The 2024 Land Law introduces significant changes to the process of land use rights auctions in Vietnam, particularly affecting foreign investors. Participating in such auctions requires FDI investors not only to strictly comply with legal procedures but also to be thoroughly prepared in terms of legal documentation, financial capacity, and alignment with land use planning.
DNP Viet Nam Law Firm provides a comprehensive overview of the land use rights auction procedures under the new law and highlights essential legal considerations for foreign investors when participating in land auctions in Vietnam.
1. Land Use Rights Auction Procedure
According to Article 125 and Article 229 of the 2024 Land Law, the land use rights auction process comprises six main steps, applicable to land lots designated for allocation or lease through auction:
1.1. Step 1: Preparing the auction plan and land lot profile
- First, the land fund management unit prepares an auction plan and submits it to the competent authority for approval.
- Next, the land lot documentation is sent to the land management agency for determination of the starting price.
- Finally, the competent People’s Committee issues a decision to organize the land use rights auction.
1.2. Step 2: Selecting the auction organization
The auction organizer signs a contract with a professional auction organization to conduct the auction in accordance with the Law on Property Auction.
1.3. Step 3: Approving the auction results
- Upon a successful auction, the competent People’s Committee subsequently issues a decision recognizing the winning bidder.
- Thereafter, the decision is forwarded to the tax authority, the land management agency, and the successful bidder.
1.4. Step 4: Fulfilling financial obligations
The winning bidder must pay the land use fee or land rent within the timeline specified by the tax authority.
1.5. Step 5: Land allocation and issuance of land use rights certificate
- After fulfilling financial obligations, the competent People’s Committee then issues a land allocation or lease decision and grants the land use rights certificate.
- Subsequently, if applicable, a land lease contract is signed, and the land data is updated in the national database.
1.6. Step 6: Handing over land and certificate to the winning bidder
The land management agency, in coordination with the local commune-level People’s Committee, organizes the physical handover of the land and delivers the land use rights certificate to the investor.
2. Key Considerations for Foreign Investors in Land Use Rights Auctions
2.1. Proper preparation of auction dossiers and proof of financial capacity and experience
Legal basis: Article 22 and Clause 1 Article 33 of the 2020 Law on Investment; Clause 2 Article 9 of the 2023 Law on Real Estate Business; Point b Clause 3 Article 125 of the 2024 Land Law.
Foreign-invested economic organizations intending to participate in land use rights auctions must prepare a complete legal dossier, including:
- A valid enterprise registration certificate and investment registration certificate;
- Audited financial statements for the past two years to demonstrate financial capacity;
- Documents proving funding sources for the project, such as confirmation of equity capital, credit support commitments from banks, or capital contribution commitments from the parent company (if any);
- A detailed explanation of capacity and experience in implementing similar-scale projects.
Foreign-invested entities must commit to complying with Vietnamese laws on property auction, land, investment, construction, and real estate business.
For further details, refer to: the 2020 Law on Investment, the 2023 Law on Real Estate Business and the 2024 Land Law.
2.2. Ensuring alignment between the investment project and land use planning
According to Point b Clause 2 Article 125 and Article 75 of the 2024 Land Law, only land lots included in the district-level annual land use plan and approved with a 1/500 detailed planning can be auctioned. Therefore, before participating in a land auction, foreign investors should:
- Review relevant land use planning, construction planning, and sectoral planning in relation to the project’s objectives;
- Ensure the project aligns with current planning to avoid winning an auction but failing to obtain investment policy approval or construction permits;
- Coordinate with the Department of Finance and the Department of Agriculture and Environment to verify relevant information.
2.3. Legal and financial risk assessment in land use rights auctions
Legal basis: Articles 81 and 127 of the 2024 Land Law.
Investors must carefully assess legal risks related to land use duration, renewal potential, termination conditions, as well as financial risks in case the project fails to meet implementation progress or obligations.
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