REAL ESTATE MORTGAGE AGREEMENT UNDER VIETNAM CIVIL CODE 2015

 In order to overcome the limitation of Civil Code 2005, The Vietnam Civil Code 2015 provides details and transparent regulations on mortgage on land use right and property attached on land. In general, The Vietnam Civil Code 2015 respects freedom of agreement of the parties, however, in cases where the parties have not agreed upon or failed to discuss upon, these issues will be handled according to the law as follows:

In principle, the land owner is also the owner of property attached on land. In case the property attached on land is not legally registered under the law of Vietnam, such property shall not be considered as mortgaged property and shall be executed separately.

Mortgage on land use rights without mortgage of property attached on land:

- if the land user is also the owner of the property attached on land; such property shall also part of the realized property;

- If the land user is not also the owner of the property attached on land, such owner may keep using such land within his/her rights and obligations during the realization of the land use rights. The rights and obligations of the mortgagor in relation with the owner of the property attached on land shall be transferred to the transferee of the land use rights.

Mortgage of property attached on land without mortgage on land use rights

- If the owner of the property attached on land is also the land user, such land use rights shall also part of the realized property;

- if the owner of the property attached on land is not also the land user, the transferee of property on land may keep using such property within the transferred rights and obligations from the owner of the property attached on land during the realization of the land use rights.

HIERARCHY ON APPLYING LAW RELATED TO REAL ESTATE BUSINESS IN VIETNAM

The Civil Code has always been identified as the Code is located, as a background laws, common law private legal system, especially in the implementation of three functions: (i) provision of the most basic problems, the most common related to all areas of civic life; (ii) orientation for the development of legal documents regulate specific civil relations, and (iii) when the special law contains no provision for a civil relationship, the provisions of the Civil Code the adjustments are applied to.

Therefore, specialized laws relating to land, properties, and real estate transactions must also not be contrary to the fundamental principles of the Civil Code. The order of application shall be as follow:

1. Where the provision in such laws are regulated or not regulated, but contrary to the provisions of the Civil Code, provisions of Civil code shall be applied.

2. Where there is a difference between the provisions of the Civil Code and international treaties which the Socialist Republic of Vietnam is a member of the same issues, then apply the provisions of international treaties. Land and properties are unique products so no international treaties is eligible to regulate it.

3. Where the parties do not agree and the law does not specify the possible application, practices shall be applied. The Vietnam Civil Code 2015 stipulates: Practices mean rules of conduct obvious to define rights and obligations of persons in specific civil relations, forming and repeating in a long time, recognized and applying generally in a region, race, or a community or a field of civil. However, the practice is not contrary to the fundamental principles.

4. Where an issue rises under scope of civil code which it is neither provided for by law nor agreed upon by the parties nor, nor applied by practices, analogy of law (quasi transaction is a form of analogy of law) shall apply.

LOAN AGREEMENTS IN VIETNAM – RIGHTS AND RESPONSIBILITIES

Civil Code 2015 continue forbidding the lender from demanding the borrower to return the property prior to the due date except (i) the borrower willingly return the loans and pay interest for the entire term; (ii) other cases stipulated by laws. For example, it is the cases where bank or credit institution demanding the borrower to return the loans prior the due date under Law on Credit Institutions.

Borrower must pay interest for the entire team even in case of returning the loans prior the due date except otherwise agreed by the parties.

Content	Civil Code 2005	Civil Code 2015
Lender MIGHT not demand the borrower to return the loan prior the due date under Civil Code 2015	O	O
Lender MIGHT demand the borrower to return the loans prior the due date under other law.	X	O
Borrower MIGHT return the loan prior the due date	O	O
Borrower MUST pay interest for the entire term, except otherwise agreed	O	O
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LOAN AGREEMENT - INTEREST RATE UNDER CIVIL CODE 2015

According to Civil Code 2015, the interest rate in loan agreement is changed substantially, as follow:

Content	Before 01 January 2017	After 01 January 2017
Maximum interest	150% of the basic interest rate announced by the State Bank 13.5% Per year	20% Per Year
Interest on overdue amount in loan Agreement	Basic interest rate announced by the State Bank   9% Per year	150% of the interest rate agreed in loan agreement
Interest on overdue amount in interest-free loan agreement	Basic interest rate announced by the State Bank 9% Per year	50% of the maximum interest 10 % Per year