In many cases, due to the need for money, when having financial difficulties, or to invest, land users often use land use right certificates as collateral for loans at banks. However, the lack of legal procedure understanding regarding land use rights mortgage may confuse and lead to later consequences. So, in this article, LSX legal firm will inform you: “Procedures for mortgage of land use rights for bank loans in Vietnam”
Legal ground
- Law on Land 2013
- Civil Code 2015
Land use rights
Land Law 2013 stipulates that land belongs to the whole people and owned by the State. The State thereby grants land use rights to the people through the form of land allocation or land lease. The law also recognizes land use rights for stable land users and stipulates the general rights and obligations of land users.
Although the Land Law does not clearly stipulate the concept of land use rights, the law also introduces the concept of land use right price as the amount of money calculated per unit area of land regulated or formed by the State in a transaction on land use rights. The value of land use rights means the monetary value of land use rights per unit area determined in a certain period of use.
Land users may own part of the value of land use rights, and transfer land use rights for the allocated areas corresponding to their obligations to the State.
Classification of land use rights
Land use rights based on the subject (organization, household, or individual):
The right to use land at this time is based on the subjective will of the subject and the use of land for any purpose is up to the subject to decide. These decisions must not exceed the limits allowed by the competent authority.
Land use rights based on the object (agricultural land, non-agricultural land, or unused land):
If the law regulates the land for any purpose, then the land user must comply with that purpose. When having a change in the purpose of use, the owner must notify the competent authority for approval before implementation.
Land use right based on time:
The land use period can be temporary or permanent, depending on the decision of the competent authority. From there, the subject’s land use right is also decided whether it is temporary or permanent.
The right to use land based on the law:
That means, it is necessary to base on decisions of competent authorities when allocating or leasing land to determine the purpose of use and to know the original use rights of organizations, individuals, and households; directly in the decision or the second land use right of the sublessee or heir.
Mortgage of land use rights for bank loans
Clause 1, Article 317 of the 2015 Civil Code provides: 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.
Accordingly, you can understand the mortgage of land use rights as the lawful land user using his/her property rights to secure the performance of obligations.
Thus, mortgage of land use rights for bank loans means a form of borrowing cash from banks to serve the purposes of shopping, investment, construction, study, tourism, medical examination, and treatment…. by using the land use right certificate collateral for loan application approval. The bank will return the land use right certificate to the customer and cancel the land mortgage loan when the customer repays the loan on time. If the borrower is unable to repay the loan, the collateral will be disposed of according to the agreement.
Conditions for mortgage of land use rights?
Clause 1, Article 168 of the 2013 Land Law stipulates: Land users may exercise the rights to transfer, lease, sublease, donate and mortgage land use rights and to contribute land use rights as capital upon possessing a certificate.
Besides:
Article 188. Conditions for the exercise of the rights to exchange, transfer, lease, sublease, inherit, donate or mortgage land use rights; to contribute land use rights as capital
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 the capital when meeting the following conditions:
a) 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;
b) The land is dispute-free;
c) The land use rights are not distrained to secure judgment enforcement;
d) Within the land use term.
2. In addition to the conditions specified in Clause 1 of this Article, when exercising the rights to exchange, transfer, lease, sublease, inherit, donate or mortgage land use rights and contribute land use rights as capital, land users must also be eligible under Articles 189, 190, 191, 192, 193 and 194 of this Law.
3. The exchange, transfer, lease, sublease, inheritance, donation, or mortgage of land use rights or contribution of land use rights as capital must be registered with the land registration agency and will take effect from the time of registration in the cadastral book.
Procedures for mortgage of land use rights for bank loans
Step 1: Receive loan request
Customer relations specialists at the Bank will receive loan requests from customers; at the same time check whether the loan documents sufficient or not and guide customers to supplement fully.
Step 2: Appraise the value of the collateral
The collateral (mortgage land) will be surveyed to determine the real value of the property, and the limit of the loan package will be based on the value of the property. The collateral valuation process can be done by the bank’s appraisal department or with the assistance of a third party. The bank’s appraisal department or a third party will perform the collateral valuation process.
Step 3: Carry out the mortgage loan procedure
After having agreed on the relevant terms of the loan term, interest rate, allowable limit, etc., the customer prepares a full mortgage loan application to complete the procedure for a bank loan to mortgage the land use rights.
Then, register the mortgage at the land use right registration office under the Department of Natural Resources and Environment; and the Land Use Right Registration Office under the Division of Natural Resources and Environment of districts, towns, and provincial cities.
Step 4: Register for secured transaction
In order to use the land use right as a valid collateral, the bank needs to register the mortgage of the property. The property mortgage contract, when notarized, will be sent to the competent agency for mortgage registration. Guaranteed transaction registration usually results in 3-7 working days from the time of application.
After obtaining the results of the registration of the property mortgage, the loan will be disbursed according to the agreement.
Legal service of LSX Legal Firm
LSX legal firm provides legal services to clients in various legal areas. To make your case convenient, LSX will perform:
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Related questions
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;
Lastly, land received for conversion, transfer, donation, and inheritance.
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.
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 the Law on Land 2013;
The land is dispute-free;
The land use rights are not distrained to secure judgment enforcement;
Within the land use term.
Contact LSX
Finally, hope this article is useful for you to answer the question about “Procedures for mortgage of land use rights for bank loans“. If you need any further information, please contact LSX Law firm: +84846175333 or Email: [email protected]
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