Condotel under the view of Vietnamese law

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Condotel under the view of Vietnamese law

Besides the rapid development of the economy, the tourism and the outstanding features on geography and cultural conditions, Vietnam is the famous, familiar tourism destination for tourists all over the world. The rapid increase in the number of tourists to Viet Nam has significantly impacted on the resorting property demand in Vietnam during the last time. According to the report of the Ministry of Construction on the home and real estate market in Vietnam, until the fourth quarter of 2020, there is one new project with 3,300 granted condotels; 93 projects with 19,128 condotels and 6,759 tourist villas which are being constructed; 18 projects with 62 completed condotels and 370 finished tourist villas. Although the increasing amount of condotels, the law of Vietnam still has not had sufficient legal basis for regulating the business, management of this type of apartment yet, which leads to many difficulties in practices. 

1. Definition: 

Condotel, also called as condotel or hotel apartment, is the name abbreviated by two words condominimum (apartment) and hotel (hotel). If this type is called condotel, it is because it can be used as both hotel and home. Condotel is considered to be a type of hotel but is constructed as an apartment with dining room, kitchen, bedroom, bathroom, living room,…The owner of the condotel is entitled to lease, sell or use it as an apartment. Almost all condotel projects are located at tourist cities, having beaches such as Da Nang, Thanh Hoa, Ba Ria –Vung Tau,… and are controlled and used as hotel type.  

The current market has three primary types of condotel, including: (i) The profit commitment model: in this model, the investor commits a proportional gain account for the first 5 – 10 years and after the commitment term, the profit shall be separated based on real business gains on renting apartments; (ii) Vacation ownership Model: Towards this model, clients do not buy the apartment from the owner, they buy from the international system. After purchasing the vacation from an investor, clients have rights to relax at projects, tourism site of this investor in the world, or make a profit from transferring the holiday; and (iii) Non-profit commitment model: With this model, clients can be free to exploit, use their flat for living, business or consign to the investor and receive gain in accordance with the apartment’s actual business profit.

2. The regulation of Vietnamese law on condotel:

At present, despite the fact that condotels are promoted they are swiftly profitable, the quantity of unsold condotels is up to 18,000 apartments. Investors are afraid of this type of property because condotels have not been prescribed particularly in Vietnam’s legal documents. The absence of the legal framework for adjustment contains much risk for the investors in transactions, transferring this apartment type. 

Realizing this factual situation, on February 12th, 2020, The Ministry of Natural Resources and Environment promulgated the Dispatch No. 703/BTNMT-TCQLDD (hereinafter referred to as “Dispatch 703”) on guiding the land use regime and certification the non-residential construction ownership such as condotels and tourist villas. The Dispatch 703 specifies resort tourism projects using land for business, service activities are classified as commercial, service land. Organizations renting land to use for trade, service purposes shall be considered, determined by the Government based on investment projects or application for renting land with the leasing term is not exceeds 50, and 70 years in exceptional cases; when the term for leasing expires, they shall be considered to renew if needing. At the same time, Dispatch 703 also mentioned the issuance of the Certificate (red book) for qualified condotels, resort villas construction projects for transferring, and the order, procedure, dossier to issue the Certificate are implemented under the law on land. However, many comments show that Dispatch 703’s content is not new and do not resolve problems concerning condotels, particularly, according to Mr. Mai Van Phan, Deputy Director General of the General Department of Land Administration, said that: “Documents of the General Department is guidance for localities based on available regulations in the law” and sent documents: “are only guiding documents, not legislative documents” .

In practices, the Real Estate Association of Ho Chi Minh City (hereinafter referred to as “HoREA”) still has three noticeable difficulties on condotel that are not settled by Dispatch 703, specifically:

  • Firstly, there have not been specific provisions on operation, management regime of condotel when this type project is put into the exploitation.
  • Secondly, there have not been particular regulations guiding to determine the common ownership part, the separate ownership, the general land use right to serve as the basis to issue the pink book to condotel apartments.
  • Lastly, problems on determination maintenance liability, maintaining charges, management, use maintaining fees for the common ownership part in condotel projects are not still prescribed. 

Thus, the most noticeable and urgent issue is the requirement to have legal regulations to solve these above difficulties, contribute to creating conditions of the issuance of pink books to condotel apartments and relieve mind for investors intending to invest in this type of apartment.

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.