giang), Da Nang...

 

However, in 2019, the commitment to profit in deals failed, and therefore the condotel lost points in the eyes of investors. At the same time, the shock called Covid-19 appearing one year later colored grayer to the picture of this market. Since then, condotel seemed to be "forgotten".

 

Considered a type with potential development, for many years now, policies and laws on tourism real estate business, in general, and multi-purpose real estates such as condotels and officetels, in particular, have remained half-baked without clear "identity". From Official Dispatch No. 703/BTNMT-TCQLĐĐ 2020 of the Ministry of Natural Resources and Environment guiding the land use regime and the certification of ownership of non-residential construction works, so far, there have not been many changes so that the localities are still confused in granting certifications for this product.

 

Recently, the Government issued Decree No. 10/2023/ND-CP amending and supplementing some articles of the decrees guiding the implementation of the Land Law (Decree 10), effective from May 20. It supplements the regulations on granting certificates of work ownership according to the purposes of commercial and service land for construction works which are used for accommodation and tourism as per law tourism on commercial and service land.

 

In the context that the real estate market is falling into depression, can the new regulations in Decree 10 revive the condotel market; and at the same time bring positive impacts and changes to the resort real estate segment and the real estate market in general? Is this a necessary and sufficient solution to comprehensively remove legal obstacles for the “healthy” development of condotel products?

 

Deeply discussing this issue, Realtimes started posting a series called "Continuing to find the legal "identity" for condotel".

 

Sincerely introduce to readers!

 

The form of tourism apartment, as known as condotel, has appeared for nearly 10 years in the market of real estate resorts, and it had reached the peak of development before stepping down since 2019.

 

As a product assessed to be potential, unfortunately, up to now, there has been no complete legal framework supplemented for condotels for its sustainable and healthy development. That is also said to be the root cause of the status that the localities have been confused about and have not dared to issue certificates of ownership of construction works for condotels for nearly a decade.

 

Facing this problem, many people expect that the appearance of Decree No. 10/2023/ND-CP (Decree 10) providing clearer regulations on the granting of certificates for condotels shall contribute to "untying the knot" for these works, promoting the development of resort real estate in the period when the general market is facing many difficulties and challenges.

 

However, some say that, in order to completely remove legal obstacles for condotels, the appearance of Decree 10 is not enough. The thing is that this type of product needs to be clearly legislated.

 

To obtain more objective views on this issue, Realtimes continues to hold the interview with Lawyer Le Cao, Lead Lawyer of FDVN Law Firm.

 

Regulations on granting certificates for condotels in Decree 10: The feasibility of these regulations.

 

Reporter: The newly issued Decree No.10/2023/ND-CP has been assessed by many people to have provided clearer legal provisions for condotels, helping localities to be more certain when issuing certificates to investors. What is your opinion on this matter, Mr. Cao?

 

Lawyer Le Cao: In my opinion, so far, there is no specific legal basis for this type of tourist apartment, even when Decree 10/2023/ND-CP of the Government was issued.

 

Many people think of Decree 10 as a basis for confirming the legality of condotels, but in my opinion, that is not the case at all.

 

Because Decree 10 only adds Clause 5, Article 32 compared to Decree No. 43/2014/ND-CP with the contents: "For construction projects developed to serve travel accommodation purposes as prescribed in laws on tourism on commercial or service land, if any of them satisfies the conditions set forth in laws on land, construction and real estate business, the ownership of that construction project attached to land is certified according to the commercial or service purposes of land”.

 

Thus, the change here is that Decree 10 has opened up the possibility for tourist apartments to be granted a certificate of ownership of the building, but there are still many issues to be discussed regarding whether or not these regulations are feasible.

 

Specifically, according to the provisions of Decree 10, in order for tourist apartments to be granted a certificate, they must fully meet the conditions prescribed by the law on land, construction and real estate trading. However,  the laws do not say specifically what those conditions are.

 

In addition, there are many other issues that need to be clarified, such as: are condotels solely for the purpose of tourist accommodation? If they are only for tourist purposes, why is it necessary to issue a separate certificate to the owner? Or what is the ownership regime for this type of construction? What are the buyer's rights when they own these properties? What are the conditions on the area of the project and the function of the building?

 

These are the issues that have not been clarified in the legal regulations.

 

When setting out the issuance of ownership certificates, it must be compatible with relevant laws such as the law on land, construction and real estate trading, and at the same time must be consistent with the law on tourism and investment. Because when being licensed to invest in tourist accommodation, to construct tourist accommodation, there may still be problems that are incompatible with the certificates that the investor has been granted or there is an ambiguity between owning a real estate product and owning a separate construction in the system of tourism development projects.

 

Therefore, in my opinion, issuing certificates immediately for tourist apartments based on Decree 10 is likely to be difficult to implement in practice and there will certainly be many obstacles when implementing.

 

Reporter: So what you mean is that if the law has not yet provided adequate regulations, the decree will not be able to solve the problem thoroughly?

 

Lawyer Le Cao: Before Decree 10 was issued, there were already a number of regulations and official letters on the issuance of certificates for condotels such as Official Letter No.703/BTNMT-TCQLĐD 2020. However, local authorities are still very confused in issuing land use right certificates for buyers of these products.

 

So a question needs to be called: What is the cause of this problem?

 

First of all, it must be clearly understood that Official Letter 703 is not a normative document, just a document providing recommendations and professional guidance to implement Decree No. 43/2014/ND-CP and Decree No. 01/2017/ND-CP, which provides supplement related to "issuance of certificates of land use rights, ownership of houses and other land-attached assets for each construction item or part of the area of the construction item".

 

However, since the condotel has not been defined as a construction work or construction item, there is no basis for granting a certificate. That is the reason why many localities are still confused in issuing land use right certificates to condotel buyers.

 

In Decree 10, it was more clearly referred to as "construction projects developed to serve travel accommodation purposes" - this can be understood as tourist apartments, and they must meet other law conditions to be granted the certificates. But because the current law does not have regulations on tourist apartment products, Decree 10 itself cannot use the word "tourist apartment", but "construction projects developed to serve travel accommodation purposes" instead.

 

Therefore, despite the efforts put into the solutions in Decree 10, but in reality, the law has not yet specified specific conditions on ownership, function, design, area, and legal liabilities of the investors, financial obligations and other related issues to obtain an ownership certificate, therefore it will obviously be very difficult to grant the certificates.

 

Although a solution can be provided through the act of promulgating regulations, If the law has no specific provisions but decrees and circulars are used as "Shortcuts", it will easily lead to obstacles and difficulties in the actual implementation.

 

Therefore, the issuance of certificates of ownership for tourist apartments will still be stuck even though Decree 10 takes effect from May 20, 2023.

 

It is necessary to anticipate the "transition curve" when the term of commercial and service land use expires

 

Reporter: Many people argue that the key issue of condotel is property ownership on commercial and service land. Specifically, when the land use term expires, how should property ownership be handled to ensure the interests of investors?

 

Lawyer Le Cao: The ownership of tourist apartments is entangled mostly in issues relating to the land use term. Because commercial and service land is land with definite-term of use, while investors who buy tourist apartments want indefinite-term of ownership.

 

We all know that according to the life limit of the building, the owner of the tourist apartment’ rights to use the property may be restricted, but it is necessary to refer to the legal consequences when the ownership expires, it is not justified to take away their ownership of the building and their land use rights.

 

If we own an apartment for a period, it's no different than spending money on a long-term apartment rental, because at some point we will completely lose the ownership of it.

 

Therefore, regulating the legal consequences relating to the land use term in cases of tourist apartments is the key issue to stipulate other legal issues related to the ownership of these types of buildings. From there, regulations on conditions and procedures for certifying ownership for residents and investors to buy tourist apartments can be implemented.

 

For example, the law needs to stipulate if the land use term or the work use term expires, how to handle the ownership rights issues of people, with what conditions, obligations and rights between investors and residents. We need to be able to measure the "transition curve" at that point.

 

At the same time, it is necessary to take into account the issue that when the investor investing in the works has the right to transfer the real estate product to the buyer, when the term of use and the life of the work expires, the investor must be obliged to ensure that the buyers can continue to exercise their rights. Along with that are the conditions which the buyers shall meet in order to be able to obtain permanent and long-term ownership of the property.

 

Clarifying the term of ownership is essential for a healthy and sustainable real estate market, ensuring confidence for investors. It is the same for ownership certificates for condotels, if this obstacle is not removed, the market will not easily change because no one will spend money on properties that they cannot firmly own.

 

Reporter: So in your opinion, what is the solution to legally identify the condotel in a comprehensive and reasonable way?

 

Lawyer Le Cao: As mentioned above, once the law has not been standardized, all solutions to remove obstacles are only temporary, sometimes they even bring the opposite effect, since they create a new regulation under unclear laws making it difficult for localities to enforce. As a result, when something goes wrong, the executor is often held liable.

 

Therefore, even though there is a decree, the law has not yet been established, and the local government will not dare to implement it. That is the reason why I am somewhat afraid that the new regulations in Decree 10 will be difficult to be practically implemented.

 

Therefore, the most important solution at this time is that law provisions need to be promulgated as soon as possible for implementation.

 

It can be seen that new concepts such as tourist apartments, and office apartments combined with accommodation specified in Decree No. 02/2022/ND-CP are in line of the form of real estate business contracts. However, no law, as well as other related regulations clearly defines the concept .

 

Up to now, the Draft Law on Real Estate Business is being consulted, including regulations on tourist apartments, and office apartments combined with accommodation (officetel). If this time, the law is promulgated and takes effect, then there will be a basis to verify a legal concept that has been repeatedly talked about but has not been clearly stated in the law.

 

However, to implement the regulations on the certification of ownership for tourist apartments and office apartments as I mentioned, the Drafts of Law on Real Estate Business, Law on Land, and Law on Tourism need to not only consistently stipulate the terms of legal concepts but also specify rights and obligations of related parties, conditions for establishing ownership rights, procedures for registration of ownership rights, limitations ( if any), legal consequences when the work, also the land use of the investor expires.

 

Thus, the foundation for establishing ownership issues and related issues surrounding the problem of new types of real estate such as condotels, officetels and shophouses... need to be standardized by legal regulations. Identifying them with legal concepts to implementing relevant specific regulations, we have a basis for enforcement.

 

If we temporarily deal with the problem based on the temporary regulations without the legal foundation or resolutions issued by the National Assembly, it will be difficult to implement in practice because it is easy to leading to the status of mechanically implementing the regulations and guidelines without understanding their underlying basis.

 

Reporter: Thank you for your sharing.

 

Link: CONTINUE TO LOOK FOR LEGAL "IDENTITY" OF CONDOTELS

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