Condotels – a new product in the real estate market has emerged with a variety of functions and has attracted the attention of a majority of real estate investors – thus becoming their ultimate choice. However, since the introduction of condotels, legal regulations for this type of multi-functional real estate has failed to exist which has been a major obstacle for competent State authorities, as well as for real estate investors to consider managing or investing in Condotels.

CNC has acquired a working knowledge of this new and exciting and new real estate feature and provides the following, useful information, entitled “Condotel – Noteworthy Legal Concerns” to support potential Condotel investments. What’s included?

  • What is a Condotel?
  • Condotel – Applicable Laws
  • “Pink book” issuance
  • Operations
  • Foreigner ownership?

What is a Condotel?

The word Condotel comes from the combination of the word “condo”, which comes from the word “condominium”, and the word “hotel”, and is defined as a type of multi-functional real estate – house and tourist accommodations combined. According to www.uslegal.com, a Condotel is defined as hybrid lodging combining a condominium and a hotel and operated – with a separate management department – as a commercial hotel despite the units being individually owned. Condotels have rental and reservation desks, short-term occupancy, food, telephone, and daily cleaning services. Rooms in Condotels are sold individually to buyers who typically continue renting them to vacationers, tourists, or business professionals.

condotel

Condotel – Applicable Laws

Because of the nature of Condotels, there currently are no specialized, applicable laws for this type of real estate. Succinctly, managing and operating Condotels requires that the parties apply various legal documents pertaining to the laws of housing, land, tourism, etc.

The result is an inconsistent and controversial application of law leading to misunderstandings among state management agencies, employers, and investors.

Confounding this situation, the Prime Minister requires the Minister of Construction to research and propose mechanisms, policies, and regulations related to the development and management of Condotels, resort villas, officetels, etc., and report to the Prime Minister.  Meanwhile, the Minister of Construction is closely monitoring the developments, regularly updating information on the real estate market, compiling system information, and managing the the housing and real estate market database.

Will a “pink book” be issued for Condotels?

Concisely, without a specialized framework to govern Condotels, it is a challenge, not only for investors to apply for ownership, but also for the management of such real estate by the local competent State authorities.

Ownership certificates relate specifically to the ownership duration of a Condotel. The competent authority shall issue permanent or short-term ownership based on the purpose of the land.

Relative to the aforementioned issues, there are some considerations:

Firstly, Determination of a Condotel as a house: according to the provisions outlined in the Land and Housing laws, a Condotel will have permanent and stable ownership.

However, implementation of a Condotel project, based on the purpose of the land for the project, investors are allocated or leased commercial land with a land or lease duration that does not exceed 50 or 70 years.

A legal confict arises when it is determined that the Condotel has permanent ownership based on the functionality as a residential property for living.

Secondly, according to the provisions on Tourism Accommodation, under the 2017 Tourism Law, a Tourism Accommodation provides accommodation needs of tourists, including: Traveling Villas, Traveling Apartments, Tourist houses, rooms for lease, etc.

With its design features and functions, Condotels can be considered as a type of tourist accommodation, particularly: traveler apartments.

Although designed as a fully furnished apartment for extended stays, very few owners use Condotel for long-term residences or continuous use. This use is not popular compared to business investment uses.

Simultaneously, Condotels are used for business and extended stay purposes as a provision from an employer, the period of the owner’s residence fee may also be included in the management fee as agreed upon, prior. Therefore, it could be considered that a Condotel is built primarily for the purpose of making a profit.

Intrinsically, Condotels are considered real estate used for business and are owned for a definite term over the duration of a project and are extended, but not granted a residential status.

Another issue, concerning real estate investors, is how Condotels are operated

With its special ‘’Dual function’’ features, Condotels may be operated as follows:

Condotel

With their many advantages, Condotels have attracted an enormous amount of attention from foreign investors. Since then, an issue has surfaced as to whether foreigners can own Condotels?

Can foreigners own a Condotel?

The obstacles or issues surrounding foreigner ownership and clarification there of, revolve around the duration of ownership.

Realistically, the Employer, while building Condotels, has divided and specified areas in which foreign individuals and organizations may own. Succinctly, foreigners may still own Condotels in Vietnam, but such ownership is limited.

Another important issue relating to national security and territorial integrity, is that the ownership of real estate by foreign individuals and organizations in Vietnam must also be considered based on the location and region of the real estate. This is the reason investors divide and designate areas where foreign individuals and organizations may own real estate.

Accordingly, provisions on conditions for which foreign entities may own houses may refer to the following:

Condotel
Article 75 of Decree 99/2015/ND-CP about Areas in which foreign entities may own houses

The aforementioned issues are the basic legal issues on Condotels which have been compiled and analyzed from relevant specialized legal documents. Promulgation of a regulatory framework for new types of real estate, such as Condotels is in progress and awaiting completion.

Following this article CNC will update and issue articles relating to sufficent invest in Condotels, legal perspectives of new types of real estate, such as traveling villas (resort villa), and officetels.

 

Support:

CNC is pleased to receive and respond to any and all inquiries in support of your purchase of or investment in Condotels quickly, safely, and effectively.

Inquiries may be submitted via email or phone provided below:

Nguyen Thi Hong Tra | Senior Associate

T: (+84-28) 6276 9900

E: tra.nguyen@cnccounsel.com

 

Tran Duc Tri | Associate

T: (+84-28) 6276 9900

E: tri.tran@cnccounsel.com

 

CNC© | A Boutique Property Law Firm

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Ho Chi Minh city, Vietnam.

T: (+84-28) 6276 9900 | F: (+84-28) 2220 0913

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Disclaimers:

This newsletter has been prepared or used for the purpose of introducing or updating customers about issues and/or the development of legal positions in Vietnam. The information presented in this newsletter does not constitute advice of any kind and are subject to change without notice.

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