Things should be noted when acquiring assets that are construction works through judgment enforcement

1. Construction works are likely to be ineligible for sale under the Land Law 2024

Due to changes in land legislation, Construction Works may not be eligible for transfer, even in the form of auction for the enforcement of judgments. Specifically, as detailed below: 

During the effective period of the Land Law 2013, the conditions for the sale of assets attached to land leased out by the State with an annual land rental payment under the enforcement decision of the civil judgment enforcement agency are solely required that assets were lawfully created in accordance with laws.   

However, according to Article 46.1 of the Land Law 2024, in order to sell assets attached to land leased out by the State with an annual land rental payment, these assets must meet the following conditions: (1) assets were lawfully created and (2) assets were registered in accordance with the law (3)…. “Registered” is understood as the ownership of assets on land that has been registered with the land management agency and recorded on the certificate of land use rights and ownership of assets attached to land. 

Article 46. Conditions for sale of land-attached assets and lease rights in land lease contracts in case of land leased out by the State with an annual land rental payment

Economic organizations, individuals, people having Vietnamese origin residing abroad and foreign-invested economic organizations may sell land-attached assets leased out by the State with annual land rental payment when fully meeting the following conditions:

a) Assets attached to leased land are lawfully created and registered in accordance with law;

b) The construction has been completed in accordance with the detailed construction planning and the investment project accepted, approved (if any), except for the cases in which it is required to comply with the effective judgments or decisions of the court, the enforcement decision of the civil judgment enforcement agencies or the conclusion of the competent state agencies in charge of inspection and examination.

With the current practice, banks accept mortgage assets that are construction works formed in the future, accordingly, there are many unfinished construction works that are assets that are put up for auction. Thus, with the new provisions of the Land Law 2024, in these cases, the assets are not eligible for sale. 

2. Regarding to Land Use Rights 

2.1 The right to continue to lease land  

Pursuant to Clause 3, Article 46 of the Land Law 2024, the acquirers of assets attached to land leased by the State with an annual land rental payment shall be allowed to continue to lease such land for the purpose of use and within the lease term as in the former lease contract. 

Article 46. Conditions for sale of land-attached assets and lease rights in land lease contracts in case of land leased out by the State with an annual land rental payment 

3. Acquirers of land-attached assets or of land-attached assets and lease rights in land lease contracts are allowed to continue to use land for the proper purposes for the remaining land use term, to continue to have the advanced amount deducted if such amount has yet to be deducted under Point b, Clause 2 of this Article, and shall carry out land registration procedures in accordance with this Law.

2.2 Procedures for continuing to lease land 

The Land Law does not have specific provisions on the procedures for leasing land to the acquirers of property through auction for judgment enforcement, therefore, the procedure for registering land use rights when acquiring land-attached assets through winning the auction of property for judgment enforcement is the same as the case of purchasing property in ordinary transactions.  

According to the clear provisions of the Land Law 2013, the People’s Committee will recover the land from the current lessee before signing a new land lease contract with the acquirer. However, according to the Land Law 2024, it is not clear whether the People’s Committee still needs to carry out land recovery procedures. 

(i) According to the Land Law 20242, the process of registering changes in land use rights is carried out as follows: 

• The acquirer shall submit the dossier for registration of land changes at the land registration office (“Land Registration Office“). 

• The Land Registration Office shall examine the conditions for exercising the rights of land users and owners of land-attached assets. 

• The Land Registration Office shall submit the dossier to the land authority of the same level to determine the land price (in case it is necessary to re-determine the land price) and sign a new land lease contract.

• The land authority shall sign a new land lease contract with the acquirer, WITHOUT having to re-issue the land lease decision. 

• The natural resources and environment agency shall notify the tax authority that the land lease contract with the seller will cease its validity.

• The Land Registration Office shall determine with the tax authority the financial obligations of the land lessee to the land plot and request the land user to perform these financial obligations (if any). 

• The Land Registration Office shall adjust and update changes in cadastral records, land databases and issue the certificate of land use rights and ownership of assets attached to land to the acquirer. 

(ii) During the effective period of the Land Law 2013, pursuant to Clause 5, Article 70 of Decree 43/2014/ND-CP guiding the implementation of the Land Law 2013, the procedures for registering land changes to record land use rights for property to the acquirers are carried out as follows:  

• The acquirer shall send a written return of the land to the Provincial People’s Committee.

• The acquirer shall submit the dossier for registration of land changes at the Land Registration Office.

• The natural resources and environment agency shall appraise the dossier and submit it to the People’s Committee to issue a decision to recover the seller’s land so that the acquirer can continue to lease the land. 

• The Land Registration Office shall determine with the tax authority the financial obligations of the land lessee to the land plot and request the land user to perform these financial obligations (if any). 

• The natural resources and environment agency shall notify the tax authority that the land lease contract with the seller will cease its validity. 

• The People’s Committee signed a new land lease contract with the acquirer. 

• The Land Registration Office shall adjust and update changes in cadastral records, land databases and issue the certificate of land use rights and ownership of assets attached to land to the acquirer. 

Thus, although the assets are construction works that are legally put up for auction in accordance with the Law on Auction and the Law on Enforcement of Civil Judgments, the establishment of ownership and land lease rights for acquirers still faces many difficulties due to the constraints of the Land Law 2024. Specifically, new conditions such as the requirement that the assets must be lawfully registered increase risks for acquirers when acquiring through judgment enforcement. Therefore, acquirers need to be careful and understand the legal regulations before participating in transactions to avoid unwanted legal risks.

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