The procedures for mortgages of residential houses which will be formed in future

 On 25 April 2014, the State Bank, the Ministry of Construction, the Ministry of Justice and the Ministry of Natural Resources and Environment issued Joint Circular No. 01/2014/TTLT-NHNN-BXD-BTP-BTNMT dated 25 April 2014 (hereafter called “the Joint Circular”) in order to guide the procedures for mortgages of residential houses which will be formed in future (“hereafter called “Future House”).

The procedures for mortgages of residential houses which will be formed in future

1. Governing scope of the Joint Circular on the procedures for mortgages of residential houses which will be formed in future

 This Joint Circular just provides guidance for the procedures for the mortgage of Future Houses in Residential House Development Projects and in New Township Investment and Construction Projects (“Residential House Projects”) by purchasers at the credit institutions only, includes:(i) procedure for mortgage, (ii) procedure for notarization of mortgage agreement, (iii) procedure for mortgage registration.

 The Joint Circular does not govern the mortgage of property rights incurred from the apartment/house sale and purchase agreement and houses built by individuals on their land.

2. Definition of Future Houses in the procedures for mortgages of residential houses which will be formed in future

 A Future House is defined as a residential house being bought by purchasers from real estate developers that is under investment/construction procedures or has been constructed completely (as per construction laws) but has not been issued with the Certificate of Land Use Rights and Ownership of Residential House and Other Assets Attached to Land (“Title Certificate”).

3. Conditions of Future Houses eligible for being mortgaged

 A Future House must meet the following conditions to be eligible for being mortgaged:
 • Must be an apartment/condominium or a separate house (a villa or townhouse) constructed in a residential house investment project;
 • Its technical design must have been approved by the competent authorities;
 • Its foundation must have been completed;
 • The relevant sale and purchase agreement has been signed in accordance with the law or the Future House has been constructed completely and delivered to the purchaser but the Title Certificate has not yet been issued in accordance with the law;
 • It must not be under seizure of the court or restricted by the competent authorities;
 • If the Future House belongs to a social residential house investment and construction project, such a project must have already obtained the relevant certificate or the land allocation/land lease decision from the competent authorities.

 A Future House being eligible for being mortgaged includes commercial residential houses and social residential houses as per law on residential house.

4. Rights and obligations of the real estate developers and purchasers

 Per the Joint Circular, real estate developers can mortgage the underlying land use rights for a project and any of the units that have not been sold to purchasers to their lenders in Vietnam.

 For the units that have been sold to purchasers, the developer has to discharge the sold units before the purchasers can mortgage such units to their lenders.

5.  Registration agency for mortgage of Future House

 Land Use Right Registration Agency of the Department of National Resource and Environment at all levels is the agency which shall receive dossiers, register the mortgage of future house and transit the mortgage registration.

6. Mortgage transition in the procedures for mortgages of residential houses which will be formed in future

 Under the Joint Circular, the purchaser and their lenders can opt for the mortgage of property rights incurred from the apartment/house sale and purchase agreement [registered with the National Registration Agency for Secured Transactions (“NRAST”) or the mortgage of Future Houses (registered with Land Use Right Registration Agency of the Department of National Resource and Environment)]. Only one of these forms may be chosen at the time.

 If the mortgage of property rights incurred from the apartment/house sale and purchase agreement has been registered at the NRAST and if parties would like to covert it to the mortgage of Future Houses, assuming that the conditions for the mortgage of Future House as mentioned above have been met, the procedures for the transition of the security registration will need to be followed as guided by the Joint Circular.

5. Effective date of the procedures for mortgages of residential houses which will be formed in future

 This Joint Circular will take effect on 16 June 2014.

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