Changes in new land law to strengthen state management, protect land users

The new Land Law 2024 along with the Law on Housing 2023 and the Law on Real Estate Business 2023 which were passed by the National Assembly in the fourth quarter of 2023 have provided a complete legal framework for the real estate market, writes senior partner Anh Dang and associate Quynh Tran at VILAF law firm.

On January 18, 2024, the National Assembly passed the amended Land Law (the new Land Law 2024), which will take effect and replace the current Land Law No. 45/2013/QH13 from January 2025, except for (i) regulations on maritime encroachment activities (Article 190) and regulations amending several articles of the Law on Forestry (Article 248) which will take effect from April 2024; and (ii) regulations on the formulation and approval of land use planning (Article 60.9) which will take effect from the expiry date of Resolution No. 61/2022/QH15 adopted by the National Assembly on June 16, 2022.

The new Land Law 2024 along with the Law on Housing 2023 and the Law on Real Estate Business 2023 provide a complete legal framework for the real estate market.

Abolishment of land price framework and annual updates of land price list

The new Land Law 2024 abolishes regulations on a land price framework (“khung giá đất” in Vietnamese) as specified in Land Law No. 45/2013/QH13 adopted by the National Assembly in November 2013 (Land Law 2013).

Specifically, under the Land Law 2013, the land price framework is issued every five years and subject to adjustment by the government if the common market land price increases by 20% or more compared to the maximum price, or decreases by 20% or more compared to the minimum one as specified in the land price framework.

However, in practice, due to the delayed adjustment to the land price framework during its implementation, it has failed to accurately reflect the actual market value of land. Consequently, the removal of the land price framework under the new law is necessary to align prices more closely with market prices.

Under the new Land Law 2024, the land price list (“bảng giá đất” in Vietnamese) will be published on an annual basis with the first list applied from January 2026. On an annual basis, the provincial People's Committee shall propose to the provincial People's Council adjustment, amendments, and supplements for the land price list, which will become effective the following year.

Currently, the Land Law 2013 does not explicitly address the land valuation methods; instead, the land valuation methods are specified under Decree 44/2014/ND-CP of the government dated May 15, 2014 regulating the land prices (Decree 44/2014).

Decree 44/2014 outlines five land valuation methods, including: (i) direct comparison method (“phương pháp so sánh trực tiếp” in Vietnamese); (ii) subtraction method (“phương pháp chiết trừ” in Vietnamese); (iii) income-based method (“phương pháp thu nhập” in Vietnamese); (iv) surplus-based method (“phương pháp thặng dư” in Vietnamese); and (v) land price adjustment coefficient method (“phương pháp hệ số điều chỉnh giá đất” in Vietnamese). The new Land Law 2024 removes the subtraction method and specifies the remaining four methods of land valuation in detail with specific circumstances to apply each land valuation method.

Diverse forms of compensation when the state recovers land

The Land Law 2013 currently stipulates that land users whose land is recovered by the state can only be compensated with land with the same use purpose or value. The new Land Law 2024 introduces more diverse forms of compensation (including compensation in money, by house, or by land with the same or different use purpose). Such change will prioritize the land user's right to choose the form of compensation when their land is subject to recovery.

Mortgage over the land use rights (LUR) for land leased by the state subject to upfront rental payments and land allocated by the state subject to land use fee collection

Under the Land Law 2013, both domestic and foreign-invested enterprises who leased land from the state with upfront rental payment for the entire lease term and allocated land by the state for collection of land use fees are permitted to mortgage the LUR and assets attached to the land at permitted credit institutions in Vietnam.

Pursuant to the new Land Law 2024, in addition to the right to mortgage over the LUR and assets attached to the land at permitted credit institutions, domestic organizations are permitted to mortgage to other economic organizations or individuals. However, foreign-invested enterprises are still only permitted to mortgage the LUR and assets attached to the land at credit institutions licensed to operate in Vietnam, which remains unchanged as compared to the Land Law 2013.

Land lease subject to upfront rental payment allowed in limited circumstances

Under the new Land Law 2024, the state allows upfront land rental payments in one of the three following circumstances:

(i) lands for implementing investment projects in agriculture, forestry, aquaculture, and salt production;

(ii) lands for industrial parks, industrial clusters, high-tech parks, and worker accommodation in industrial parks; lands for public purposes with business purposes; commercial and service lands for tourism and office business activities; and

(iii) lands for construction of social housing for rent in accordance with the law.

For land users who are currently paying upfront or annual rental payments before the effective date of the new Land Law 2024, they are allowed to continue using the land under the chosen land lease method for the remaining land lease terms except when:

(i) Land users currently leasing land from the state under an annual rent basis, but falling under the category eligible for upfront rental payments, may choose to switch to upfront rental payments for the remaining land lease term. The land rental fee must be recalculated at the time of approval for this transition; and

(ii) Land users currently leasing land from the state under upfront rental payment for the entire lease period may choose to switch to a land lease under annual land rental payments. The previously paid fees will be deducted from the annual land rental fee in accordance with regulations.

More conditions to be satisfied prior to transfer of LUR

The new Land Law 2024 sets forth additional conditions that must be satisfied before transferring the LUR, including the settlement of all financial obligations to the state. In addition to the general conditions currently specified in the Land Law 2013, when an investor transfers an LUR which is attached to technical infrastructure within a real estate project, they must adhere to additional specifications set out by the Law on Real Estate Business and the Law on Housing. Specifically, under the new Law on Real Estate Business 2023, the investor must submit written notification to the provincial-level state management agency regarding the eligibility for transfer of the LUR before initiating the transfer.

Land in transfers of real estate projects

To align with the new Law on Real Estate Business 2023, the new Land Law 2024 confirms that when a real estate project is transferred in accordance with the new Law on Real Estate Business 2023, the transferor shall not be required to obtain the certificate of LUR and ownership of assets attached to land (the LURC) before the transfer.

The new Land Law 2024 further sets out transitional provisions for real estate projects which were transferred to foreign-invested enterprises in accordance with the Law on Real Estate Business 2014 and Investment Law 2020, but have not been completed before the effective date of the new Land Law 2024.

In this situation, competent authorities shall carry out procedures for land allocation, land lease, and grant the LURC to the transferee in accordance with the new Land Law 2024. The transferee will assume all rights and obligations related to the land from the transferor.

Issuance of the LURC to households and individuals currently using lands without holding LUR documents

The new Land Law 2024 allows households and individuals using land without documents on the LUR before July 2014 (instead of July 2004 under the current Land Law 2013) to be granted with the LURC, provided that they have not breached land regulations or been allocated the land without proper authority.

The Land Law 2014 divides cases of land users without LUR documents before July 2014 who are entitled to the LURC into three milestones, including (i) before December 18, 1980; (ii) from December 18, 1980 to before October 15, 1993; and (iii) from October 15, 1993 to before July 1, 2014.

Furthermore, the new Land Law 2024 provides that the state shall be responsible for issuing the LURCs to the qualified cases. These regulations will both safeguard the legitimate rights and interests of the land users who use the lands stably without having the LUR documents and emphasize the full extent of the state’s responsibilities toward the land users.

In conclusion, the new Land Law 2024 represents the legislative body’s endeavor to establish a comprehensive legal framework concerning land-related issues. Following a prolonged period of drafting and assessment, the new Land Law 2024 has been approved by the National Assembly, demonstrating a broad vision aimed at facilitating both efficient land exploitation and effective state management. While it will take time to assess the impacts in practice, there are positive indicators in the changes to the new law for land users, particularly economic organizations engaged in the real estate sector.