Foreigners Permitted To Purchase Limited Ownership Of Land-Use Rights – Amended Lao Land Law

Source: VDB/Loi

Today sees the entry into force of the new Law on Land No. 70/NA dated 21 June 2019 (the “2019 Land Law”), which among other things, includes new provisions concerning the limited ownership of land-use rights by foreigners under certain circumstances, and the limited ownership of individual units in a condominium or apartment building. This replaces the old law, which dates back to 2003.  We have outlined below some key new provisions of the 2019 Land Law:

Foreign Ownership of Land-Use Rights

Foreigners are now permitted to purchase from the Government of the Lao PDR a limited ownership of land-use rights over state land for a period of up to 50 years, extendable (“Temporary Ownership”). The Temporary Ownership is permitted only for the specific purpose of the development of condominiums, apartment buildings, or other residential or commercial complexes. While Temporary Ownership applies to Lao nationals as well, we expect that they will be less likely to avail it since they are entitled to hold the more attractive permanent land-use rights.


Legal rights under Temporary Ownership

Temporary Ownership means that foreign developers will no longer have access to land only through concessions and leases. In addition, they will have the legal right to transfer, mortgage, or bequeath their rights over the land and the buildings on it, albeit only for the remaining term of the Temporary Ownership. More importantly, they will have the right to sell or transfer ownership rights in the individual units of a building to potential buyers (both Lao and foreigners). We understand that these provisions are aimed at allowing private developers to use state land to develop state-of-the-art condominiums and commercial buildings and sell or lease the individual units (ownership of the individual units is discussed in the next section). As you may have discerned from the above, foreigners cannot purchase limited ownership rights over private land from a Lao national.

Additional registration requirement

Foreign developers who purchase Temporary Ownership to construct a condominium or apartment building, must, in addition to obtaining an investment license and a construction license, register the land as “Condominium Construction Land” with the concerned land management authority prior to commencement of construction.


Ownership of Individual Units in a Condominium or Apartment Building

The 2019 Land Law entitles both Lao and foreign nationals to purchase individual units of a building with the right to use, sell, lease, mortgage, and bequeath the ownership of the unit in a manner similar to the alienation of permanent land-use rights of land that is privately owned by a Lao national. However, the ownership of an individual unit is not perpetual.

Per our understanding, the term of ownership of the individual units depends on the nature of the ownership of the construction land. On that basis, the ownership of individual units can broadly be categorized into the following types:

The seller is a Lao developer with ownership of the construction land

In such a case, both Lao nationals and foreigners can purchase individual units for the duration of the lifespan of the units. The term “lifespan” has not been defined under the 2019 Land Law, and therefore, it is not clear whether it refers to the actual lifespan of the unit, the expected lifespan of the unit as specified in the design or construction plan, or the mutually agreed lifespan of the unit in the sale and purchase contract.

The seller is a Lao or foreign developer with Temporary Ownership

Although the 2019 Land Law states that the purchaser of an individual unit from a seller with Temporary Ownership enjoys ownership rights up to the lifespan of the unit, it is not clear whether the actual ownership rights of the individual unit purchaser can be more than the period of Temporary Ownership (which is a maximum of 50 years from the date of gaining ownership rights, including the construction period). It is likely that in such cases, the civil law principle: “one cannot transfer more rights in a thing than one has” (Nemo dat quod non habet; nemo plus iuris ad alium transferre potest quam ipse habet) will apply, and the duration of the ownership of the individual unit will be limited to the remaining period of Temporary Ownership.

Purchasers of the individual units must register their ownership with the concerned Lao land management authority.

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Other provisions

Unlike the old law, the 2019 Land Law no longer discriminates by nationality or residency status when it comes to the length of leases and concessions of state land, which can now be for up to 50 years for all lessees and concessionaires, depending on the nature, size, and specifics of the project or business. Furthermore, such leases and concessions will now have to undergo a bidding process, although the new law gives little detail as to how this is to take place.

In addition to the aforesaid new provisions, the 2019 Land Law provides for a new computerized national land ownership database, which can be accessed by the general public for a small fee.

This article is intended to provide an overview of the new land legislation of the Lao PDR for general purposes only and therefore, the contents herein must not be construed as legal advice or as a substitute for legal advice for any specific matter or situation.

We will be providing further insights into the new 2019 Land Law as we see it put into practice, and will report on any relevant subordinate legislation as it comes out. For more information on the 2019 Land Law, or for any other queries about the legal and regulatory environment in the Lao PDR, please feel free to contact us at the VDB Loi Laos office: Daodeuane Duangdara (daodeuane.duangdara@vdb-loi.com), Sornpheth Douangdy (sornpheth.douangdy@vdb-loi.com), Sibasish Mohapatra (Sibasish.mohapatra@vdb-loi.com).

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