LEASE PURCHASE OF OFF-PLAN CONSTRUCTION WORK

Off-plan construction works (or off-plan works) are types of real estate permitted for business according to the provisions of law. However, since the type of construction is not yet completed at the time of transaction, are there any restrictions on lease-purchase of off-plan construction work?

Which kind of off-plan construction work are allowed to be traded?

The Real Estate Business Law 2023 (applied from January 1, 2025) has more detailed regulations on transaction of off-plan construction work.

Accordingly, the objects of off-plan real estate that are allowed to be traded are works (including construction works with functions serving educational, medical, sports, cultural, office, etc.) commercial, service, tourism, accommodation, industrial and construction works with mixed service functions) and the construction floor area in the construction work.

Forms of transaction for off-plan construction work include sale, lease-purchase.

What are the conditions for off-plan construction work to be transacted?

Is a type of high-value asset that is directly related to the safety of users, legal completion conditions for off-plan construction work needs to be fully satisfied.

Construction works must ensure legal land use rights, shown by documents on land use rights such as land allocation decisions; decide to lease land; contract on leasing land use rights; Certificate of land use rights, ownership of houses and other assets attached to land… corresponding to each specific case.

In addition, the off-plan construction work is the subject of the contract and must be commenced according to regulations, possessing all types of construction documents from the licensing, commencement and acceptance stages.

In addition, before the transaction, the procedure to notify the competent state agency that the project has met the sale and purchase conditions must be completed fully and on time.

>> OBLIGATION OF GUARANTEE IN SALE OF OFF-PLAN HOUSING https://linconlaw.vn/obligation-of-guarantee-in-sale-of-off-plan-housing/

>> PROCEDURES OF PERSONAL INCOME TAX REFUND https://linconlaw.vn/procedures-of-personal-income-tax-refund/

Some content to be noted when implementing lease-purchase transaction for off-plan construction work.

The investor must fulfill the guarantee obligation. Before the processing the transaction on the floor area under construction, the investors must be guaranteed by a bank for financial obligations. In particular, the commercial bank commits to the buyer that it will perform financial obligations on behalf of the investor when the deadline for delivering and receiving the committed part of the project comes but the investor does not hand it over to the buyer. Non-refundable or incomplete refund of the advance payment and other amounts under the contract for sale and purchase of floor area under construction signed to the buyer; The investor must accept the debt and repay the commercial bank.

The buyer of a plan-off project can request the investor to provide a letter of guarantee to ensure compliance with contractual obligations.

Payment for contracts of sale on floor under construction must comply with the prescribed ratio. The law prioritizes the parties’ right to negotiate in off-plan construction work transaction to ensure compatibility with actual needs and construction progress that the project meets. In particular, the payment can be made into different installment, however, it is necessary to pay attention to the limits on the implementation ratio corresponding to each form as follows:

Payment in the purchase and sale of off-plan housing, the first payment made must not exceed 30% of the value of the sale purchase contract of off-plan housing. From January 1, 2025, this 30% limit on first payment will include the deposit.

Subsequent payments can be divided into installments but must be consistent with the construction progress. At the same time, the total payment value must not exceed 70% of the contract value before handing over the construction work to the customer. In case the seller is a foreign-invested enterprise, the total payment value must not exceed 50% of the contract value. Note, from January 1, 2025, the payment value for this period will be adjusted, stipulated to be no more than 50% of the value of the lease-purchase contract for off-plan housing, construction works, and the construction floor area in the construction project. The remaining amount is calculated as rent to be paid to the lessee-purchaser within a certain period of time as agreed in the contract.

In case the lessee-purchaser has not been issued a Certificate of land use rights, ownership of housing and other assets attached to land, the payment value up to this point must not exceed 95% of the contract value. The entire remaining value will be paid when the issuance of Certificate of land use rights, ownership of houses and other assets attached to land to the lessee-purchaser has been completed.