INCREASE DEPOSIT VALUE BY 20 - 30%
According to Article 23 of the draft Law on Real Estate Business (amended) being submitted for comments at the National Assembly, the drafting agency has proposed two options on the principles of trading in future housing and construction works. Option 1, real estate project investors are only allowed to collect deposits from customers when the housing and construction works have met all the conditions for being put into business and have conducted transactions in accordance with the provisions of this law. Option 2, real estate project investors are only allowed to collect deposits according to the agreement with customers when the project has a basic design appraised by a state agency and the investor has one of the documents on land use rights. The maximum deposit amount does not exceed 10% of the selling price or lease-purchase price.
Deposits need to be clearly regulated to protect people when buying real estate.
Lawyer Nguyen Dang Tu, Trilaw LLC, analyzed that for option 1, the nature of the deposit according to the Civil Code is to ensure the performance of civil obligations. Accordingly, one party (the depositor) transfers to the other party (the depositee) an amount of money or property within a certain period of time to confirm the agreement between the parties and to ensure the conclusion or performance of a civil contract. For real estate transactions, the deposit is to ensure the signing of a real estate sale and purchase contract. If the regulation is as in option 1 above, it is no longer necessary, because when the project is qualified to be put into business, the parties can immediately sign a real estate sale and purchase contract without having to make a deposit. Therefore, option 1 aims to limit risks for customers, increase the responsibility of investors, and filter out investors who do not have sufficient financial capacity, but it is unnecessary to apply it to deposits. The condition that a project is eligible for commercial operation should only apply to the signing of a sales contract.
Option 2 is more "open" for investors to make deposit transactions. However, to protect customers' rights, the draft should add content to limit deposits to an appropriate level (about 20 - 30%). Because the current Civil Code does not stipulate a minimum or maximum deposit for real estate transactions. This has led to recent chaos in the real estate deposit market. Some investors, through deposits, require customers to deposit up to 95% of the property value to mobilize capital under the guise of a deposit. However, when disputes arise, investors are unable to pay the deposit to customers and delay in refunding the money to customers. Many customers also have a hard time getting their principal back, let alone asking investors to pay the deposit. Typically, in many cases of mobilizing to buy and sell land projects, the legal procedures have not been completed but the deposit is received up to 95% of the value, but the contract is not signed on time and there is no longer the ability to refund, the people denounce, the investor is prosecuted and the people lose money. There are also many cases where the investor receives a deposit of 10%, however, when land and housing prices increase, many investors are willing to return the deposit without continuing to sign the sale contract. There are also cases of low deposits, when real estate freezes and decreases in price, customers are also willing to forfeit the deposit. "The draft should stipulate that in order to sign a deposit, the investor must provide a bank guarantee letter committing to refund the deposit to the customer when the investor violates the agreement. This proposal will create more conditions for investors to mobilize capital and also ensure the rights of customers when the investor violates its commitments," lawyer Tu suggested.
Deposits will only be accepted when the project is eligible for business.
According to Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association, with option 1, the purpose of the deposit is to ensure contract performance, but in reality, after the contract is signed, there are rarely cases where the depositor is defrauded by the deposit recipient. The reason is that the contract is often strictly checked by the parties and implemented in accordance with the provisions of law. When the contract is executed, the deposit is often deducted from the initial payment of the transaction. Option 2 is for the purpose of depositing to ensure contract performance. In reality, before the contract is signed, there are often cases where the depositor is defrauded by the deposit recipient and does not perform the contract, causing damage to the depositor. Currently, both options 1 and 2 are correct, so it is necessary to integrate both options into one regulation on deposits to ensure contract signing or deposits to ensure contract performance, in order to protect the legitimate rights and interests of customers who buy, lease-purchase real estate, available housing or housing formed in the future.
Accordingly, Mr. Chau proposed to combine two options into one in the direction: "Project investors are allowed to collect deposits from customers when the houses and construction works are qualified to be put into business and have conducted transactions in accordance with regulations in order to ensure contract performance, or real estate project investors are only allowed to collect deposits to ensure contract signing according to the agreement with customers when the project has a basic design appraised by a state agency and the investor has one of the documents on land use rights specified in Clause 2, Article 24 of this Law. The deposit agreement must clearly state the selling price, lease-purchase price of the house or construction works. The maximum deposit amount is according to Government regulations but does not exceed 10% of the real estate value".
"The 2006 and 2014 Real Estate Business Laws do not regulate deposits occurring before the time when the real estate project is eligible to enter into a contract or mobilize capital to sell future housing, especially land. Therefore, there has been a situation where speculators, land brokers, and dishonest businesses have taken advantage of Clause 1, Article 328 of the 2015 Civil Code, which does not regulate the value and rate of deposits, so they have received deposits from customers with large values, in some cases up to 90 - 95% of the value of the property being transacted. Speculators, land brokers, and dishonest businesses have even set up "ghost" projects without a legal basis for the purpose of fraud, causing huge losses to customers and disrupting social order, a typical example being the fraud case at Alibaba Company," said Mr. Le Hoang Chau.
Dr. Nguyen Van Dinh, Vice President of the Vietnam Real Estate Association, said that the draft revised Law on Real Estate Business needs to have clearer regulations on deposits, especially the timing of deposits, to avoid investors taking advantage of this loophole to illegally raise money. "We have studied deposits in the real estate market in many countries around the world, all of which allow deposits. But the deposit is transferred to a joint account for a third party such as a bank to manage and supervise. If the investor does not fulfill its commitments such as not building or not being able to sign a contract according to the law, then the customer can completely get their money back," said Mr. Dinh.
Customers can enjoy interest on the deposit amount during the time of depositing it in the bank, customers do not worry about losing money. The deposit amount does not exceed 20% of the contract value. This limits the situation where investors have not done anything but mobilized a lot of money from customers in the style of "catching a thief with bare hands".
Dr. Nguyen Van Dinh, Vice President of Vietnam Real Estate Association
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