As an emerging economy, Vietnam’s rapid economic growth in recent years has meant a lot more interest in investing in its property market. Like that of many other developing countries, however, the numerous types of property ownership and various rules and regulations around property titles may be a bit confusing for someone just starting to consider investing in this market. Below, we break down the different types of property titles, with some quick explanations on what they are and how to own property in Vietnam.
Deposit Agreement
The deposit agreement is perhaps the most basic document you sign when buying a piece of property. The information below covers what the deposit agreement signifies in both the primary and secondary markets!
1. In the Primary Market
When purchasing new apartments off the grid from developers, you have to go through a process that includes a series of installment payments over the next 1-5 years. Depending on the developer and project, these payments are on a schedule that can be as little as 2% every 6 months, to 10% every month, and correlate to additional incremental progress of the apartment project building progress over time
Often, the first such installment involves signing a deposit agreement with the property developer immediately after selecting a specific unit at a booking event.
For these cases, the developer will usually require you to put in at least 10% of the property value as a deposit to “secure your claim” on it.
*Note that depending on the developer’s policy, you may or may not be allowed to sell the apartment after signing the deposit agreement.*
2. In the Secondary Market
When purchasing property from another seller, you’ll often put in a deposit and sign a deposit agreement as a sign of good faith and to “stake your claim” on the property. This is done to show that the transaction will actually happen between both parties – and to lock both parties’ commitments in!
Deposit amounts usually range from 5-10% of the property value – even to 50% in cases where the buyer and seller agree.
Deposit agreements can be signed directly between the parties, prepared by an agent, or notarized at a notary office to be more “official”.
Usually, deposit agreements will contain clauses that dictate:
The remaining payment schedule for the property (when the buyer has to pay the remaining balance and complete the transaction – usually within 30 days of the deposit agreement signing); or,
Penalties if either party decides to pull out:
For the buyer, this is usually the loss of the deposit fee they have put in.
For the seller, this is usually a penalty equal to the deposit that the buyer has put in.
*This applies to properties that aren’t apartments as well*
Long Term Lease Agreement (L.T.L)
1. What is a Long Term Lease?
A long term lease agreement is what it sounds like – instead of buying the property, you can choose to “lease it” from the property developer for a time period of 50 years.
According to the government, once the 50 years is up, you can renew the agreement for another 50 years. However, no one has reached this point yet and policies may change in the future. During this time period, the property is yours to use but technically still belongs to the developer because you are just leasing it.
You cannot opt for a pink book, which signifies the official form of property ownership that is recognized by the government of Vietnam.
2. Who would get a Long Term Lease?
In many cases, people sign a long term lease agreement when they opt for buying a property that may be quite limited in quota/supply where SPAs have already run out.
Long term lease isn’t popular among locals, most Vietnamese citizens can buy an apartment under the SPA (sales purchase agreement), which doesn’t face as many quota/restrictions. As a result, many of the people who sign this agreement are foreigners who want to invest in property since foreigners cannot own more than 30% of any project.
Because of the inferior legal status of LTL agreements, prices are also around 8-15% cheaper for them than if they were to buy an apartment under an SPA.
3. Anything else I need to know about a Long Term Lease to own property in Vietnam?
If a foreigner with the long term lease agreement sells their property to a local, then this lease agreement will be converted to a local SPA by the developer.
Sales and Purchase Agreement (S.P.A)
1. In the Primary Market
After signing the deposit agreement in the primary market payment schedule, the next step would be getting an SPA issued from the real estate developer. The SPA is a further contract of ownership of the property, and includes a promise from the developer that they will transfer a unit to you on a certain schedule, with the specific features, dimensions, and plans of the apartment all clearly laid out.
Usually, developers can only issue SPA’s when the foundation of the apartment has been completed – at this point this signifies that the developer has done work to build the property.
Developers will usually issue SPA’s for the property when they have collected around 30% of the property value. Usually, once an SPA is issued, you are able to sell/transfer the property to other people.
As a point of legal regulation, only 30% of the apartment project’s total units can be sold to foreigners and can be issued “foreign SPAs”, while the remaining 70% can be sold to locals. This means that often, foreign SPA units are around 8-15% more expensive than comparable units under local SPAs.
If additional foreigners want to buy units, they must buy under the Long Term Lease (LTL) scheme. After the SPA is signed, buyers will still be on the installment payment schedule for the next several months/years.
Buyers will hold the SPA as their form of property ownership/title until the Pink Book is issued after the apartment project is fully completed/handed over, and the developer applies for it from the government.
Foreigners are issued foreign SPAs, but if they sell to a local buyer, the title would then be transferred to a local SPA. However, local SPA holders usually have trouble selling back to a foreigner due to the limited 30% foreign quota.
2. In the Secondary Market
In the secondary market, the SPA usually refers to the document signed at the notary office that consummates the transfer of the property between a buyer and seller.
The SPA will contain the remaining payment for the property that hasn’t already been covered in the deposit agreement (usually 90-95% of the property value). SPAs are usually signed at a notary office to be made official, and so the notary office can check that the property hasn’t been sold to anyone else or if there are any other liens on the property.
Usually, SPAs will contain clauses that dictate:
The remaining payment schedule for the property (sometimes a certain small amount of the property is withheld until the title transfer process is completed successfully)
The different items to be handed over, or how rental contracts are transferred between the buyer and seller
*This applies to properties that aren’t apartments as well*
Pink Book
1. What is a pink book?
The pink book is the official legal document issued by the Vietnamese land registrar that signals your ownership of the property. The document is a literal pink-colored, physical piece of paper, with the property details, and ownership history of the property written on it.
The pink book indicates the “full ownership” over a property and allows you to like selling it to someone else, or pledging it to a bank for a mortgage. This also means that if you don’t have the pink book, it’ll be nearly impossible for you to sell the property or pledge it as an asset.
2. When are pink books issued?
For primary market properties, pink books are issued when the developer has completely finished the construction of the project, handed over the apartment to you, and applied for the pink book from the government for your apartment unit
For secondary market properties, the property should already have a pink book. In fact, the scanned copy of the pink book should be one of the first items that you or your agent examines to make sure that the owner selling the property is the real owner of the property, and that the specific dimensions and property details match the descriptions laid out in the book.
3. Can foreigners get pink books?
Foreigners can and have gotten pink books in Vietnam! In Hanoi, many apartment projects have issued pink books for foreigners already. However, issuance of pink books for foreigners in Ho Chi Minh City is not extremely common due to the delayed implementation of new ownership laws. We do expect that this will be common in the future however!
We are here to help
Feel free to reach out to Century 21 Dragon City if you have any more questions about how to own property in Vietnam. Get in touch via phone/Line/Wechat/Whatsapp at +84-902-079-666 or email at contact@vietnamrealty.vn
