Lawyer Nguyen Thi Anh Huong
Lawyer Doan Van Tiep
The Land Law and its guidelines for implementation stipulate the principles and conditions for subdivision of a land area, pursuant to which the provincial people’s committee shall decide on subdivision of a minimum land area. However, in practice, there are several cases in which parties agree to transfer, donate, contribute capital, or inherit, part of the land use rights but such part does not meet the minimum area conditions for subdivision. This results in the inability to proceed with the related administrative procedures and gives rise to disputes.
Court’s practical adjudication
The court’s practical adjudication shows that in cases where disputes arise due to agreements failing to meet the minimum land subdivision area, the court shall review and decide in compliance with the provisions of the land law, civil code. For disputes governed by the 2013 Land Law, the court shall take Article 29.2 of Decree 43/2014/ND-CP as basis for resolution, which stipulates that if the parties agree to subdivide a registered land parcel that has been issued a land use rights certificate into two or more parcels, and at least one of these parcels has an area smaller than the minimum area specified by the provincial people’s committee, such agreements shall not be notarized, authenticated, or issued land use right certificates, ownership of houses, and other assets attached to the land, nor can the procedures be prepared to have the land use rights exercised by the land users((Decree 43/2014/ND-CP
Article 29. Issuance of Certificates of Land Use Rights, Ownership of Houses, and Other Assets Attached to the Land for Cases Where the Land Parcel Area is Smaller than the Minimum Area
1. Land parcels currently in use that were formed before the provincial People’s Committee’s regulations on minimum subdivision area took effect, and whose area is smaller than the minimum area stipulated by the provincial People’s Committee but meet the conditions for issuing a certificate of land use rights, ownership of houses, and other assets attached to the land, shall have the certificate issued to the current land user.
2. Notarization, authentication, and issuance of certificates of land use rights, ownership of houses, and other assets attached to the land are prohibited in cases where registered land that has been issued a certificate is divided into two or more parcels, with at least one parcel being smaller than the minimum area as stipulated by the provincial People’s Committee.
3. In cases where a land user requests to subdivide land into parcels smaller than the minimum area while also requesting to merge that parcel with an adjacent parcel to create a new parcel with an area equal to or greater than the minimum subdivision area, the subdivision may be permitted simultaneously with the merger, and a certificate of land use rights, ownership of houses, and other assets attached to the land will be issued for the new parcel)). Article 146 of the 2024 Land Law specifies that in cases where a registered land parcel, which has been issued a land use rights certificate or a house ownership and land use rights certificate, is subdivided into two or more parcels, and at least one of these parcels has an area smaller than the minimum subdivision area as stipulated in Article 220 of the Land Law, then the certificate of land use rights and ownership of assets attached to the land shall not be issued(( Land Law 2024:
Article 146. Issuance of Certificates of Land Use Rights and Ownership of Assets Attached to Land for Cases Where the Land Parcel Area is Smaller than the Minimum Area
1. Land parcels currently in use that were formed before the effective date of the provincial People’s Committee’s regulations on minimum subdivision area—yet whose area is smaller than the minimum stipulated—shall be issued certificates of land use rights and ownership of attached assets if they meet the conditions for such issuance.
2. Certificates of land use rights and ownership of house and attached assets shall not be issued in cases where registered land, which has already been issued a certificate, is voluntarily divided into two or more parcels, with at least one parcel being smaller than the minimum subdivision area as specified in Article 220 of this Law.
3. If a land parcel has been issued a certificate of land use rights or a certificate of land use rights, ownership of houses, and attached assets and the land user wishes to subdivide or merge the parcel, and if all conditions stipulated in Article 220 of this Law are met , certificates of land use rights and ownership of attached assets shall be issued.)).
Agreements to subdivide a land area into two or more parcels, at least one of which has an area smaller than the minimum area stipulated by the provincial people’s committee, may be declared invalid by the court due to its unenforceability as provided by Article 411 of the Civil Code 2005((Civil Code 2005
Article 411. Invalidity of Civil Contracts Due to Non-Enforceable Subject Matter
1. If a contract has a subject matter that cannot be enforced from the time of signing due to objective reasons, the contract is invalid.
2. If, at the time of entering into the contract, one party knows or should know that the contract has a non-enforceable subject matter but does not inform the other party, and the other party enters into the contract, the first party must compensate the other party for damages, unless the other party knows or should know that the subject matter is non-performable.
3. The provisions of this paragraph also apply in cases where the contract has one or more parts of the subject matter that cannot be enforced, but the remaining part of the contract is still legally valid)) and Article 408 of the Civil Code 2015((Civil Code 2005
Article 408. Invalidity of Contracts Due to Non-Enforceable Subject Matter
1. If a contract has a subject matter that cannot be enforced from the time of signing, the contract is invalid.
2. If, at the time of entering into the contract, one party knows or should know that the contract has a non-enforceable subject matter but does not inform the other party, and the other party enters into the contract, the first party must compensate the other party for damages, unless the other party knows or should know that the subject matter is non-performable.
3. The provisions of paragraphs 1 and 2 of this article also apply in cases where the contract has one or more parts of the subject matter that cannot be enforced, but the remaining part of the contract is still valid.)). Likewise, some courts have determined that such agreements between the parties are void due to a violation of prohibitions by law, as stipulated in Article 128 of the Civil Code 2005((Civil Code 2005
Article 128. Invalidity of Civil Transactions Due to Violating Legal Prohibitions and Social Morality
Civil transactions with purposes or contents that violate legal prohibitions or social morality are invalid. Legal prohibitions refer to regulations that do not allow subjects to perform certain acts.
[…])) or Article 123 of the 2015 Civil Code((Civil Code 2005Article 123. Invalidity of Civil Transactions Due to Violating Legal Prohibitions and Social Morality
Civil transactions that have purposes or contents violating legal prohibitions or social morality are invalid. Legal prohibitions are defined as the regulations that do not allow. […]))
The following practical adjudications illustrate the court’s approach in declaring agreements invalid due to its unenforceability and/or violations of prohibitions prescribed by law. For example:
Judgment No. 415/2018/DS-PT
Judgment No. 415/2018/DS-PT dated April 23, 2018, by the People’s Court of Ho Chi Minh City regarding a dispute over a house purchase contract between Ms. O (Plaintiff) and Ms. L (Defendant)((https://thuvienphapluat.vn/banan/ban-an/ban-an-4152018dspt-ngay-23042018-ve-tranh-chap-hop-dong-mua-ban-nha-115454))
According to the judgment, Ms. L signed a contract to sell part of her house to Ms. O with an area of 58.54 m² at an amount of VND2,100,000,000. After signing the contract, Ms. O paid Ms. L VND1,600,000,000 and took possession of the house, with the remaining amount to be paid after the subdivision and transfer of ownership to Ms. O’s name. However, the subdivision could not be completed because the remaining portion of the house did not meet the minimum area required for subdivision. Ms. O filed a lawsuit requesting Ms. L to continue complying with the contract by completing the procedures for subdivision and transferring ownership of the house, as well as fulfilling payment of the remaining amount of VND500,000,000. In Civil Judgment No. 67/2018/DS-ST dated January 29, 2018, the first-instance court accepted the lawsuit. The appellate court determined that the subdivision could not be completed because the remaining portion of the house – 96 m² less 58.5 m², equaling 37.5 m² (reduced further to 25.2m² after accounting for setback line) – did not meet the minimum area required for subdivision as stipulated in Article 5.1(b) of Decision No. 60/2017/QĐ-UBND dated December 5, 2017, of the People’s Committee of Ho Chi Minh City (which prescribes a minimum subdivision area of 36m² in this area and a minimum frontage width of 3m). Consequently, the appellate court determined that the deposit and house purchase contract dated May 20, 2010, between Ms. L and Ms. O became invalid and unenforceable right at the time of its execution pursuant to Article 411 of the Civil Code 2005.
Judgment 881/2019/DS-PT
Judgment 881/2019/DS-PT dated October 9, 2019, by the People’s Court of Ho Chi Minh City regarding a dispute over a deposit contract between Mr. C Ms. T (Plaintiffs) and Mr. H and Ms. U (Defendants)((https://thuvienphapluat.vn/banan/ban-an/ban-an-8812019dspt-ngay-09102019-ve-tranh-chap-hop-dong-dat-coc-112759))
According to the judgment, on July 29, 2017, the Plaintiffs and Defendants signed a deposit contract for the transfer of land use rights for a portion of land measuring 60 m² (5 m x 12 m) from plot No. 583, map sheet number 19, with an agreed price of VND22,000,000 per square meter, with a total value of VND1,320,000,000. The period for fulfilling the contract was three months from the date of signing the deposit contract (if the subdivision of the land plot and notarization were completed before three months, payment would be made according to such completion). However, after signing the deposit contract, the Plaintiffs submitted an application for subdivision approval, which was rejected by the District A Branch of the Land Registration Office. The rejection was based on the reason that the frontage of the land plot did not meet the minimum length required for subdivision as regulated by the People’s Committee of Ho Chi Minh City.
The Plaintiffs filed a lawsuit requesting the court to annul the deposit contract for the transfer of the land use rights signed on July 29, 2017, and to order Mr. H and Ms. U to return the deposit of VND600,000,000, along with interest based on the basic interest rate set by the State Bank of Vietnam for the deposit amount. In Civil Judgment No. 19/2019/DS-ST dated June 11, 2019, the District A People’s Court, Ho Chi Minh City, decided to accept the Plaintiffs’ claim and declared the deposit contract for the transfer of land use rights signed on July 29, 2017, as null and void. On June 25, 2019, the Defendants appealed the entire first-instance judgment. The appellate court reviewed the case and concluded: Based on the current status map – location prepared by the Mapping Center of the Ho Chi Minh City Department of Natural Resources and Environment on November 19, 2018, the land area for which the parties placed a deposit for transfer had a frontage of 1.98 meters facing an existing alley. At the time the parties signed the deposit contract, the minimum area for subdivision was governed by Article 3.1(b) of Decision No. 33/2014/QĐ-UBND dated October 15, 2014, of the People’s Committee of Ho Chi Minh City, which states: “The newly formed land parcel and the remaining land parcel, after deducting the road demarcation, must meet the following minimum requirements: for land without a house, the minimum area is 80 m² with a frontage of at least 5 m; for land with an existing house, the minimum area is 50 m² with a frontage of at least 4 m.” Therefore, the land parcel agreed for transfer under the deposit contract dated July 29, 2017, with a frontage width of 1.98 m, did not meet the required conditions for land subdivision.
Consequently, the appellate court determined that the deposit contract for transfer of the land use rights dated July 29, 2017, was null and void due to its unenforceability as stipulated in Article 408.1 of the 2015 Civil Code.
Judgment No. 17/2017/DS-ST
Judgment No. 17/2017/DS-ST dated August 11, 2017, of the People’s Court of Dat Do District regarding a dispute over a land use rights transfer contract between Ms. N (Plaintiff) and Ms. X (Defendant)((https://thuvienphapluat.vn/banan/ban-an/ban-an-172017dsst-ngay-11082017-ve-tranh-chap-hop-dong-chuyen-nhuong-quyen-su-dung-dat-46661))
Subject to the judgment, on February 3, 2004, the Defendant signed a handwritten document to transfer half of a land parcel with an area of 4 m x 20 m = 80 m² to the Plaintiff for the price of VND15,000,000. In early 2016, when the Plaintiff prepared to build a house for her child on the land, the Defendant intervened, stating her willingness to return VND50,000,000 to the Plaintiff, but the Plaintiff refused. The Plaintiff filed a lawsuit requesting the court to recognize the contract by ordering the Defendant to hand over the land. On May 5, 2017, the Plaintiff submitted an additional petition asking the Court to resolve the consequences if the contract was declared invalid, and order the Defendant to return the previously promised amount of VND50,000,000. The trial penal referred to Clause 4(a) of Decision No. 59/2014/QD-UBND dated November 28, 2014, of the People’s Committee of Ba Ria – Vung Tau Province, which stipulates that the minimum area required for subdivision of land parcels in the province must be at least 100 m² with a minimum width of 5 m. The trial penal determined that the contract violated the prohibitions of the law because the agreed-upon land parcel subdivision was smaller than the minimum area stipulated in Decision No. 59/2014/QD-UBND. Besides, the contract was deemed invalid in terms of its form due to several other reasons.
Draft Precedent No. 10/2024
Draft Precedent No. 10/2024 regarding the agreement on the division of inherited assets in the form of land use rights that violates the regulations on land parcel subdivision conditions:
Draft Precedent No. 10/2024 is based on the Cassation Decision No. 163/2023/DS- GĐT dated August 10, 2023, concerning the “Inheritance Dispute,” issued by the High People’s Court in Ho Chi Minh City.
In this case, the parties involved in the inheritance dispute reached an agreement to resolve the case. The People’s Court of Vinh Long Province issued First-instance Decision No. 39/2021/QDST-DS dated November 24, 2021, recognizing the parties’ agreement. Subject to the agreement, the inherited land portions were divided among the heirs, but the areas of the divided land parcels failed to meet the minimum area required for subdivision as stipulated in Decision No. 27/2021/QD-UBND dated November 1, 2021, of the People’s Committee of Vinh Long Province. This decision specifies the minimum area thresholds for land area subdivision applicable to various land categories within Vinh Long Province. On July 14, 2023, the Chief Justice of the High People’s Court in Ho Chi Minh City issued Decision No. 61/2023/KN-DS to lodge a cassation protest against the First-instance Decision No. 39/2021/QDST-DS of the People’s Court of Vinh Long City. In Cassation Decision No. 163/2023/DS-GDT dated August 10, 2023, the cassation panel concluded that the agreement reached by the parties violated the prohibitions under the law. The recognition by the People’s Court of Vinh Long City of such parties’ agreement was deemed improper. And it was necessary to annul the decision recognizing the agreement of the parties and re-adjudicate the case.
In the case proposed for precedent, the parties agreed to divide the inherited estate consisting of land use rights for land parcels that did not meet the minimum area required for subdivision as permitted by the Decision of the provincial People’s Committee on the minimum area thresholds for land area subdivision for each land category. Therefore, the cassation panel reasoned that such an agreement constituted a case of “violating the prohibitions under the law”, and the court declined to recognize the parties’ agreement in this instance.
On September 10, 2024, the Supreme People’s Court issued Official Letter No. 163/TANDTC-PC((https://thuvienphapluat.vn/cong-van/Thu-tuc-To-tung/Cong-van-163-TANDTC-PC-2024-giai-dap-vuong-mac-trong-xet-xu-625374.aspx)) providing guidelines for resolving certain issues in adjudication. In Section 15 of Part IV, a similar issue was addressed regarding the matter of “The land use rights transfer contract was not notarized nor authenticated due to violations of the conditions for land subdivision. If the transferee has however fulfilled two-thirds of their obligations or has paid the full amount to the transferor and has constructed a house on the transferred land without facing any local government enforcement actions, will the court recognize the land use rights transfer contract in this case?” The Supreme People’s Court based its decision on Article 29 of Decree No. 43/2014/ND-CP and Article 146 of the 2024 Land Law to resolve the issue as follows: “In the aforementioned case, the court will only recognize the validity of the civil transaction if the land parcel meets the conditions specified in Clause 1 and Clause 3 of Article 29 of Decree No. 43/2014/ND-CP or Clause 1 and Clause 3 of Article 146 of the 2024 Land Law. If the land parcel falls under the circumstances specified in Clause 2 of Article 29 of Decree No. 43/2014/ND-CP or Clause 2 of Article 146 of the 2024 Land Law, the court will declare the land use rights transfer contract invalid”. The Supreme People’s Court’s approach is that it will not recognize the validity of land use rights transfer contract that violates the conditions for land subdivision, even if the contract has fulfilled two-thirds of the obligations, or payment has been made in full to the transferor, and the transferee has constructed a house on the transferred land without any local government enforcement actions.
Conclusion
Although Draft Precedent No. 10/2024 and Official Letter No. 163/TANDTC-PC have not yet clearly addressed whether the court shall declare the aforementioned agreement invalid solely based on violations of the prohibitions under the law, or if the agreement can be invalidated due to its unenforceable subject matter, these documents have clarified the court’s direction in adjudication. Specifically, in disputes where the parties agree to transfer, donate, contribute capital, or inherit, etc., and the agreement does not meet the minimum land area required for subdivision, the agreement will be declared invalid due to violation of the prohibitions under the law, specifically under Article 29.2 of Decree No. 43/2014/ND-CP or Article 146.2 of the 2024 Land Law.
