Need to cover all deposit behaviors in the market
Regarding the regulation that real estate project investors "can only receive deposits from customers when the houses and construction works have met all the conditions for being put into business and have conducted transactions after the time of signing the transaction contract" at Point d, Clause 4, Article 24 of the Draft Law on Real Estate Business Amendment, Mr. Le Hoang Chau - Chairman of the Ho Chi Minh City Real Estate Association (HoREA) - acknowledged that this is a correct but insufficient regulation. Because, according to him, it is necessary to supplement the regulation that the deposit is received before the time of signing the contract for the sale and purchase of real estate, houses, and land plots formed in the future.
Legal regulations on deposits and the need to supplement strict regulations on receiving deposits before signing contracts for the sale and purchase of real estate, houses, and future housing plots to ensure consistency and uniformity of legal regulations and prevent fraudulent behavior.
An apartment project under construction in Hanoi (Illustration photo: Ha Phong).
The Chairman of HoREA said that the Law on Real Estate Business 2006 and 2014 had shortcomings because it only regulated real estate transactions after the transaction contract was signed, but did not stipulate deposits before signing the transaction contract.
In fact, due to the very necessary need for deposits before signing real estate transaction contracts, deposit activities are still very common and only comply with the provisions of Clause 2, Article 328 of the 2015 Civil Code. However, the provisions of the Civil Code above do not stipulate the maximum ceiling for deposits, so there have been many cases of "speculators, land brokers, dishonest businesses" taking advantage to receive deposits of large values.
"There are cases of receiving deposits of up to 90-95% of the transaction value, then misappropriating, even defrauding, causing damage to the depositor and also a cause of instability in the real estate market, so it is very necessary to regulate in the Law on Real Estate Business," Mr. Chau said.
However, Point d, Clause 4, Article 24 of the Draft Law on Real Estate Business Amendment also repeats this shortcoming because it does not stipulate deposits before the time of eligibility to enter into a real estate transaction contract. Especially in cases of deposits to promise to buy or sell "subdivided land" or deposits to promise to buy or sell products of real estate projects before the time of eligibility to enter into a contract without documents on land use rights or without the competent authority "approving the investment policy at the same time as approving the investor" or without starting construction, the loss usually belongs to the party making the deposit.
For example, in the case of a low "deposit" but the real estate price increases, the deposit recipient is willing to "cancel the deal" and return the "deposit" (doubled) to the depositor. Or, in the case of a large or very large "deposit", the deposit recipient may defraud and appropriate the customer's "deposit"...
In addition, according to Mr. Chau, Point d, Clause 4, Article 24 of the Draft Law on Real Estate Business Amendment only stipulates the case of deposit after signing the contract for the purpose of "ensuring contract performance", but does not stipulate the case of deposit before signing the contract for the purpose of "ensuring contract conclusion", so the "scope of regulation" does not cover all deposit acts in the real estate market.
From the above analysis, he proposed to add the content that the real estate project investor is responsible for only receiving deposits from customers who want to buy or lease houses or future construction works when the project has been approved by the competent authority for investment policy, construction permit (if required) and construction has started. Or the investor is only allowed to receive deposits from customers when the houses or construction works have met all the conditions for being put into business and have conducted transactions in accordance with the provisions of this Law.
"The deposit amount must not exceed 5% of the value of the house or construction being sold or leased; the seller or lessor must clearly state in the deposit contract the selling or lease price of the house or construction," Mr. Chau emphasized.
Restrict investors from circumventing the law
In the preliminary review report of the revised Law on Real Estate Business by the National Assembly's Economic Committee, there was an opinion that it was not necessary to stipulate the content of deposits in the Law on Real Estate Business, but to implement it according to the general provisions of the Civil Code. Therefore, the provision on "deposit" is a new provision in the draft Law; it is requested that the drafting agency report and clarify the necessity and basis for proposing the provision, especially the practical basis.
"If necessary, only the draft Law should stipulate specific contents of deposits in future real estate transactions; it is not necessary to repeat the contents already stipulated in the Civil Code," the review report stated.
According to experts, it is necessary to cover all deposit behaviors in the market to limit risks for depositors (Illustration: Ha Phong).
Regarding deposits in housing business transactions and future construction projects, Minister of Construction Nguyen Thanh Nghi also said that previously, real estate business laws did not have regulations on this content.
In reality, there are investors who circumvent the law by signing deposit contracts or many other types of contracts to collect money from customers when they are not qualified to sell houses or construction works in the future. Therefore, this draft has added regulations on receiving deposits when houses and construction works are qualified to be put into business and transactions are conducted in accordance with regulations.
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