Conditions for Mortgage of Housing Construction Investment Projects and Future-Formed Housing

Conditions for mortgage of housing construction investment projects and future-formed housing are critical factors that investors, credit institutions, and secondary investors must pay special attention to during project implementation and capital mobilization. Mortgages can only be executed when strictly meeting conditions on land, investment, construction, and housing legality according to current laws. In this article, Long Phan Consulting Company details the current regulations under the Law on Housing 2023.

Regulations on mortgaging housing construction investment projects and mortgaging future housing units.

Based on Article 183 of the Law on Housing 2023, regulations on mortgaging housing construction investment projects and future-formed housing are as follows:

1. Project Investor’s Right: The investor can mortgage part or all of the project or housing built in the project at a credit institution operating in Vietnam to borrow capital for that project investment or housing construction. The mortgage must include the land use rights.
2. Release of Mortgage (Redemption):
   • If the investor has mortgaged part or all of the project/housing and wishes to mobilize capital or sell/lease-purchase that housing, they must release the mortgage (redeem) on that part or all of the project/housing and land use rights before signing capital mobilization, sales, or hire-purchase contracts with customers.
   • Exception: Unless buyers/hire-purchasers and the mortgagee (bank) agree that release is not required.
   • The determination of release must be clearly stated in the Notice of Sales Eligibility from the provincial housing management agency. The investor must provide this notice (or the release document for capital mobilization) to customers/partners.
3. Individual/Organization’s Right:
   • Individuals/organizations building future-formed housing on their own lawful residential land can mortgage it.
   • Individuals/organizations buying future-formed housing in a project can mortgage it at a credit institution in Vietnam to borrow capital for buying, renovating, or repairing that specific house.

Conditions for mortgaging housing construction investment projects and future housing units.

According to Article 184 of the Law on Housing 2023:

1. Mortgaging the Project (Investor):
   • Must have the project dossier.
   • Must have the approved technical design.
   • Must have the Certificate (LURC) or decision on land allocation/lease from competent state agencies.
2. Mortgaging Future-Formed Housing (Investor):
   • Besides the above, the housing must have completed the foundation according to construction laws.
   • Must not belong to the part of the project that the investor has already mortgaged (unless released).
3. Mortgaging by Individuals/Organizations:
   • On own land: Must have documents proving land use rights and a construction permit (if required).
   • Buying from Investor: Must have the Sales Contract signed with the investor; document of contract transfer (if any); proof of payment according to progress; and must not be under dispute/complaint/lawsuit regarding the contract.

Note: Mortgaging not in accordance with the Law on Housing 2023 is invalid.

>>> See more: Housing mortgage conditions formed in the future

Handling mortgaged housing and housing construction investment projects.

According to Article 185 of the Law on Housing 2023:

• Housing: Handling mortgaged housing (including future-formed) follows the Law on Housing, Civil Code, and related laws.
• Project: Handling mortgaged projects follows the Civil Code and related laws. The transferee must be eligible to be a project investor and perform transfer procedures under the Law on Real Estate Business and related laws.

>>> See more at: Pros and Cons of Investing in Future-Formed Housing

Long Phan Consulting provides consulting services on mortgages for housing construction investment projects and mortgages for future-built houses.

Long Phan Consulting Company provides comprehensive consulting services to control risks:

• Legal Check: Verifying the legality of assets intended for mortgage.
• Risk Assessment: Assessing ownership, usage rights, and mortgage ability.
• Project Due Diligence: Checking the overall legal status of the housing project.
• Sales Eligibility Review: Checking the Department of Construction’s notice on sales eligibility.
• Mortgage Status: Determining if there are overlapping or illegal mortgages.
• Release Support: Advising on asset release procedures.
• Drafting: Preparing necessary documents and contracts.
• Representation: Handling administrative procedures at competent authorities.

>>> See more: Off-Plan Property Purchase: A Guide

Frequently Asked Questions

Below are some frequently asked questions regarding mortgage conditions for housing construction investment projects and mortgages for future housing units. Please refer to them:

Must future-formed housing mortgage contracts be notarized?

Yes. Mortgage contracts must be notarized or certified to have legal value, unless the mortgagor is an organization with real estate business functions (then it depends on agreement). (Legal Basis: Clause 1, Article 164, Law on Housing 2023).

When does a mortgage contract for a housing construction investment project become effective?

For mortgage contracts for housing construction investment projects that require notarization or authentication, the effective date of the contract is the date of completion of notarization or authentication as prescribed by law on notarization and authentication.

In the case of mortgage contracts for housing construction investment projects that do not require notarization or certification, the effective date of the contract is determined by agreement between the parties; if the parties do not agree, the effective date of the contract is the date of signing.

However, in order to be effective against third parties, the mortgage must be registered with the secured transaction registration authority.

(Based on: Article 164 of the Housing Law 2023; Clause 1, Article 297 of the Civil Code 2015)

Can an investor mortgage land use rights and the project separately?

No. The law requires that mortgaging a housing construction project or housing in a project must include mortgaging the attached land use rights to ensure consistency. (Legal Basis: Clause 1, Article 183, Law on Housing 2023).

Can individuals mortgage future-formed housing for other business purposes?

No. Individuals can only mortgage future-formed housing to borrow capital for building, renovating, repairing, or buying that specific house. (Legal Basis: Clause 3, Article 183, Law on Housing 2023).

Does the Foundation Acceptance Minutes replace the “completed foundation” condition?

The Minutes of Acceptance of the completed foundation is the legal document confirming the condition “completed foundation,” which is mandatory for mortgaging future-formed housing in a project. (Legal Basis: Point b, Clause 1, Article 184, Law on Housing 2023).

What rights does the buyer have if the investor fails to release the mortgage?

The buyer has the right to request the Court to declare the sales contract invalid (unless agreed otherwise with the bank). The investor must refund the money and compensate for damages. (Legal Basis: Clause 2, Article 183, Law on Housing 2023; Article 123, Civil Code 2015).

Conclusion

Strict compliance with Conditions for Mortgage of Housing Construction Investment Projects protects the rights of parties in credit transactions. Clients must thoroughly appraise dossiers and release status before signing to avoid invalidity risks. For in-depth advice on procedures, please contact Long Phan Consulting Company via Hotline 1900636389.