Real Estate

Is Buying and Selling More Than 10 Properties in a Year a Red Flag for Individuals?

"The legal experts assert that the regulations on criteria and scale limits for small-scale real estate businesses are valid, lawful, and practical. However, they emphasize the need to clarify several issues to effectively monitor and curb individuals from exceeding the prescribed small-scale business limits."

Administrator

7 August, 2024

New Criteria for Small-Scale Real Estate Business

Article 7 of Decree 96/2024/ND-CP (referred to as Decree 96, effective from August 1) details and guides the implementation of the 2023 Law on Real Estate Business, outlining the criteria for small-scale real estate business, as well as activities that are not considered business or fall below the small-scale threshold.

According to the decree, individuals engaging in small-scale real estate business must meet the following requirements: They must not fall under the category of having to establish an investment project as per the construction and housing laws. The value of a single transaction must not exceed VND 300 billion, and the number of transactions must not be more than 10 times a year. In the case of a single transaction in a year, the value is not taken into account.

A legal representative from a real estate company explained that, according to the above regulation, individuals engaged in real estate business, to be considered small-scale, must meet two conditions simultaneously: They must not be required to establish an investment project as per the construction and housing laws. The value of a single sale or transfer contract of real estate must not exceed VND 300 billion, and the number of sales or transfers must not be more than 10 times a year.

If an individual does not meet these criteria, they must establish a company to ensure they can legally operate in the real estate sector.

“This means that if an individual exceeds only one of the two criteria, they are still considered small-scale. Specifically, in the case where the value of a single transaction exceeds VND 300 billion, but the total number of sales or transfers in a year does not exceed 10 times. Or, in the case where the value of a single transaction is below VND 300 billion, but the total number of sales or transfers in a year exceeds 10 times,” the representative analyzed.

Tightening the conditions for real estate business entities helps enhance state management and promote a stable and healthy market. Illustrative image: Hong Khanh

According to the company’s legal representative, Article 38 of Decree 96 stipulates that these regulations only apply to real estate that individuals sign contracts to buy and sell, including future real estate in projects from August 1, 2024, onwards.

For real estate that individuals have already signed contracts to buy and sell, including future real estate in projects before August 1, these above-mentioned regulations do not apply.

Tightening Conditions for Real Estate Business Entities Is Necessary

Speaking to VietNamNet, real estate legal expert Nguyen Van Dinh affirmed that, first and foremost, it is important to emphasize that real estate business is one of the more than 200 sectors and fields that require business conditions according to the Investment Law.

Real estate is a unique and complex field, requiring deep knowledge in various legal, financial, market, and construction aspects. It also poses risks to the business entity itself, as well as related entities, including customers and state management agencies.

“Tightening the conditions for real estate business entities is necessary. Entities involved in real estate transactions should also be subject to strict state management, including periodic reporting on transactions and disclosure of information to help the state build a real estate market database, enhance state management, promote market stability and health, and curb fraudulent and price-manipulating behaviors,” said Dinh.

Citing the case of Nguyen Thai Luyen and accomplices (commonly known as the “Alibaba case”), the expert pointed out loopholes in the legal system that failed to clearly define when entities engaged in real estate sales and transfers would have to establish an economic organization and comply with the Law on Real Estate Business, and what scale would require them to operate as individuals.

“As a result, the defendants in the case were able to carry out procedures for land subdivision and transfer of large-scale real estate in their personal capacity,” Dinh explained.

“Therefore, the law needs to define what constitutes a small-scale real estate business, and if that scale is exceeded, the business entity must establish an economic organization and comply with the Law on Real Estate Business to maintain social order and safety and protect the rights and interests of all involved parties,” he added.

The expert also raised the question of ensuring compliance with Decree 96. Specifically, how can we monitor and regulate individuals who exceed the small-scale business threshold? What sanctions will be imposed? And if an individual deliberately buys and sells real estate beyond the small-scale limit (for example, buying and selling more than 10 houses in a year), will the transactions exceeding the limit be considered invalid? What are the legal consequences?

“Clarifying these issues is crucial for entities to effectively apply the regulations and for Decree 96 to truly come into force,” concluded Dinh.

Hong Khanh