Thinking about buying or selling property in Vietnam, but you are not physically here? Wondering if you can transfer a property with a Sales and Purchase Agreement? Can these be done?

Yes! All of the above can be achieved through a Power of Attorney (POA or authorization) contract. This article will explain how the POA contract works, the structure of the contract, its legal value, and the potential risks involved with buying and selling real estate with it.

What is a Power of Attorney (POA) contract?

A POA contract is used by a person (the authorizer) to appoint another party (the authorized) to act on their behalf. Here, we are looking at using POA/ full POA contracts specifically in the real estate market in Vietnam.

In this regard, a full POA means the authorizer gives the authorized all rights that the former has related to the property, it could include:

Acquiring the property

Buying or selling the property

Pledging or mortgaging the property

Paying debts related to property

Many transactions in the real estate market take advantage of the POA contract to transfer properties.

Advantages of using a POA contract

Transferring properties via POA contracts have become increasingly common; it has many advantages, such as:

A simpler and faster procedure that is also cost effective as the authorizer does not have to be physically present for future dealings with the property. The authorized will be the one to keep all the original documents, such as the pink book or the SPA contract (if applicable).

The owner of the property can “sell” or rather transfer the property to the authorized person without officially changing the ownership status of the property - this is a time saving measure as it takes about 1.5 to 2 months to change the ownership status on the pink book.

The first transfer of the property via a POA contract does not incur the authorizer to pay personal income tax.

Disadvantages of using a POA contract

There are risks and disadvantages involved with using a POA contract, including the following:

Lack of full legal value: As mentioned above, with a POA contract, the owner of the property can “sell” or rather transfer the property to the authorized person without officially changing the ownership status of the property on the pink book - thus the transfer does not come with full legal value. Should any disputes arise, the official owner of the property may be legally liable.

Potential double personal income tax payment: While the first transfer of the property via a POA contract does not incur the authorizer to pay personal income tax (PIT), should there be subsequent transfers of that property, PIT will have to be paid on all transfers including those by the previous sellers i.e. when original owner A transfers her property to Person B via a POA contract, Person A does not need to pay PIT. However, if Person B transfers or sells the property to Person C,  Person B will now have to pay PIT for both Person A and Person B. (Note: PIT is 2% of the value of the house on each transaction, thus Person B will be liable for 4%, from Person A’s transfer to Person B, and Person B’s transfer to Person C. The exception to paying double PIT is when Person A and Person B, or Person B and Person C, are family members under the same household registration.)

Other things to keep in mind when using a full POA contract

Here are a few tips to keep in mind if you are considering using a full POA contract. In general:

• Keep a copy of all parties’ ID number and household registration for future reference
• The term of the POA contract should be 20 years or more to protect your rights
• Regarding the aforementioned double PIT - remember to keep 2% of the value of the house from the first transfer (Person A to Person B), in case of a second transfer (Person B to Person C)
• The POA contract can be terminated in the following cases:
• The POA contract expires
• The work has been completed
• The authorizer or the authorized terminates the contract
• The authorizer or the authorized passes away, loses capacity for civil acts, or has their civil act capacity limited

As the authorizer/original owner of the property (Person A), you may want to include in the contract that the authorized is also allowed to use a POA to transfer the property to a third person (Person C)

As the authorized/second “owner” of the property (Person B):

If you are using a full POA contract to receive a property from the original owner (Person A), should you not resell it in 2 years’ time, it might be wise to change the official owner of the property on the pink book to your own name, i.e. Person B might want to officially change the ownership name on the pink book from Person A to Person B

As Person B, you should keep all documents of the sale process and money transactions.

Structure of a POA contract

Now that we have gone over the advantages, disadvantages, and potential risks associated with a full POA contract, let us dive into its structure.

The exact authorization contract that you use may be different from the example below, however the content will be largely similar.

For the purpose of explaining the document, let us imagine you are the owner of a property, and you are using the following POA contract to authorize your friend as your representative.

1. Information of the Authorizer and the Authorized

The first section of the authorization contract includes your and your friend’s personal information. In this section, input the following:

• Full name
• Date of birth
• ID/CCDC/Passport number and date of issue
• Permanent address and household registration                

2. Article 1: Basis of authorization

This section will help you to clarify which assets are authorized assets. The information comes from your pink book. This might include:

• The parcel of land
• Information of the owner
• Address
• Land area
• Other assets attached on land, etc.                                                                                  

3. Article 2: Terms and conditions

Here you will state the rights that you want to assign to your friend. Depending on your aims, this section may include:

• Authorization to pay taxes
• Authorization to mortgage the house
• Authorization to pay interest on loans, etc.

If the contract is a full POA contract, then article 2 will outline that your friend is authorized to have all rights that you have associated with the property, including the rights to buy, sell, transfer, etc.

4. Article 3: Authorization duration and remuneration

The authorization term refers to the specific length of time during which the contract will be in effect. The term can be decided mutually between the parties, otherwise the term would automatically be a year, as prescribed by the law.

On the issue of payment for your friend’s involvement as the authorized party, this too can be mutually decided between the two of you. Should the contract state that there is no remuneration, then you can terminate the contract at any point in accordance with the notice period. Should there be payment involved, you will have to make the payment to your friend should you decide to terminate the contract.

5. Article 4: The responsibilities of both parties

This section specifies the obligations and responsibilities of both parties, as mutually decided between you and your friend.      

‍6. Article 5: Method of dispute resolution

Here, the method of dispute resolution is stated. Generally, disputes are first settled via private negotiations. If an agreement cannot be reached by the two parties, it will be resolved in accordance with the law.                                                                                                                                        

7. Article 6: The final terms and the signatures of both parties

This section confirms that both parties have read, understood and agreed to all the rights and obligations written in the authorization contract. The two parties will sign the authorization contract. It will also be notarized by a notary officer, who will sign it and stamp it with a red stamp.

Conclusion

All transactions in the real estate market come with potential risks. It is vital to have the right paperwork to protect yourself. With our vast experience in real estate transactions in Vietnam, Homebase is here to help you find your ideal home! Please contact us for additional assistance by reaching us at (+84) 964 245 404 through Zalo/WA/phone or email at contact@gethomebase.com.

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