Land auctions need mechanisms with sufficient “scope”

Vietstock – Land auctions need mechanisms with sufficient “scope”

A number of recent pile demolition cases have shown that there are still many loopholes in the land auction mechanism that need to be fixed.

* Ho Chi Minh City will continue to auction Thu Thiem land

In fact, there are still many ambiguities in the current legal and regulatory system related to land auction activities, and even the contents are overlapping and contradictory.

Land auction loophole

The conflict between the 2013 Land Law and the 2013 Bidding and Bidding Law regarding the selection of investors through land auctions and tenders for land use rights-related projects is an example.

The 2013 Tender Law does not explicitly regulate the bidding of any type of land (cleared or not), but only regulates the cases, sequence and procedures for project bidding. At the same time, the 2013 Land Law regulates land use rights auction cases. However, these two laws do not have unified provisions on whether projects require bidding or whether land use rights must be auctioned. Or if the land use rights have already been auctioned, do we still have to bid for the project?

Regarding the auction procedures, although the regulations are open and transparent, many auctions do not guarantee openness, or “create difficulties” during the submission stage, so there is a situation where only one applicant is qualified. According to Article 118 of the 2013 Land Law, land will be allocated without auction.

There are also many loopholes in auction prices, which largely depend on the wishes of a few people, causing huge losses to the national budget and a waste of land resources. At present, the issue of land valuation and price grading is the issue that attracts the most attention in the 2013 revision of the Land Law.

In particular, there are cases where auction participants do not have sufficient financial resources. The current Asset Auction Law does not provide for determining the financial resources of auction participants, leading to situations where auctions are used to disrupt the land market, or auctions are conducted in the name of individuals with insufficient financial resources. There are many cases where the company completely relies on bank guarantees, or gives up the deposit without easy recovery, or the project implementation is very delayed after winning the bid.

If these loopholes are not dealt with in a timely manner, there will still be situations in the market where investors use land use rights auctions to establish “virtual” land price levels for the purpose of speculation, illegal profiteering, or to “inflate” the actual value. Real estate assets, especially bank mortgages, are used to borrow more money, “squeeze” the bank, or increase the value of bonds, or increase the value of stocks on the stock exchange.

What’s more serious is that the auction stage may be exploited to misappropriate black money or launder money, resulting in the auction assets being delayed, extended or used for wrong purposes, as was the case with Chen Huangming.

Solutions to “close” the gap

In order to overcome this situation, it is necessary to consider amending and supplementing many provisions of the Asset Auction Law of 2016 to strictly stipulate that investors participating in the auction must have financial ability and do not violate the prescribed conditions. It is not allowed to have the unreasonable situation of investors paying only a low “deposit” but paying several times the winning bid in the auction.

In addition, the “Land Valuation Principles” were revised to determine the “winning bid price in the auction of land use rights” as one of the reference sources of land price information, and the land valuation was carried out in accordance with the “price determination” principle. Be consistent with current land prices in the market. Because point c of Article 1 of the 2013 Land Law stipulates: “The winning bid price at the auction of land use rights at the site where the land use rights are auctioned” is based on the principle of “land valuation is based on the prevailing land price in the market.” “.

The addition of this provision will lay a sufficient legal foundation for promoting the effective and healthy development of auction activities and help improve the effectiveness and efficiency of the country’s management of current auction activities.

The ability of auction participants can be determined based on factors such as project size, corporate financial capacity, experience in implementing similar projects, and whether legal constraints are required. What laws and responsibilities are there after the auction? At the same time, it is necessary to unify the evaluation criteria for the ability of auction participants and the responsibilities of the project in the Bidding and Bidding Law, the Asset Auction Law, laws, regulations, and other relevant laws. Decide……

However, in addition to the advantages, coupled with the condition of financial ability, auction participants will be those who may face immediate difficulties in completing the formalities and preparing documents.

Attorney Ruan Ngoc Hung – Director of Connection Law Office