Unease over condotel ownership issue
Unease over condotel ownership issue
Experts have sounded the alarm over the development of the condotel segment in Vietnam after the first project was forced to revise the ownership duration which it had issued to buyers.
Located in the central city of Danang – one of the cities with the highest number of condotels currently, 586 Company is the owner of a land area which was approved by the local authorities for manufacturing, trading, and service activities and includes condotel units.
In 2008, Danang authorities issued permanent ownership over the condotel units to the buyers of this project. However, the Government Inspectorate last week announced that this condotel project was not permitted to issue permanent ownership to buyers because the units’ approved function is leasing, not living.
Danang authorities therefore had to revise the unlimited ownership to a duration of 50 years, which is the duration applied for commercial and trading properties.
The revision shocked many buyers who had bought a condotel in Vietnam, and developers are also looking it more difficulties in sales when their condotel units cannot be given permanent ownership.
Condotels have been the rising star in the Vietnamese real estate scene in recent years. However, as a novelty it is not fully covered by current regulations. The related laws on Housing and Real Estate Business make no mention of this type of property.
Therefore, according to policymakers, because condotels are built on land areas which have been approved by the government for the purpose of manufacturing, trading, commerce, and services (for trading and for lease), they cannot be given a red book which is given to properties earmarked for residential purposes. However, at present, besides Danang, some other condotels in the south-central provinces of Khanh Hoa and Binh Dinh have also been advertising that they can provide a “red book” representing permanent ownership.
Together with high rental yield commitments, permanent ownership is one of the largest points of attraction among buyers. However, in fact, no condotel units have been granted permanent ownership yet.
According to Le Hoang Chau, chairman of the Ho Chi Minh City Real Estate Association, some local authorities such as Danang have issued permanent ownership for condotels (for leasing only, not for living) which was not in line with current regulations. “Permanent ownership can only be given to properties that are earmarked for living, not for leasing,” Chau said, adding that permanent ownership can be given to two types of properties including land and house for living, and land for graveyards. All other properties are limited in ownership duration of 50 years maximum.
According to Tran Duc Phuong, a lawyer from the Ho Chi Minh City Bar Association, local authorities which had issued permanent ownership to condotel developers will be penalised because this is against the current law.
“Advertisements promising permanent ownership to buyers is a sign of violation as it is a false promise to customers. This issue puts buyers into difficult circumstances as they cannot transfer condotel units to other buyers if they want because the units does not have a red book,” Phuong said.
On the side of policymakers, Nguyen Trong Ninh, head of the Department of Housing Management and Real Estate Market under the Ministry of Construction (MoC), said condotels are in fact hotel rooms and according to current regulations on trading and commercial land usage, they can only have limited-duration ownership. “For any other purposes, we still have to wait for more guidelines from the government,” Ninh said.
According to the MoC, the legal framework for condotels will be released within 2019. In the last three years, condotels have been booming in the coastal localities. In Nha Trang, Danang, Phu Quoc, and Halong, more than 30,000 condotel units were launched into the market as of March 2018. It is estimated that in 2020 there will be an additional 20,000 condotels up for sale.
