1. Laws on transfer of land use rights
The land law does not provide a specific concept on the transfer of land use rights, but in the most general sense: Transfer of land use rights is a form of land transfer by the owner along with the use right. own to the assignee. The owner will receive an amount corresponding to the land use right value as agreed between the parties.
According to the provisions of Clause 3, Article 188 of the Land Law 2013, “3. The conversion, transfer, lease, sub-lease, inheritance, donation, mortgage of land use rights, capital contribution with land use rights must be registered at the land registration office and take effect from the date of registration. time of registration in the cadastral book.”
In order to be registered in the cadastral book by the land registration agency, the transferors of land use rights must complete all procedures such as: Notarization or certification of the transfer contract as prescribed at Point a. Clause 3, Article 167 of the 2013 Land Law: “a) Contracts on transfer, donation, mortgage, capital contribution with land use rights, land use rights and properties attached to land must be notarized or authenticated. …”; Declare financial obligations and pay personal income tax (including tax exemptions); Register the change of land and submit the application for registration of the change to the land registrar. Thus, there must be a notarized or authenticated transfer contract between the parties before the transferee can carry out the procedures for transferring the name on the land use right certificate.
2. About the authorization contract
Article 562 of the Civil Code 2015 stipulates that an authorization contract is as follows: “A authorization contract is an agreement between parties whereby the authorized party is obliged to perform work on behalf of the authorizing party, the authorization only has to pay remuneration if it is agreed or provided for by law.”
From the above provisions, it can be seen that the authorized party only acts on behalf of the authorizing party to use the land plot, transfer, donate and other rights if there is an agreement in the authorization contract, the authorized person cannot transfer to himself because he is not a part of the registration file for the transfer of land use rights.
2.1. Advantages
Recently, when the real estate market gradually developed again after a long period of silence caused by the Covid-19 pandemic, the sale and purchase of real estate took place actively and attracted great purchasing power. For many different reasons, many people buy and sell real estate with an authorization contract to transfer land use rights. This is a form of trading that is chosen by many investors because this form has advantages such as:
Firstly, in terms of procedures, this is a quick and easy form of buying and selling. If the sale and purchase are carried out in the usual form, the parties must sign the sale and purchase contract and then carry out the procedures for the transfer of land use rights, between the two parties must take many steps such as: notarization or authentication; submit the land use right transfer dossier at the People’s Committee of the district where the land is located; receive tax notices; go to pay taxes, then return the receipt of tax collection and wait for the certificate… the procedure follows the correct process and time to receive the certificate of land use right from the old owner to the new owner. It may take a whole month while buying and selling land with an authorization contract, the two parties only need to sign a notarized or authenticated authorization contract, notarize procedures,
Second, the buyer and seller will “dodge” to pay personal income tax and pay registration fees. According to regulations, when carrying out procedures for real estate purchase and sale, the two parties must pay a tax rate of 2% on the transfer price (Clause 12, Article 2, Decree 12/2015/ND-CP) and a registration fee of 0.5% value of houses and land (Clause 1, Article, 7 of Decree 140/2016/ND-CP) while the transfer by authorization contract will “avoid” these taxes and fees, the buyers and sellers will enjoy profits from the sale, but the state will lose tax revenue of buyers and sellers.
Third, to buy properties that have not yet met the conditions to conduct the sale. For example, the purchase and sale of social housing has very specific regulations, that is, after 5 years from the time of payment for the house purchase, the owner of the social house is free to transfer (Clause 4. Article 62 of the Law on Housing) but for some reason the owner of the social house wants to sell it before 5 years, the buyer and the seller will “evade the law” by signing a contract. authorization, or the purchase and sale of land for resettlement before receiving the foundation, the parties will make an authorization contract for real estates that do not meet the conditions as prescribed in Article 188 of the Land Law. 2013[1].
2.2. Legal risks
For the purpose of legalizing transactions of buying, selling and transferring real estate that the parties have not yet qualified for, or for some reason without making a contract for the transfer of land use rights, have signed an authorization contract. permission. However, in addition to the “immediately” benefits, in terms of legality, when performing a transaction by a detour of land use right transfer authorization contract, there are many legal risks.
2.2.1. The transfer of land use rights by the authorization contract will not have legal effect
According to the provisions of Clause 3, Article 188 of the 2013 Land Law, only when the land use right transfer contract is registered at the land registration agency, the transfer will take effect. In order to register in the cadastral book, a notarized or authenticated land use right transfer contract is required. Thus, an authorization contract is not a form of transferring land use rights from one person to another, but the authorized person only acts in the name of the principal to perform transactions such as buying, selling, gifting, giving , mortgage. Therefore, the authorization contract does not give rise to full legal value when one person receives the transfer of land use rights from another person. At the same time, When the land price is high, the seller can easily change his mind, it is easy for the seller to ask the Court to declare the contract invalid because of the nature of the authorization contract to conceal the transfer of the right to use the house. soil. Therefore, it is not possible to prove the validity of the land use right transfer in this case.
2.2.2. The rights to the land plot may be limited according to the scope of authorization
The scope of authorization is agreed upon by the parties, but if you pay the land owner but only receive the authorization, in many cases the rights of the land user will not be fully exercised and the situation is likely to occur: the buyer paid the land owner, but the name on the land use right certificate and the land parcel documents is still in the name of the former owner.
2.2.3. The authorizing party may unilaterally terminate the authorization contract
Since it is an authorization contract, the land owner (the authorizing party) has the right to unilaterally terminate the contract. Article 569 of the 2015 Civil Code clearly stipulates the unilateral termination of the authorization contract as follows:
In case of authorization with remuneration, the principal has the right to unilaterally terminate the performance of the contract at any time, but must pay remuneration to the authorized party in proportion to the work performed by the authorized party and damages; if the authorization does not provide remuneration, the principal may terminate the performance of the contract at any time, but must notify the principal a reasonable time in advance.
The authorizing party must notify the third party in writing of the termination of the performance of the contract by the authorizing party; if not, the contract with the third party will still be valid, unless the third party knows or ought to know that the authorization contract has been terminated.
In case of authorization without remuneration, the authorized party has the right to unilaterally terminate the performance of the contract at any time, but must notify the principal of a reasonable time in advance; if the authorization has remuneration, the authorized party has the right to unilaterally terminate the performance of the contract at any time and must compensate the principal for damage, if any.
The law allows the parties to easily unilaterally terminate the authorization contract. Therefore, when one of the parties feels that the benefits from this land transfer are no longer as good as desired or for many other reasons, this authorization contract can still be terminated at any time, and the person who suffers will be the other side.
2.2.4. The contract automatically expires if the principal or the authorized party dies
According to the provisions of civil law, an authorized representative shall terminate in a number of cases: the representative or the representative unilaterally terminates the authorization; the representative, the representative who is an individual dies and then the relatives of the authorized person will have trouble in carrying out the procedures for inheriting the purchased property. According to Clause 3, Article 422 of the 2015 Civil Code, when the individual entering into the contract dies, the contract will automatically be terminated. Therefore, when the principal dies, the use right to the land plot in the contract will become an inheritance and will be divided among the principal’s heirs in accordance with the law on inheritance. authorized will no longer have any interest in the land plot.
In addition, there are many risks affecting the rights of the buyer such as: loss, loss, fire of power of attorney; the authorized person still owes money to others, owes money to the bank, owes taxes, the creditor has the right to request the court to distrain the property and auction it to collect the debt payment.
The trial practice shows that there are many disputes over the authorization contract for the transfer of land use rights, causing great losses in terms of time, effort and money of the parties involved in the proceedings. The writer would like to give an example:
Mr. Tran Van A has an area of 690m2 and wants to sell it to Mr. Nguyen The B for a transfer price of VND 250,000,000.
On November 2, 2020, the two parties signed a deposit receipt contract, whereby Mr. A received a deposit of 70,000,000 VND from Mr. B, the remaining amount of 180,000,000 VND will be paid when notarizing his name in term 01 month.
On November 30, 2020, Mr. A and Mr. B went to the Notary Office to complete the procedures. Instead of making a contract for the transfer of land use rights, Mr. A and Mr. B agreed to make an authorization contract, whereby Mr. A authorizes Mr. B to dispose of and transfer the above-said land area after Mr. B has paid all the money to Mr. A.
At the beginning of March 2021, the area of land that Mr. B bought was adjacent to the road of the newly opened urban area, the land price increased, so Mr. B sold that land plot of 690 m2 to Ms. Nguyen Thi C for 900,000,000 VND. . However, because the transfer authorization contract is subject to tax twice[2], Mr. B went to Mr. A to ask Mr. A to sign a transfer contract directly from Mr. A to Ms. C to save one tax. but Mr. A refuses to pay, and at the same time demands to terminate the authorization contract with Mr. B, refund Mr. B the amount of VND 250,000,000 and reclaim the land. Mr. B does not accept to continue to transfer the above land to Ms. C and accepts to pay the fee twice.
On March 26, 2021, the branch of the district land registration office received the land change adjustment dossier from Mr. Tran Van A and transferred it to Ms. Nguyen Thi C for that land plot No. A change registration dossier includes: Certificate of land use rights No. MT issued by the People’s Committee of VT District to Mr. Tran Van A and the contract of land use right transfer between Mr. A (represented by Mr. notarization authorization contract at the Notary Office) with Ms. Nguyen Thi C. After reviewing the registration file changes, deeming it to be valid, the branch of the Land Registration Office confirmed on the Certificate. received the land use right on the transfer to Ms. Nguyen Thi C.
Mr. A did not accept the assignment of Mr. B to Ms. C, so he asked the Court: To cancel the authorization contract dated November 30, 2017 between Mr. A and Mr. Nguyen The B, which was invalidated due to forgery; Canceling the land use right transfer contract between Mr. B and Ms. C due to its invalidity; Cancel the content of land parcel certification of the branch of the land registration office from Mr. A to Ms. C.
Solving the above situation currently has the following views:
The first point of view is that: Because the authorization contract for the transfer of land use rights is fake to cover up the fact that the land is transferred to evade taxes, it is necessary to accept Mr. A’s request to cancel the authorization contract. between Mr. Tran Van A and Mr. Nguyen The B due to invalidity. Because the authorization contract is invalid, the contract between Mr. B and Mrs. C is also invalid because Mr. B does not have the right to transfer the land use right and needs to petition the VT District Land Registry Office for correction. , adjusted to cancel the confirmation of transferring the name of the branch of the Land Registration Office from Mr. Tran Van A to Ms. Nguyen Thi C.
The second point of view is that: The transfer authorization contract between Mr. A and Mr. B is legally valid because thanks to this authorization contract Mr. B can transfer the land use right to Mrs. C, so , the transaction between Mr. B and Ms. C needs to be recognized because Ms. C is the third person in good faith and the transfer of the name to the branch of the Land Registration Office from Mr. Tran Van A to Ms. Nguyen Thi C is complete. fully valid.
In our opinion: The authorization contract between Mr. A and Mr. B is a fake transaction in order to conceal the land transfer, so the above authorization contract is void according to the provisions of Article 124 of the Civil Code. 2015 [3].
As for Mr. A’s request to cancel the land use right transfer contract between Mr. B and Ms. C and cancel the confirmation of the land parcel of the Branch of the Land Registration Office from Mr. A to Mrs. C, it can be found: Mr. B has transferred the entire land parcel to Mrs. C under the land use right transfer contract certified by the Notary Office, the two parties have completed the transfer and have completed the delivery of money and land, Ms. C has registered and has been adjusted by the branch office of the land registration office into Mrs. C’s name.
According to the provisions of Article 503 of the Civil Code 2015, the transfer of land use rights takes effect from the time of registration in accordance with the provisions of the Land Law; According to the provisions of Clause 7 Article 95 of the Land Law: The registration of land and land-attached assets takes effect from the time of registration in the cadastral book. Thus, the transfer between Mr. B and Ms. C has legal effect. At the same time, Ms. C received the transfer of the above property in full compliance with the provisions of the law and was established by the competent authority to be transferred to Ms. C’s name, so the contract for the transfer of land use rights between Mr. B and Mr. B. Ms. C is not invalidated according to the provisions of Clause 2, Article 133 of the Civil Code 2015[4] against a bona fide third party. Therefore, according to the provisions of Clause 3, Article 133[5] of the Civil Code, Mr. A has no right to reclaim the land use right of plot No. from Mrs. C.
3. Recommendations
Through practice, it has been shown that the disputes over the contract of authorization for the transfer of land use rights are increasing and becoming more complicated, for many reasons, there are still many cases of transferring land use rights by means of a legal form. authorization contract. However, at present, there is still no detailed and specific guidance document for the authorization of the transfer of land use rights, if there is a dispute, how will it be resolved, accept the authorized transaction, protect a third party in good faith or declare the authorization contract invalid due to forgery and cancel the transaction against the third party.
The author recommends that there should be a document to guide the settlement of the above cases in the following direction: for an authorization contract with the purpose of transferring land use rights, if a dispute arises, the contract shall be declared invalid, and if has been transferred to a bona fide third party and the third party does not know that the purpose of the authorization is to evade taxes, it is necessary to accept the third party’s transactions as lawful in order to protect the legitimate rights and interests of the third party. citizens, in accordance with the provisions of civil law.
[1] Article 188. Conditions for exercising the rights to exchange, transfer, lease, sublease, inherit, donate or mortgage land use rights; capital contribution with land use rights
1. Land users may exercise the rights to exchange, transfer, lease, sublease, inherit, donate or mortgage land use rights; contribute capital with land use rights when the following conditions are met:
a) Having a Certificate, except for the case specified in Clause 3, Article 186 and the case of inheritance specified in Clause 1, Article 168 of this Law;
b) Undisputed land;
c) The land use right is not distrained to secure judgment enforcement;
d) During 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 or donate land use rights; the right to mortgage land use rights or contribute capital with land use rights must also satisfy the conditions prescribed in Articles 189, 190, 191, 192, 193 and 194 of this Law.
3. The exchange, transfer, lease, sub-lease, inheritance, donation, mortgage of land use rights, capital contribution with land use rights must be registered at the land registration agency and take effect. from the time of registration in the cadastral book.
[2] Point d, Clause 4, Article 3, Decree No. 65/2013/ND-CP dated June 27, 2013 stipulating taxable income of individuals from real estate transfer in any form, of which has “including income from the authorization of real estate management that the authorized person has the right to transfer real estate or has the same rights as the owner of real estate in accordance with the law.”.
Source of Electronic People’s Court Journal (http://tapchitoaan.vn).
