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Buying and selling future housing – Understand the law to protect your “wallet”
In recent years, the Vietnamese real estate market has exploded with apartment and townhouse projects being sold while still under construction. This form is called future housing sales. Thanks to flexible payment methods, competitive prices and the opportunity to own houses in new projects, this type has become an attractive choice for many investors and consumers. Besides the opportunities, this type of transaction also has many potential risks; therefore, buyers need to carefully check the legality and reputation of the investor to avoid the situation of "losing money and getting sick".
From August 1, 2024, the Law on Real Estate Business 2023 officially takes effect, replacing the Law on Real Estate Business 2014. This is considered an important turning point for the real estate market, with many regulations to tighten the buying and selling of future housing. Specifically:
1. Conditions for putting future housing into business.
According to Article 24 of the Law on Real Estate Business 2023, future housing put into business must meet the following conditions:
- The house has been started construction in accordance with the provisions of the law on construction.
- Have one of the following types of documents on land use rights:
- Decision on land allocation;
- Decision on land lease and contract on land use rights lease in accordance with the provisions of the law on land;
- Decision on permission to change land use purpose;
- Certificate of land use rights;
- Certificate of house ownership and land use rights;
- Certificate of land use rights, house ownership and other assets attached to land;
- Other certificates of land use rights, ownership of assets attached to land according to the provisions of the law on land.
There are the following types of documents:
House construction permit and application for a construction permit in cases where a construction permit is required according to the provisions of the law on construction;
Notification of commencement of house construction and house construction design documents in cases where a construction permit is not required according to the provisions of the law on construction;
Documents on acceptance of the completion of technical infrastructure construction according to the provisions of the law on construction corresponding to the project progress; in the case of apartment buildings or mixed-use buildings with houses, there must be documents proving that the foundation construction has been accepted according to the provisions of the law on construction.
Before selling future housing, the project investor must notify the provincial-level state management agency for real estate business in writing that the housing is eligible for sale.
Within 15 days from the date of receipt of the notification, the provincial-level state management agency for real estate business is responsible for checking the conditions of the housing put into business and replying in writing to the investor about the housing being eligible for sale; in case of ineligibility, the reason must be clearly stated.
The housing must be in a real estate project approved by a competent state agency in accordance with the provisions of law and the approved project content must include the purpose of investing in the construction of housing for sale.
Information on real estate and real estate projects put into business must be made public in accordance with the provisions of Article 6 of the Law on Real Estate Business 2023.
Meeting other general conditions such as: No disputes; Not being seized to ensure enforcement of judgments; Not subject to the law prohibiting transactions; Not subject to the suspension or temporary suspension of transactions according to the provisions of law; In accordance with the approved planning; The project investor has fulfilled financial obligations regarding land…
Thus, the above regulations help buyers avoid the risk of “buying and selling houses on paper” when the project has not yet formed a minimum legal basis, has not been permitted to build or does not meet the conditions for transactions.
2. The deposit limit for future housing purchase is not more than 5% of the selling price.
Previously, the 2014 Law on Real Estate Business did not regulate deposits when buying and selling future housing, leading to many investors or brokers often using the trick of depositing and holding a place to illegally mobilize capital when the project is not yet qualified to be put into business. When the project is not implemented as committed, it will be difficult for the buyer to get their money back and they will suffer heavy losses.
To overcome the above situation, the 2023 Law on Real Estate Business has specifically stipulated: real estate project investors are only allowed to collect a deposit of no more than 5% of the selling price of future housing from the depositor when the housing has met all the conditions for being put into business according to the provisions of this Law. The deposit agreement must clearly state the selling price of the housing.
This new regulation is an important “legal barrier” to protect buyers in future housing deposit transactions, limiting investors from only collecting a deposit of no more than 5% of the selling price and only collecting a deposit when the housing has met all the conditions for being put into business according to the law.
3. Payment is linked to construction progress.
Article 25 of the 2023 Law on Real Estate Business continues to strictly control the payment progress. Accordingly, the payment in the purchase and sale of future housing is made in installments, the first installment must not exceed 30% of the contract value including the deposit, the subsequent installments must be consistent with the construction progress but the total amount must not exceed 70% of the contract value when the house has not been handed over to the buyer; in case the seller is an economic organization with foreign investment capital, the total amount must not exceed 50% of the contract value.
In addition, if the buyer has not been granted a certificate of land use rights and ownership of assets attached to the land according to the provisions of the law on land, the seller must not collect more than 95% of the value contract; the remaining value of the contract is paid when the competent state agency has issued a certificate of land use rights and ownership of assets attached to the land in accordance with the provisions of the law on land to the buyer.
This provision aims to prevent the situation of “quickly collecting money, slow construction”, which has been the main cause of many disputes in the past and has pushed difficult consequences for the state to resolve.
4. Obligations of the investor – seller
To protect the rights of the buyer, the 2023 Law on Real Estate Business has set out many obligations for the investor – seller. Before signing the contract, the seller must provide full information and legal documents of the house to the buyer, and the conclusion of the sale and purchase contract must comply with the model contract as prescribed by law. In addition, the investor is responsible for transparently disclosing project information according to Article 6 of the Law on Real Estate Business 2023, and is responsible for information about housing and real estate projects that it provides to customers. In particular, the investor must also fulfill the obligation to provide a bank guarantee to ensure the rights of the buyer in case the house is not handed over as committed.
Conclusion: Before “putting money” to buy a house being built in the future, the buyer needs to carefully study the legality of the project, request the investor to provide documents to prove that the project is eligible for business such as: documents on land use rights; construction permit; documents on acceptance of the completion of construction of technical infrastructure corresponding to the progress of the project; in the case of apartment buildings, mixed-use buildings with houses, there must be documents proving that the foundation has been accepted; documents of state management agencies announcing eligibility to sell future housing… Absolutely, only sign the contract when the project has met the above conditions.
Buyers need to carefully read the deposit contract, the contract for sale of future housing, only sign the contract directly with the investor without going through other organizations or individuals, pay attention to the payment schedule in accordance with legal regulations: deposit not exceeding 5% of the selling price, first payment not exceeding 30% of the contract value including the deposit, payment of a maximum of 70% of the contract value when the house has not been handed over and not exceeding 95% of the contract value when the certificate of ownership has not been issued.
