Land use rights certificates in Vietnam - Do they protect Bona Fides Transferees?
20/12/2023 18:00
In Vietnam, the land titles system is fundamentally different to the land titles systems of many jurisdictions worldwide, although there are some similarities. Under the Constitution of Vietnam and relevant Vietnamese law, all of the land in Vietnam is owned by all of the citizens of Vietnam collectively, and the people have appointed the State to administer all of the land of Vietnam on behalf of the people. The holding of land use rights is recorded in a State-issued certificate, known as a “Certificate of Land Use Rights and Ownership of Residential Houses and Other Assets Attached to Land” (a LURC).
When land use rights or Buildings are transferred from one person or entity to another, the transfer is recorded on the face of the applicable LURC. Similarly, when mortgage security is placed over land use rights or Buildings, the imposition and release of that mortgage security are recorded on the face of the applicable LURC. Accordingly, it is reasonable to suggest that LURCs may be regarded as providing reliable and State-issued evidence as to the historical chain of “title”.
However, new or amended LURCs can be and sometimes are issued in a manner which is not strictly compliant with applicable law, for any number of reasons including administrative errors, incorrect application of Vietnamese law, or transparency issues (Invalid LURC Issuances). Invalid LURC Issuances may occur when land use rights are first allocated or leased by the State, when Buildings are first registered on the face of the LURC, or when land use rights (and, where applicable, Buildings) are transferred from one person or entity to another.
From the perspective of a buyer and/or transferee of land use rights and/or Buildings, who enters into the relevant purchase and/or transfer transaction in a bona fides manner and with “clean hands” (a Bona Fides Transferee), it becomes crucial to understand whether or not:
(a) the issuance of a new or amended LURC in effect “cures” any defects in Title which may otherwise have arisen from a historical Invalid LURC Issuance;
(b) the Bona Fides Transferee may be exposed to any liability or other risks as a result of the historical Invalid LURC Issuance; and
(c) there is anything that a Bona Fides Transferee can do, in order to eliminate or mitigate these liabilities or risk exposures.
We explore the answers to these key questions in our analysis.