IMPORTANT NOTES WHEN CHANGING THE LAND USE PURPOSE

Changing the land use purpose is a familiar procedure, yet it carries significant financial risk if the land user does not correctly understand its legal nature. In practice, many people are only "caught off guard" upon receiving the financial obligation notice, when the amount payable turns out to be far higher than expected. The cause does not lie in administrative procedure, but in how the land price is determined, the timing at which the price list is applied and the method used to calculate the land use fee. The article below will help you fully and correctly understand these issues, so you can apply them right away before deciding to change the land use purpose.

What is a change of land use purpose? Why cant it be done "on a whim"?

A change of land use purpose is when a land user is permitted by the competent state authority to convert the currently registered land type into another type of land in accordance with the law. Every parcel of land has a clearly defined use purpose stated on its Certificate, such as residential land, perennial-crop land, rice-cultivation land or commercial-service land.

Using land for a purpose other than the one stated on the Certificate is not only a legal violation but also triggers a series of consequences: construction permits cannot be issued, as-built certification cannot be completed, transactions become difficult and access to bank credit is restricted. For this reason, changing the land use purpose is not a "minor procedure" but a mandatory legal step for anyone seeking to legally exploit and increase the value of their real estate.

An important point to understand is that changing the land use purpose is not an automatic right. Whether it is approved or not depends on the local land-use planning and land-use plan, as well as the decision of the competent authority. Being careless or misunderstanding this from the outset can cause the land user to pay a real financial price.

Cases where changing the land use purpose is mandatory

In practice, many people only think about changing the land use purpose when preparing to build a house. However, there are several situations in which carrying out this procedure is mandatory.

The most common case is building a house on land that is not designated as residential land. If the land use purpose has not been changed, the structure may be subject to penalties, be forced to be demolished or fail to receive as-built certification.

In transactions such as sales, gifts and bank mortgages, the land use purpose is a decisive factor. Many credit institutions only accept residential land as collateral; land that has not undergone a change of use purpose is often appraised at a lower value or fails to qualify for a loan.

In addition, when land-use planning changes and a parcel falls within an area now permitted to convert to residential land, but the land user has not carried out the procedure, applying for a construction permit or completing legal documentation will run into significant obstacles. Therefore, changing the land use purpose is not merely a personal need but also a condition for preserving the long-term value of the real estate.

Conditions for approval of a change of land use purpose

Not every parcel of land is eligible for a change of use purpose. The first and most important condition is that it must conform to the approved land-use planning and land-use plan. If the parcel does not fall within an area permitted for conversion, the application will be rejected regardless of the land users actual need.

In addition, the land must have a legitimate Land Use Right Certificate, be free of disputes and not be under judgment-enforcement seizure. This is a mandatory condition to ensure transparency and legal safety.

Finally, the land user must fully satisfy the financial obligations stated in the notice from the tax authority. Among these, the land use fee typically accounts for the largest share and is also the item that causes the most concern for people changing their land use purpose.

How the land use conversion fee is calculated: Why is the amount often "higher than expected"?

The land use fee for a change of purpose is not a fixed amount. It is determined based on the difference between the price of residential land and the price of the land before the conversion, according to either the official land price list or the specific land price decided by the provincial Peoples Committee at the time the conversion is permitted.

The most common mistake is confusing market price with the land price used as the basis for calculating the land use fee. In many cases, the specific land price determined through appraisal can be significantly higher than the land price list issued periodically.

In addition, the timing of application submission also has a direct impact on cost. If an application is received after a new land price list or adjustment coefficient takes effect, the amount payable can increase markedly. This is why two applications for the same parcel of land, submitted at two different points in time, can end up with very different financial obligations.

Common risks when changing the land use purpose without adequate preparation

Changing the land use purpose without careful preparation can lead to a number of risks. The most common is being subject to administrative penalties and being forced to restore the land to its original condition.

In civil transactions, land that has not been legally converted often has reduced value and may even be ineligible for transactions altogether. This causes direct losses for the land user, particularly for high-value real estate.

Even more concerning, if an application is delayed or requires repeated supplementation, the land user may become subject to a new, higher land price list, resulting in unexpected additional costs. This is a risk that can be entirely avoided by being proactive from the outset.

Appraisal - The decisive factor in controlling the cost of changing the land use purpose

Throughout the entire process of changing the land use purpose, land appraisal plays a pivotal role. Appraisal is not simply about arriving at a number - it is a comprehensive process of analyzing the legal status, planning, exploitation potential and actual value of the parcel of land.

An appraisal report carried out using the correct methodology gives the managing authority an appropriate basis for determining financial obligations, while also limiting the risk of an excessively high price being applied due to insufficient data or an incorrect methodology. Conversely, a superficial appraisal can leave the land user bearing unnecessary costs.

Solutions for controlling costs when changing the land use purpose

In practice, most cases where significant costs arise from changing the land use purpose stem from failing to correctly determine the land price used as the basis for calculating the land use fee from the very beginning. This is precisely why many individuals and businesses choose to work with Indochina International Appraisal for high-value applications involving complex legal issues related to changing the land use purpose.

Indochina International Appraisal approaches valuation as a comprehensive financial exercise, not merely a matter of "producing a number." Every application is fully analyzed in terms of planning, use purpose, exploitation potential and the appropriate valuation method, so as to accurately reflect the actual value of the land use right.

With a team of licensed valuers who have a deep understanding of land law and the mechanisms for applying land prices in each locality, Indochina International Appraisal provides independent, objective and legally valid appraisal certificates. This allows clients to proactively estimate their financial obligations before submitting an application, limit unexpected risks and shorten processing time.

Contact Indochina International Appraisal for fast, accurate and reasonably priced land appraisal at market value:

Indochina International Investment & Appraisal JSC (SunValue) 

• Address: Indochina International Appraisal System 

• Hotline/Zalo: 081 519 8877 

• Email: contact@sunvalue.vn 

• Facebook: Indochina International Investment & Appraisal 

• Website: inavn.vn

Conclusion

Changing the land use purpose is an important decision that directly affects the value and legal standing of real estate. Correctly understanding the regulations, clearly grasping how costs are calculated and proactively obtaining an appraisal from the outset will help land users avoid unnecessary risks. Amid increasingly stringent land policy, choosing an in-depth appraisal solution is the key to changing the land use purpose in a way that is lawful, effective and sustainable in the long run.