Background

Under the business cooperation contract (BCC) structure, the parties do not establish an entity but usually cooperate to use their available resources, including land use rights (LUR) to do business. The party having LUR (Landlord) will “contribute” its LUR to the BCC and allow the other party (Developer) to develop house/construction works on the land while retaining title to the LUR.

Discussion

Under the current land law, implementing a project involving LUR via BCC is arguably possible. However, the relevant regulations seem vague and may give rise to certain legal issues. With new regulations of the Land Law 2024, the BCC structure will have a more concrete legal framework. In particular,

• Article 148 and 149 of the Land Law 2024 now codifies regulation on granting ownership certificates to owners of ready-built house/construction works who are not simultaneously land user under Decree 43/2014 guiding the Land Law 2013. In this regard, the Land Law 2024 now expressly recognizes BCC as valid evidence of the owners’ lawful right to use the other party’s land for building their houses/construction works. In light of this clear regulation, the Developers to the BCCs now may find it confident that its title to the building on land will be protected.

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In this post, we compare the rights and obligations of land users being domestic economic organizations (Domestic EOs) according to Land Law 2013 and Land Law 2024. Our comparison is provided in the contexts of land allocation/land lease with one-off rental payment and land lease with annual rental payment.

This post is written by Cao Khanh Linh, Nguyen Hoang Duong, and Nguyen Quang Vu.

In this post, we highlight some key changes to regulations on industrial zone land under the new Land Law 2024.

State-owned developers

• Regarding areas eligible for investment incentives (those with underdeveloped socio-economic conditions) that are unable to attract private developers, the Land Law 2024 allows the State to lease or allocate land to a public-service entity (đơn vị sự nghiệp công lập) to develop industrial zones.

• Under the Land Law 2013, it appears that only economic organization, foreign-invested company, and Vietnamese individual residing oversea can become industrial zone developer (IZ Developer).

IZ Developer’s option to change method of payment for land rental

• The Land Law 2024 expressly allows the IZ Developers using industrial zone’s land via annual rental payment method to change to the one-off land rental payment method for all or part of the leasable land area.

• The Land Law 2013 also generally entitles a land user using land on annual rental payment to change to using land with one-off land rental payment. However, the law does not make clear whether the change can be made for separate land parcels in the industrial zone. Accordingly, one may take a strict view that the IZ Developer may only convert all industrial zone land to one-off rental payment instead of a portion of it.

• The new regulation of the Land Law 2024 may provide flexibility for both a IZ Developer and its tenants in negotiating the suitable land rental payment method.