Why Are Condotel Purchasers Not Recognised as
Consumers?
Tran Nguyen Phuoc Thong
According to an announcement by the Vietnam
Competition and Consumer Authority under the Ministry of Industry and Trade,
purchasers of condotel units or tourist apartments are not regarded as
consumers and therefore fall outside the scope of application of the Law on
Protection of Consumers’ Rights. This position raises the question of why such
a determination has been made.
Condotels Are Not Intended for Residential Use
The first reason lies in the intrinsic nature of the
condotel. In Viet Nam, most condotel projects are developed under a hotel
apartment model, whereby ownership is granted on a unit by unit basis in a
manner similar to conventional apartments.
Owners of individual units are entitled either to hand
over their units to a professional management entity for leasing purposes or to
exercise possession of the units themselves. In practice, however, the vast
majority of owners entrust their units to the management operator, as their
primary purpose in acquiring this type of real estate is not permanent
residence but rather leisure use, investment and the perception of the unit as
a second home.
This real estate product has long been recognised in
many jurisdictions and has generated highly successful financial projects in
parts of South America and Europe over recent years.
The management entity is responsible for marketing the
hotel apartments to customers, ensuring booking operations and providing
ancillary services in accordance with standard hotel practices.
Meanwhile, individual unit owners are obliged to pay
monthly management fees, taxes and insurance costs, in return for which they
receive an agreed percentage of profits derived from the hotel leasing
business.
With respect to the purchasers’ objectives, it is
evident that few acquire such hotel apartments with the intention of using them
as permanent residences. Under the laws of most countries, as well as under the
project management agreements concluded between developers and purchasers,
owners are typically permitted to occupy their units for only a limited number
of days each year, commonly around ninety days, in their capacity as residents
of the complex.
Because the purpose of condotels is not residential
living or consumption, purchasers of condotel units are therefore not
considered subjects governed by the Law on Protection of Consumers’ Rights.
Existing Interim Safeguards for Condotel Transactions
The second reason concerns the purpose of the contract
for the transfer of ownership of a condotel unit. Such a contract represents an
agreement whereby the transferor conveys ownership of the asset to the
transferee, and the transferee pays the corresponding consideration.
The purpose of entering into this contract is to place
the unit into a leasing programme in order to generate profits, rather than to
serve daily living or consumption needs.
Rental income is regarded as profit from the
developer’s hotel leasing business, with the developer acting as the operator
of the resort. From this perspective, the arrangement may be understood as an
investment fund structure based on the agreement between the unit owner and the
project developer.
These characteristics render condotels highly
flexible, enable rapid capital mobilisation and allow for multiple objectives
to be pursued simultaneously, without requiring owners to appoint alternative
managers, since a professional hotel management team is already in place.
Accordingly, condotels constitute a highly mobile
asset in terms of both transferability and profitability. It is therefore
reasonable that transferees of condotel ownership are not treated as consumers,
as investors, upon acquiring ownership, utilise the property for commercial and
business purposes rather than for consumption.
Furthermore, disputes arising from contracts for the
transfer of condotel ownership are resolved in accordance with civil law.
For example, where a dispute arises concerning the
validity of a contract, reference must be made to Article 401 of the Civil Code
2015 to determine the time of contract formation or the applicability of any
statutory exceptions.
In the case of condotel ownership transfer contracts,
civil law directs attention to specialised legislation containing specific
provisions, namely housing law and real estate business law, under which the
contract is deemed effective at the time of notarisation. If a notarised
contract gives rise to a dispute, it constitutes a dispute over a valid
contract. Conversely, where a contract has been signed but not notarised, any
dispute concerns an invalid contract.
If a document bears the signature of only one party,
no contract is deemed to exist. The resolution of disputes in cases where no
contract has been formed does not apply rules on invalid contracts, but rather
other provisions governing civil obligations.
In conclusion, owing to the nature of condotels and
the legal character of contracts transferring condotel ownership, the legal
status of transferees is treated as a specialised category. This leads to the
conclusion that purchasers of this type of property do not fall within the
scope of consumer protection legislation.
In other words, condotel transactions possess
distinctive features when examined across different stages of ownership and in
light of the specific purposes and legal significance of each stage. Although
there is currently no dedicated statute governing this issue, civil law,
housing law and real estate business law continue to provide interim legal
mechanisms to safeguard transactions involving this form of real estate.