Separate property agreement against apartment formed in the future, how to make it right?

ARTICLES

Separate property agreement against apartment formed in the future, how to make it right?

To the majority of the Vietnamese people, pursuing a stable life is one of the most critical targets of life, this also explains the tendency of buying house and land of Vietnamese people in general and young people in particular.

Since the Law on Real Estate Business 2006 effected on January 1st, 2007, houses and construction works formed in the future had been defined and been allowed to business the real estate market and in civil transactions. In 2014, the new Law on Real Estate Business, replacing the previous law in 2007 had widened and transparent rules for selling real estate products which are formed in the future. The expansion of policies and legal regulations along with the financial advantages, payment schedule of transactions of housing/apartments formed in the future that help these transactions gradually become more and more popular. Accordingly, not only new investors want to buy houses formed in the future for business but also young husband and wife are also particularly interested in choosing to own a private house which is suitable to their economic conditions.

However, the transactions for real estate formed in the future are quite special since of the properties formed in the future are subject to strict conditions prescribed by the real estate business law[1]. Then, in the marriage relationship, if real estate formed in the future is established as a common property of husband and wife, will the implementation of the husband and wife’s separate property agreement for real estate in general, or the house/apartment in particular, have any difference or should it be noted?

According to the law on marriage and family, husband and wife have the right to choose to apply the statutory property regime (common property of husband and wife) or the agreed-upon property regime[2]. In general, to minimize the occurrence of disputes, investors often require both husband and wife to sign on the purchase contracts of apartments formed in the future (“the Purchase Contract“). However, after signing the Purchase Contract, it is not rare for husband and wife to sign an agreement to seperate a part of the whole of their common property, which includes housing/apartments form in the future. In this case, the question is how to make the separate property agreement for house/apartment form in the future is legally, also minimize the risks. At the same time, what procedure does it take to transfer the name of a house/apartment form in the future’owner to the husband or wife who has the right to own this property separately? Accordingly, the content of this article aims to clarify the issues mentioned above, specifically as follows:

1| How is a separate property agreement for an apartment is formed in the future considered legal?

An agreement on a separate property for an apartment which has been signed by both husband and wife on the Purchase Agreement is essentially an agreement on common property division during the marriage period. Accordingly, the law on marriage and family requires this agreement to be made in writing and notarized at the request of a spouse or as prescribed by law[3]. The object of the agreement is the future apartments; in other words, at the time of implementing the agreement on private property, the property has not existed. Therefore, the condition of notarization and authentication of real estate business contracts does not apply to the agreement of separate the common assets of husband and wife. Since according to the provisions of real estate business law, the condition of notarization and authentication is only compulsory to real estate transfer contracts that have been formed and contracting subjects are individuals and households[4].

Thus, in terms of the form condition, the agreement on common property division for apartments is formed in the future is only required to be made in writing, while the notarization/ authentication of the contract will be due to the wife, the husband request.

Besides the formal conditions, a separate property agreement of husband and wife in general needs the following main contents: the object of the property to be divided, the state of the property, the title property of husband and wife on this property, the effective time of the division of property, personal information of husband and wife, information on marriage registration, divided property, method of division, how to obtain property, the cost of carrying out necessary legal procedures, and other agreements.

From the aforementioned analysis, a separate property agreement for husband and wife ‘s house/apartment is formed in the future must be made in writing (Notarization must be done if required by either husband or wife, however, to continue carrying out the procedures of transfer ownership title of the apartment that is agreed to be private property, the Investors of the apartment project or the state agency often requires to provide a notarized, authentication agreement). At the same time, the content of the separate property agreement must ensure information about house/apartment is formed in the future, the Purchase Contract, payment schedule and other legal conditions related to house/apartment formation. Besides, please note that the notarization of a private property agreement is a mere civil agreement and can be notarized at any authorized notary organization, regardless of administrative location boundaries. Therefore husband and wife can make their property agreement at any notary organization where they reside.

2| How to legally execute the procedure to transfer the ownership of the future house/apartment owner according to the separate property agreement?

After the Separate Property Agreement is established in accordance with the provisions of laws as mentioned above, the apartment formed in the future will be under the private ownership of only the husband or wife to receive the property. Accordingly, in order to ensure the legal status and minimize the risk of property disputes in the future, the person who owns the private property need to carry out the title transfer procedure to directly sign the Purchase Contract or name on the Certificate of land use right, ownership of houses and other land-attached assets (“Certificate”) for house/apartment after being formed. In the case of Certificate, the transfer of common property to private property may be done through the donation /transfer procedure as with ordinary real estate. However, for the case of a new Purchase Contract, only that has not been granted a certificate of land-use ownership, the current law does not provide for the legal procedures governing this case.

As analyzed in section 1, the nature of a separate property agreement between husband and wife is merely a civil agreement governed by civil law and family marriage and can not a transaction of transfer or donation to real estate. However, because there is no clear legal procedure in accordance with the law, in fact, the parties often choose to carry out the procedure of transferring the Purchase Contract of apartments formed in the future. The order and procedures for transferring the Purchase Contract of each Investor will be different, and there will be certain adjustments as well as the normal procedure for transferring a Purchase Contract. However, in general, when performing the transfer of the Purchase Contract, the parties will have to take the following steps:

Step 1: Make a Separate Property Agreement and should be notarized. At the same time, depending on the document requirements of each notary organization, the husband or wife as the transferor must make a written confirmation of rejection confirming the refusal of house/apartment is formed in the future (“ Refusal Confirmation”).

Step 2: Submit all documents including Purchase Contract, Separate Property Agreement, Refusal Confirmation (if any) and other personal documents attached to the Request for Transfer to the Investor (owner of the apartment project) to request review and resolve records.

Based on the payment schedule and the progress of the procedures for issuance of Ownership Certificate for the house/apartment is formed in the future, the Investor will  issue necessary approval notices to continue the procedures at Step 3 or the Investor will solve by himself by liquidating the old contract and transferring the name of the new Purchase Contract owner.

Step 3: After receiving the Notice of approval from the Investor, the couple comes to the authorized notary organization to notarize the Transfer Contract. Please also note that the notarization of this Sales Contract Transfer must be done at a notary organization within the province where the house/apartment is formed in the future is located in accordance with the law following the notarization of real estate transactions.

Step 4: Provide the documents in Step 3 to the Investor to carry out the legal procedures for issuing Ownership Certificate for the person who owns the private properties. The husband and wife may be subject to a transfer fee according to the Investor’s policy, depending on each case. 

Step 5: As a rule, the transfer of a housing/apartment Purchase Agreement is formed in the future must declare and pay personal income tax. However, the transfer of house/apartment is formed in the future between husband and wife is exempt from personal income tax. But, the husband and wife must declare personal income tax within 10 (ten) days from the date the Transfer Contract of Purchase Contract takes effect at the tax office in the locality where the house/apartment is formed in the future is located. 

Above are some outstanding notes in the process of implementing the separate property agreement for houses/apartments formed in the future of husband and wife. If you have any questions, please do not hesitate to contact Apolat Legal for further support.

If you have any questions or require any additional information, please contact Apolat Legal – An International Law Firm in Viet Nam.

This article is for general information only and is not a substitute for legal advice.

 

[1] Article 38 Marriage and Family Law 2014

[2] Article 17 Real Estate Business Law

[3] Article 9 Real Estate Business Law 2014

[4] Clause 1 Article 28 Marriage and Family Law 2014