Bank guarantees in the purchase and sale of real estate formed in the future

Currently, according to the law on buying and selling houses to be formed in the future, to sell houses to be formed in the future, conditions must be included, which can be divided into two types of conditions: (i) conditions set for the type of property being traded, which is future housing, and (ii) conditions related to the seller of future housing. A guarantee for the sale of future housing is one of the mandatory conditions that the home seller must comply with.

What is a guarantee for the sale or lease purchase of future housing?

According to the provisions of Clause 4, Article 3, Circular 11/2022/TT-NHNN stipulates:

Guarantee for the sale, lease purchase of future housing (hereinafter referred to as future housing guarantee) is a bank guarantee, whereby the guarantor is a commercial bank that commits to the party. The guarantee recipient is the buyer or lessee (hereinafter referred to as the buyer) to perform financial obligations on behalf of the guaranteed party, which is the investor, when the committed deadline for delivering and receiving the house arrives, but The investor does not hand over the house to the buyer without performing or incompletely performing the financial obligations under the signed house purchase or lease purchase contract; The investor must accept the debt and repay the guarantor according to the signed agreement. In case a commercial bank guarantees on the basis of a counter-guarantee, the counter-guarantor commits to the commercial bank that it will fulfill the financial obligations to the commercial bank when the commercial bank must fulfill financial obligations on behalf of the investor; The investor must accept the debt and repay the counter-guarantor according to the signed agreement.

Guarantee for the sale of houses formed in the future

Pursuant to Article 56 of the Law on Real Estate Business 2014 stipulates:

• Real estate project investors, before selling or leasing houses to be formed in the future, must be guaranteed by a commercial bank with sufficient capacity to guarantee the investor’s financial obligations to customers when the investor does not hand over the house on schedule as committed to the customer.

The State Bank of Vietnam announces a list of commercial banks capable of providing guarantees for real estate businesses formed in the future. In particular, according to Clause 1, Article 13 of Circular 11/2022/TT-NHNN, commercial banks have enough capacity to guarantee housing to be formed in the future when:

• In the license for establishment and operation or in the document amending and supplementing the license for establishment and operation of a commercial bank, there are regulations on the content of bank guarantee activities;
• It is not prohibited, restricted, suspended or temporarily suspended from guaranteeing future housing.
• The scope, conditions, content and guarantee fees are agreed upon by the parties but must ensure the fulfillment of the guarantor’s responsibilities prescribed in the 2014 Real Estate Business Law and must be made into a contract. The investor is responsible for sending a copy of the guarantee contract to the buyer or hire-purchase party when signing the purchase or hire-purchase contract. The guarantee contract has a term until the house is handed over to the buyer or lessee.
• In case the investor does not hand over the house according to the committed schedule and the buyer or lessee requests, the guarantor is responsible for refunding the advance payment and other amounts to the customer according to the signed housing purchase and lease purchase contract and guarantee contract.

Thus, the bank guarantee is intended to ensure home buyers eliminate the biggest risk of not receiving housing built in the future. The bank guarantee also protects the interests of home buyers in case the project and house are mortgaged at a bank.

Recommendations of LS Law Firm

Above are the basic contents of bank guarantees in the purchase and sale of real estate formed in the future based on the law at the time of writing. If you need advice on the above issue or are interested in other legal services, please contact LS Law Firm immediately via Email: lslawfirm2014@gmail.com for timely support.

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