Legal procedures of real estate projects

Real estate projects are a very popular investment channel, of interest to many domestic and foreign economic groups. However, depending on the nature of each type of real estate project, the process may change accordingly, but for legal procedures to develop a regular real estate project, the following procedures are needed as follow

Principles for implementing Investment Projects

For Investment Projects subject to investment policy approval, the investment policy approval must be done before the investor implements the project;

For Investment Projects subject to issuance of Investment Registration Certificates, investors are responsible for carrying out procedures for issuance of Investment Registration Certificates before implementing the Investment Project;

In addition, the Investor is responsible for complying with the provisions of the Law on Investment, laws on planning, land, environment, construction, labor, fire prevention and fighting, real estate business and other regulations relevant legal provisions during the implementation of the Investment Project.

Real Estate Investment Projects usually go through 4 stages with the following procedures and procedures corresponding to the project:

Legal procedures during the investment preparation stage

During this period, the investor must carry out procedures to request a document approving the policy and permitting investment according to the provisions of law. Authority to approve investment policies of competent authorities such as the National Assembly, Prime Minister, etc. (Depending on the scale of the Project).

Specifically, Article 30 of the Law on Investment 2020 stipulates as follows;

The National Assembly approved investment policies for the following investment projects:

• Investment Projects that greatly affect the environment or have the potential to seriously affect the environment, including:
• Nuclear power plant;
• Investment Projects requiring change of land use purpose for special-use forests, watershed protection forests, or border protection forests of 50 hectares or more; protection forests to block wind and sand, and protection forests to block waves and sea encroachment of 500 hectares or more; production forests of 1,000 hectares or more.
• Investment Projects requiring change of land use purpose for wet rice cultivation of 02 or more crops with a scale of 500 hectares or more;
• Investment Projects requiring resettlement of 20,000 people or more in mountainous areas, or 50,000 people or more in other regions;
• Investment Projects requiring the application of special mechanisms and policies need to be decided by the National Assembly.

Accordingly, if implementing real estate investment projects under the approval authority of the National Assembly’s investment policy, the investor needs to carry out the necessary procedures to get approval.

The Prime Minister approved the investment policy for the following investment projects:

• Investment Projects regardless of capital source fall into one of the following cases:
• Investment Projects requiring resettlement of 10,000 people or more in mountainous areas, or 20,000 people or more in other regions;
• Housing construction Investment Projects (for sale, lease, lease purchase), urban areas with land use scale of 300 hectares or more or population size of 50,000 people or more;
• Investment Projects on construction and business of infrastructure of industrial parks and export processing zones; (…).

(Article 31 of the Law on Investment 2020, amended by Clause 1, Article 3 of Law No. 03/2022/QH15)

The Provincial People’s Committee approves investment policies for the following Investment Projects:

• Investment Projects that request the State to allocate or lease land without auction, bidding or transfer, investment projects that request permission to change land use purposes, except in cases of land allocation, leasing land, allowing change of land use purpose for households and individuals who are not required to have written approval from the Provincial People’s Committee according to the provisions of land law;
• Housing construction investment projects (for sale, lease, lease purchase), urban areas with land use scale of less than 300 hectares and population size of less than 50,000 people;
• Golf course construction and business investment project;
• Investment Projects of foreign investors and foreign-invested economic organizations implemented in islands and border communes, wards and towns; coastal communes, wards and towns; other areas that affect national defense and security. (…).

(Article 32 of the Law on Investment 2020, amended by Clause 2, Article 3 of Law No. 03/2022/QH15)

Legal procedures during the Investment Project preparation stage

At the stage of establishing an Investment Project, the investor needs to carry out many legal procedures to be granted legal documents for the project such as:

2.1 Project legal planning

Includes Planning license

Planning license is the legal basis for investors to organize urban planning, establish construction Investment Projects and deploy construction investment. Planning license is a regulation of a competent authority that investors must comply with during the process of organizing urban planning, formulating construction Investment Projects and implementing projects.

Approval of planning scale 1/500

1/500 planning is an important document of a project. This is a type of license that shows a detailed planning map of the total area of construction Investment Projects, which is the basis for locating the project, basic design, technical design of construction and implementation currently under construction. There are some cases where the law does not require a project to have 1/500 planning. According to Clause 5, Article 10 of Decree No. 44/2015/ND-CP, in case a construction Investment Project organized by an investor has a scale of less than 5 hectares (less than 2 hectares for Investment Projects construction of apartment buildings) then proceed to establish a construction Investment Project without having to prepare detailed construction planning. General site drawings, construction architectural plans, technical infrastructure solutions in the basic design content must be consistent with the construction zoning plan or planning permit; Ensure the connection of technical infrastructure, consistent with the regional architectural space.

2.2 Legality of land projects

All real estate projects must carry out legal procedures related to land. In land law, the investor needs to carry out compensation procedures, site clearance, apply for a land use right certificate, etc. Accordingly, the project’s legal documents related to the land law includes documents related to compensation, relocation and resettlement for organizations and individuals currently using land, and site clearance such as: decision to establish a compensation council, decision to approve methods overall/ detailed compensation plan for site clearance by competent authorities; Decision on temporary land allocation; land lease decision of the competent authority; Land use rights transfer contract; Land lease agreement; Certificates of land use rights. In addition, if the land type for the Project is not used for housing construction, the Investor enterprise needs to carry out procedures to apply for approval to change the land use purpose to residential or commercial land services (depending on project development purposes).

2.3 Other legal procedures

Margin:

Investors must have a deposit or a bank guarantee on deposit obligations to ensure the implementation of Investment Projects requiring the State to allocate land, lease land, or allow change of land use purpose, except in the following cases:

• Investors who win an auction of land use rights to implement an Investment Project are allocated land by the State with land use fees collected, and leased land with a one-time land rental fee for the entire lease period;
• The investor wins the bid to implement an Investment Project using land;
• Investors are allocated or leased land by the State on the basis of receiving transfer. Investment Projects have made deposits or completed capital contributions and capital mobilization according to the schedule specified in the investment policy approval document, Investment Registration Certificate;
• Investors are allocated or leased land by the State to implement investment projects on the basis of receiving transfer of land use rights and assets attached to land from other land users.

Based on the scale, nature and implementation progress of each Investment Project, the deposit level to ensure the implementation of the Investment Project ranges from 01% to 03% of the investment capital of the Investment Project. In case an Investment Project includes many investment phases, the deposit amount is paid and refunded according to each phase of Investment Project implementation, except in cases where it is not refundable.

In addition, the Investor needs to carry out relevant legal procedures to ensure that Project implementation complies with legal regulations on fire prevention and fighting, environmental protection, etc. and need to obtain legal documents of the Project such as:

• Decision to approve the fire prevention plan;
• Decision to approve the environmental impact assessment report;
• Electricity and water connection agreements and communication with functional units.

Legal procedures during project implementation phase

The enterprise will agree with the locality and city where the project is managed on connecting infrastructure inside and outside the project. After asking permission from the competent authorities, the enterprise proceeds with leveling, building infrastructure, roads, etc.

After the infrastructure is completed, each part will be accepted by the competent authority to see whether it meets the standards or not. If it passes, the Investor will proceed to the next step. If it fails, it will require revision.

After completing the project’s infrastructure, the investor needs to have a basic design and construction design. Once these procedures are completed, the investment enterprise will be granted a construction license.

Once there is a construction permit, the investor begins construction. After completing the construction of the foundation and piles and being accepted by the competent authority, the quality and technique of completing the foundation and piles of the project is completed. The investor can meet the conditions to sell real estate formed in the future (for apartments, but for townhouse projects, the investor must complete the construction of infrastructure, be approved by the agency have authority) and carry out procedures to request the Department of Construction to issue a written approval to allow housing transactions.

After completing the project, there needs to be a handover step between the construction unit and the investing enterprise. The construction unit and contractors complete construction completion procedures in accordance with the approved design and modifications and are approved by the competent authority.

Legal procedures during the investment completion phase and putting the Project into operation

The investor will hand over the house to the buyer after the house is completed and the investor completes the payment obligation.

After 50 days from the date of handing over the house to the buyer, the Investor must send all documents and procedures about the project and the house along with the buyer’s documents to the competent authority. Certificate of housing use rights for the buyer to complete the obligations of the Investor’s business. At the same time, the investor enterprise must carry out procedures for handing over the infrastructure that must be handed over to the state for management according to the approved content of the project’s investment policy decision.

Regulations on the Legal List of Real Estate Projects normally required

• Investor recognition
• Register to invest in the Project
• Compensation – clearance – resettlement
• Latest business registration certificate
• Planning tasks
• Planning certificate (planning permit)
• Approve the 1/500 scale planning
• Agreement on total floor plan & architectural plan
• Adjust planning
• Announcement of planning
• Investment approval
• Approve Investment Projects
• Escrow
• Change the purpose of land use
• Allocation
• Issue land use rights certificates to Investors
• Issue a land use right certificate to the buyer.
• Transfer projects
• Infrastructure connection agreement
• Ask for permission to level
• Ask for permission to build infrastructure
• Acceptance of infrastructure according to project progress
• Approve basic design
• Approval of Construction Design
• Ask for permission to build
• Notice of commencement
• Acceptance of foundation
• Notice of capital mobilization (confirming eligibility for sales)
• Bank mortgage release (if there is a mortgage)
• Register sample contract
• Fire protection installation and acceptance
• Acceptance & Handover of the project from the construction contractor to the Investor
• Completion
• Hand over the house to the buyer
• House number allocation
• Issuing certificates of land use rights and housing ownership

Above is the basic content of “legal procedures of Real Estate Projects” based on the legal regulations at the time of writing. Note that, depending on the actual nature of each Project, the order of steps will be different (some procedures may be added or reduced). Therefore, if your business is interested in the above legal services or is interested in other legal services, please contact LS Law Firm immediately via Email: lslawfirm2014@gmail.com or su. ho@lslawfirm.com.vn for support.