Recently, Prime Minister Pham Minh Chinh directed the Ministry of Construction to preside over and coordinate with the Ministry of Natural Resources and Environment and relevant agencies to study the establishment of a land use rights trading floor.
Summary: Resolution No. 18-NQ/TW dated June 16, 2022 of the Central Executive Committee on continuing to innovate and improve institutions and policies, improving the effectiveness and efficiency of land management and use has proposed the solution: "Public land prices, mandatory transactions through trading floors, payment via banks, no cash". Based on this political basis, in order for the real estate market to operate openly and transparently, recently, Prime Minister Pham Minh Chinh directed the Ministry of Construction to preside over and coordinate with the Ministry of Natural Resources and Environment and relevant agencies to study the establishment of a land use rights trading floor. In order to contribute more perspectives on this policy, this article discusses the basis, objectives, necessity, and experience of some countries, thereby proposing some related solutions.
Doctor, Lawyer Doan Van Binh.
1. Real estate trading floors are not a new issue in our country. Regulations on real estate trading floors and transactions through real estate trading floors are one of the provisions of the 2014 Law on Real Estate Business to enhance transparency and safety in real estate transactions. Clause 6, Article 3 of the 2014 Law on Real Estate Business stipulates: “A real estate trading floor is a place where transactions on buying, selling, transferring, leasing, sub-leasing, and leasing-purchasing real estate take place”.
According to current legal regulations, real estate trading floors are established by enterprises with the following activities: Carrying out transactions of buying, selling, transferring, leasing, sub-leasing, and leasing-purchasing real estate; Organizing the sale, transfer, leasing, sub-leasing, and leasing-purchasing of real estate; introducing, listing, and publicly providing information about real estate to parties who have a need to transact; checking documents about real estate to ensure that they are eligible for transactions; acting as an intermediary for parties to exchange, negotiate, and sign contracts for buying, selling, transferring, leasing, sub-leasing, and leasing-purchasing real estate.
Clause 1, Article 107 of the 2015 Civil Code stipulates that real estate includes land; houses and construction works attached to land; other assets attached to land, houses and construction works. Accordingly, the activities of the Real Estate Trading Floor include services related to transactions on land use rights. Transactions through the trading floor are not mandatory but are at the discretion of the buyer and seller.
Recently, the Prime Minister assigned the Ministry of Natural Resources and Environment and related ministries and sectors to study the establishment of a land use rights trading floor. This policy demonstrates the determination of the Prime Minister and the Government in economic development, attracting the attention of society. Currently, the model of the land use rights trading floor is still being discussed. The Ministry of Natural Resources and Environment is developing two options for the land use rights trading floor to submit to the Prime Minister for decision, specifically as follows:
- Option 1: Develop and upgrade the real estate trading floor model according to the Law on Real Estate Business in a professional direction with State supervision.
- Option 2: build a specialized trading floor for land use rights.
The general direction is to stipulate the principle that the real estate trading floor is managed by the State, not assigned to enterprises, and at the same time must expand the scope to include all types of land in the transaction. That trading floor must be connected to the Information System, land database, construction to update synchronously to the system.
Thus, if the land use rights trading floor is established according to the above options, although it has the same nature as the real estate trading floor according to the provisions of the current Law on Real Estate Business (as an intermediary in real estate transactions in general, land use rights in particular), there will be many differences in organization and operation. Accordingly, the land use rights trading floor will operate "as a public service organization of the State for management".
Is it necessary to establish a separate land use rights trading floor? (Illustration photo)
2. The policy of establishing a Land Use Rights Exchange and initial opinions from relevant state agencies have attracted the attention and discussion of businesses, people, researchers, and policy makers.
Assessing the necessity of the Land Use Rights Exchange, many opinions have affirmed the advantages of trading through the exchange such as: controlling the legality of land plots and real estate put into business; controlling the actual land transaction value, thereby forming a land database, land prices close to the market; increasing trust, minimizing risks and disputes when trading land use rights; preventing tax losses, creating a healthy business environment...
It can be said that the biggest goal when establishing the Land Use Rights Exchange is to ensure information transparency, minimize risks in transactions due to lack of information, thereby helping to build a relatively complete and accurate data system on transactions, buying and selling prices close to market prices to effectively serve the state management of land and real estate business.
However, there are many concerns about the necessity of the Land Use Rights Exchange, especially in aspects such as creating costs and procedures that add burdens to people and businesses participating in transactions; if it is mandatory to transact through the exchange, it will limit people's freedom of transaction; if it is mandatory without a good control and operation mechanism, it is very likely to lead to "monopoly" of information, negativity, manipulation, and market distortion.
In particular, some opinions assess that we now have regulations and institutions to ensure the transparency of the real estate market such as regulations on conditions, procedures, and real estate transaction contracts; transparency obligations of investors in real estate transactions; notarization of real estate transaction contracts, etc.
So, is the problem really a lack of management mechanisms and tools or an ineffective use of existing tools; or a limited capacity and responsibility of relevant staff? Therefore, "whether the establishment of a land use rights exchange will help make the market more transparent or not is still a hypothesis at the present time".
3. In order to have more basis for assessment, we have consulted the experience of some countries in the region and around the world on land use rights trading floors and solutions to ensure transparency and safety in real estate transactions.
Through discussions with colleagues at the Real Estate Associations of countries such as the US, Korea, Singapore, Thailand, Indonesia, etc., we found that these countries do not have their own land use rights trading floors. In the US, information about real estate (both houses and land) is made public on the US Real Estate Portal via the Multiple Listing Service Listings (MLS).
This platform lists information on houses, land, foreclosed properties, new properties, old properties, commercial properties, investment properties, etc. to serve the buying and selling activities of brokers. MLS.com or state MLSs are not part of the US government.
This site is privately operated on the basis of collecting fees from sellers in the real estate buying and selling process in the US. Any real estate that wants to be traded on the market must be "listed" on the MLS to make information public. The purchase and sale must go through licensed brokers. Usually both the seller's broker and the buyer's broker. Brokerage fees are included in the selling price, ranging from 1-10% depending on the negotiation, location and type of real estate. This fee varies from state to state, or even within a state or city. This fee is shared with brokers and related parties in the buying and selling process at the time of closing.
In some other countries such as Korea, Singapore, Indonesia, there is no land use rights trading floor. Thailand has a Land & Housing Bank (or Land Bank) with the function of buying and selling land, but mainly buying and selling to regulate land, supporting people without agricultural and forestry land. Main services include: Deposits (receiving deposits), business loans, consumer loans to buy real estate, buy land, trust funds, asset management services, foreign exchange...
Thus, the trend of many countries is to make information about real estate in general and land in particular transparent on a single floor, using technology applications to manage and capture information about real estate and real estate transactions, and exploiting information from a common database to simplify procedures in real estate transactions and transfers.
4. Based on the experience of other countries and the orientation of establishing a Land Use Rights Exchange in Vietnam, we have the following thoughts:
4.1. Is it necessary to establish a separate land use rights trading floor?
Resolution No. 18-NQ/TW dated June 16, 2022 of the Central Executive Committee on continuing to innovate, perfect institutions and policies, improve the effectiveness and efficiency of land management and use with the orientation: "Public land prices, mandatory transactions through trading floors, payment through banks, no cash". Thus, the orientation of the Resolution is "transactions through trading floors" and not specifically "land use rights trading floors" or must be floors established and directly managed by the State.
Therefore, it is necessary to carefully consider the establishment of a separate Land Use Rights Exchange, avoiding overlap with real estate exchanges according to current regulations and ensuring effectiveness and efficiency when the Exchange comes into operation. If the Land Use Rights Exchange is established according to the model of public service organization of the State, it is necessary to study and develop a pilot project to establish an Exchange in a number of localities, on that basis, summarize and evaluate before officially regulating in the Law.
4.2. Do all real estate transactions have to go through the floor?
Real estate transactions through trading floors have many advantages but also have potential risks, increased procedures, costs, and negative aspects as we mentioned in section 2 above.
To suit the current practical conditions, in our opinion, real estate transactions through the Exchange should be regulated in an encouraging manner as in the Draft Law on Real Estate Business to gradually create habits in society, helping to promote the autonomy of entities in choosing business and transaction forms; at the same time, forcing the Exchanges to constantly improve quality and prices to ensure competitiveness and attract customers according to market mechanisms.
4.3. What can we learn from the experiences of countries in the region and the world?
Each country has its own land ownership regime. However, all countries operate their markets on the principle of ensuring information transparency. We can refer to the experiences of other countries on real estate databases, the mandatory disclosure of information on real estate databases. All countries have complete information systems on housing, land and real estate markets.
Up to now, we have not done this well and have not achieved the desired results. We need to summarize and evaluate this policy and implementation organization to improve it so that we can have a data center to operate a transparent market. This is suitable and feasible in the context of strong digital transformation in our country today. Controlling cash flow, regulating and checking transactions through banks will help achieve this goal.
Because full market information and cashless payments will bring transparency; when the floor is transparent, people are not required to follow. Besides, with the development of the legal services market, people increasing the use of notary services, lawyers, etc. when transacting real estate will also contribute to market transparency and reduce risks in transactions.
4.4. Recommendations
The Real Estate Trading Floor model under the Law on Real Estate Business has been legalized and has been practically implemented for real estate transactions including land use rights and assets on land.
Real estate trading floors provide services for real estate transactions for business purposes between investors and people and can completely provide real estate transaction services for non-business purposes between people if people have a need. This is also something that managers are interested in and consider as one of the reasons for the need to research and establish a land use rights trading floor.
Therefore, we recommend implementing the plan to perfect the Real Estate Trading Floor model according to the Law on Real Estate Business in a professional direction with State supervision.
This plan is both in line with the Party's policy and under the State's management, avoiding overlapping functions, obtaining information data for administration, ensuring market principles, freedom of business, freedom of choice of people and businesses, and achieving efficiency without creating new apparatus, increasing administrative procedures, increasing time, increasing compliance costs, etc.
It is easy to see that even the participation of state agencies in meetings to discuss the plan to establish this new floor model is very costly, and the time to come up with a suitable plan, in sync with other specialized laws, will it be in time to be included in the Draft Land Law (amended) expected to be passed by the National Assembly in October 2023, and if it is in time, will it be a hasty solution when the time for research and impact assessment is too short?
(Source: Construction Newspaper)
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