The holder of a land use right certificate, or in other words a red book, has the right to mortgage the land use right. However, not all cases can mortgage land use rights due to the specific situation of the land. In this article, LSX legal firm will provides information regarding: “Cases of not being able to mortgage land use rights in Vietnam”
Legal grounds
- Law on Land 2013
- Civil Code 2015
- Decree 21/2020/ND-CP
Overview of mortgage of land use rights
According to the provisions of Clause 1, Article 317 of the Civil Code 2015, Mortgage of property means the use by one party (hereinafter referred to as the mortgagor) of property under the ownership of the obligor as security for the performance of an obligation to the other party (hereinafter referred to as the mortgagee) without transferring such property to the mortgagee.
So, the mortgage of the red book, also known as the mortgage of the land use right certificate, means the land user uses the land use right under his/her ownership to secure the performance of obligations and does not assign the land to the mortgagee. In this case, the mortgagor will hand over the land use right certificate (red book) to the mortgagee.
Conditions for mortgage of land use rights
Mortgage of land use rights for bank loans belongs to the basic rights of land users. According to Article 167 of the Law on Land 2013, households and individuals owning land may exercise the right to mortgage land use rights to borrow capital at credit institutions licensed to operate in Vietnam. However, for land leased with annual payment, the land user may only mortgage his/her own property attached to the leased land in accordance with Point dd, Clause 2, Article 179 of the 2013 Land Law.
The time to be able to mortgage the land use right for a bank loan, according to the provisions of Article 168 of the Land Law 2013, is when the land user has been granted a land use right certificate. In the case of conversion of agricultural land use rights, the land user may exercise the mortgage right after the issuance of decision on land allocation or land lease by the State. In case of inheriting land use rights, land users may exercise their mortgage rights when fully meeting the conditions for grant of certificates of land use rights and ownership of houses and other land-attached assets.
Pursuant to Clause 1, Article 188 of the 2013 Land Law, a land user may exercise the mortgage right when fully meeting the following conditions:
“1. Land users may exercise the rights to exchange, transfer, lease, sublease, inherit, donate or mortgage land use rights and contribute land use rights as capital when meeting the following conditions:
a) Having the certificate, except the case prescribed in Clause 3, Article 186 and the case of receiving inheritance prescribed in Clause 1, Article 168 of this Law;
b) The land is dispute-free;
c) The land use rights are not distrained to secure judgment enforcement;
d) Within the land use term.”
Type of land to mortgage
According to Clause 1, Article 179 of the Law on Land 2013, households and individuals using land in one of the following types of land have the right to mortgage their land use rights at a bank:
- Firstly, agricultural land allocated by the State within the limit;
- Secondly, l and allocated by the State with a collection of land use levy;
- Thirdly, land leased with a one-time payment for the entire lease period;
- Fourthly, land recognized by the State with land use rights;
- Fifthly, land received for conversion, transfer, donation, and inheritance.
Cases of not being able to mortgage land use rights
Not eligible for a mortgage
Land users may not mortgage their red books if they do not fully meet the conditions for a mortgage of land use rights as prescribed in Clause 1, Article 188 of the Land Law as follows:
- Having the certificate, except for the case prescribed in Clause 3, Article 186 and the case of receiving inheritance prescribed in Clause 1, Article 168 of this Law;
- The land is dispute-free;
- The land use rights are not distrained to secure judgment enforcement;
- Within the land use term.
Heritage management as the right to use land
According to Article 617 of the Civil Code 2015, an administrator of an estate as heritage has the following obligations:
- Make a list of the property within the estate and collect any property belonging to the estate of the deceased which is possessed by others, unless otherwise provided by law;
- Take care of the estate and do not sell, exchange, give, pledge, mortgage, or otherwise dispose of the property within the estate without the written consent of the heirs;
- Notify the heirs of the estate;
- Compensate for any damage if the administrator breaches any of its obligations, thereby causing damage;
- Deliver back the estate at the request of the heirs.
Therefore, if the estate is a land use right being managed by the administrator of the estate, the administrator of that estate may not mortgage the land use right to another person without the written consent of the heirs.
Land use rights formed in the future
According to Clause 2, Article 1 of Decree No. 11/2012/ND-CP amending and supplementing Decree No. 163/2006/ND-CP, security assets mean existing assets or assets formed in the future that The law does not prohibit transactions.
Land use rights formed in the future do not belong to security assets to secure the performance of obligations. Therefore, land use rights formed in the future cannot be used as collateral.
Land of religious establishments, residential communities
Clause 2, Article 181 of the 2013 Land Law:
“Article 181. Rights and obligations of religious establishments and communities using land
2. Religious establishments and communities using land may not exchange, transfer, lease or donate land use rights or mortgage or contribute as capital land use rights.”
According to the above regulations, religious establishments and residential communities using land can not mortgage their land use rights even though they fully meet the conditions for a mortgage of red books.
Land for civil aviation activities
According to Clause 4, Article 156 of the Law on Land 2013, organizations and individuals using land at airports or airfields have the following rights and obligations:
- Firstly, to use the land for proper purposes; to refrain from exchanging, transferring, donating, or leasing land use rights, or mortgaging or contributing as capital land use rights;
- Secondly, to use the assets under their ownership which are attached to the leased land as collateral at credit institutions that are licensed to operate in Vietnam; to sell or lease assets and contribute as capital assets under their ownership which are attached to the leased land.
So, organizations and individuals using land at airports and airfields may not mortgage land use rights.
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Related articles
- Conditions for transferring land use rights by Vietnamese law
- Regulations on converting land for perennial crops to residential land in Vietnam
- Current regulations on mixed residential land in Vietnam
Related questions
Land used for civil aviation operations at airports or airfields includes:
a) Land used for construction of offices of state agencies which operate constantly at airports or airfields;
b) Land used for construction of infrastructure in airports or airfields, including land for construction of runways, taxiways, aircraft parking areas, facilities to ensure flight operations, aviation security and airfield emergency, fences, construction-serving roads, internal roads and other auxiliary facilities areas of the airfields;
c) Land used for construction of facilities for aviation services at airports or airfields;
d) Land used for construction of facilities for non-aviation services.
The use of land for production of construction materials and ceramic products must comply with the following provisions:
Firstly, Having a decision on land lease for the purpose of exploitation of raw materials, processing and production of construction materials and ceramic products issued by a competent state agency;
Secondly, Taking necessary measures to avoid causing damage to production activities, life and negative effects to the environment, water flows or transportation;
Thirdly, Land users shall return the land in accordance with the progress of exploitation of raw materials and with the status of surface soil as stipulated in the land lease contract.
1. Where the parties agree that the mortgagee will hold the documents relating to the mortgaged property, to return to the mortgagor such documents upon termination of the mortgage.
2. Follow procedures for realization of mortgaged property in accordance with regulations of law.
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