CAN INVESTORS RECOVER MONEY AFTER DEPOSITING IN REAL ESTATE PROJECTS? (PART 1)
The real estate field is a potential industry. It has stormed the market and has attracted the attention of investors for many years. However, at the current time, the real estate market is showing signs of “freezing” due to numerous factors. As the real estate project that investors are choosing may lose its potential and fail to achieve the desired results, many investors are concerned about recovering the deposit they have put into purchasing that. To answer the question: “Is it possible to recover the deposit from a purchased real estate project?”, TNTP’s lawyers give the following opinions:
1. What is a sale contract for Real Estate Project?
Real estate is the subject of business activities including: houses, land-attached construction, and types of land that are permitted to be transferred, leased, or sub-lease the land use rights according to the provisions of the law. Real estate project means a construction project that is formulated, appraised, and approved as per the construction law. Real estate projects include: projects on building houses and construction works; projects on building infrastructure to transfer or lease land use rights, in accordance with the provisions of law (Article 3.2 Decree No. 02/2022/ND-CP, Decree on elaboration of certain articles of the law on real estate trading, issued on 6 January 2022)
Within the scope of this article, we only mention issues related to housing investment projects and house construction projects between individuals and real estate businesses, excluding the purchase, sale, and transfer of houses and land use rights between individuals and households.
The parties shall agree in writing to establish, change or terminate rights and obligations in the activities of buying, selling, leasing, and easing houses, construction work, transferring, leasing, or subleasing land use rights, transferring the whole or a part of real estate projects. This document is called the Real Estate Business Contract. In other words, this is an agreement between the buyer and the seller and the object is the land use right or house ownership as prescribed by law. In this article, TNTP will refer to two types of Real Estate Agreements: (i) Completed Real Estate Projects; and (ii) Off-plan Real Estate Projects
2. How is the sale contract for a Completed Real Estate Project stipulated in the regulation?
The current law still lacks definition of completed real estate. However, based on TNTP’s point of view, completed real estate is the real estate that has been formed or completed before the time when civil transactions between related parties arise. Accordingly, the buyer can clearly see the structure, shape, and area of this real estate.
Contents of a contract for purchase, sale, lease or lease purchase of a house or construction include:
(i) Names and addresses of the parties;
(ii) Information on real estate;
(iii) Price for purchase, sale, lease, or lease purchase;
(iv) Method and term of payment;
(v) Time limit for delivery and receipt of real estate and accompanying documents;
(vii) Rights and obligations of the parties;
(viii) Liability for breach of contract;
(ix) Penalties for breach of contract;
(x) Cases of contract termination, cancellation, and handling measures;
(xi) Dispute settlement;
(xii) Effective date of the contract.
It can be seen from the above regulations that a sale contract of real estate which is valid must satisfy all conditions as prescribed by law. Besides, in certain cases, The Real Estate Sales Contract that violates prohibitions of the law will not be recognized and will be declared invalid, regardless of whether it is completed or not.
3. Is it possible to recover the deposit when buying a completed Real Estate project?
Deposit is a measure to secure the performance of obligations under the provisions of the Civil Code 2015, Law on Land 2013, and Law on Housing 2014. However, according to current law, there is no requirement that the deposit is a mandatory condition when participating in real estate transactions. Therefore, whether to make the deposit or not depends on the agreement between the parties when entering the contract. However, it should be noted that the deposit must ensure the rights and interests of the parties, depending on the content of the committed Contract. For example, in case, the Project Owner makes a deposit to ensure that he will hand over the Certificate of Land Use Right, Ownership of House and Property on Land on time, but then he does not fulfill this commitment, the Investor has the right to request the Project Owner to return the deposit (if the Contract has agreed on damages).
However, in reality, many Project Owners draft Completed Real Estate Sales Contract with content detrimental to the Investor, such as the content of the voluntary will of the Investor in the payment of the deposit; or article about the agreement of the deposit will not be refunded in any way. If the Investor entered into such Contracts, it would be very difficult to recover the deposit, because these are not an illegal agreements. There will be legal value because the core of a civil transaction is to respect the agreement between the parties. Therefore, in case the Investors have accepted to enter into a Sale Contract for Real Estate Project with unfavorable terms, it will be difficult to guarantee their rights and interests.
Therefore, in order to protect their legitimate rights and interests, the investor need to carefully research the articles of the sale contract for completed real estate projects, and apply the provisions of law to avoid the conclusion of the contract affecting their own rights and interests
In part 1 of the article, TNTP answered the question: “Is it possible to recover the deposit for a real estate project?”. TNTP will continue to refer to the requirement to recover the deposit in the contract of sale and purchase of Off-plan estate project in the next article. Please keep following us.
TNTP International Law Firm and Associates