The performance of off-the-plan real estate contracts means that the parties conduct obligatory activities under the nature of the object, term, method, and location under the contents of the Contract. This performance is intended to meet the respective rights and obligations of each party in the Contract. However, the right and full performance of the parties under commitments depends on many factors. In the previous article, TNTP mentioned the risks of entering into Contracts. In this article, we mention the risks of performing this type of Contract.

1. The investor request the buyer to pay over the permitted legal limit

Under Article 57 of the 2014 Law on Real Estate Trading on Payment for off-the-plan real estate sales or lease purchases, the payment of the plan houses is made several times:

  • For the first time no more than 30% of the Contract’s value;
  • The next time shall be conformable with real estate construction progress provided that the total installment does not exceed 70% of the Contract’s value if the building has been not transferred to clients. In case the seller or the lessor is a foreign-invested enterprise, the total installment does not exceed 50% of the Contract’s value.

Therefore, the buyer can base on the provisions of the law to make the contract payment in many installments. If the Investor requests payment over a percentage of the contract’s value under the law or requests the buyer to sign an additional Contract Annex to request the buyer to make additional payments, the buyer has the right to refuse this request of the Investor.

In addition, for the issue of payment, the agreement stipulating that the payment of 100% of the Contract’s value will be made after the buyer is granted the Certificate of land, ownership of land and property on land (Abbreviated as Certificate of Land Use Rights) can help the buyer avoid the case that the buyer has paid in full but The Investor makes it difficult to support the procedures for Certificate of Land Use Rights.

2. The investor is late on the house handover

In fact, the investor’s late house handover is quite common. In addition, the investor also does not want to compensate, and delays the handover for a long time and explains to the buyer that “such industry practice”, which seriously affects the legitimate rights and interests of the buyer.

Under Article 23 of the 2014 Law on Real Estate Trading on Rights of building buyer and Clause 2, Article 16 of the 2014 Law on Real Estate Trading: Penalty and compensation for damage caused by late payment or late real estate handover by the seller shall be agreed by the parties and must be stated in the Contract. Therefore, the buyer has the right to request the Investor to hand over the house under the deadline as specified in the agreement and request the Investor to compensate for damage caused by the late house handover with the compensation level specified in the Contract.

In addition, under Point h Clause 6 Article 57 of Decree No. 139/2017/ND-CP, The Investor must be forced to refund the amount for real estate paid by the buyer to the purchase if the buyer requests the Investor to refund and forces the Investor to compensate for damage (if any).

Thus, in case the Investor does not handover the house on time and in quality as specified in the agreement, the buyer has the right to:

(i) Request the investor to handover the house on time; in case of delaying handover and the buyer agrees with it, the buyer can receive the house later and request the Investor to pay compensation for damage and penalty for violations caused by the late house handover with the value of compensation and penalty specified in the Contract; or

(ii) In case the buyer does not agree with the delayed handover, the buyer may request the Investor not to continue performing the contract, the buyer has the right to request the Investor to refund the Amount that the buyer has paid to the Investor and pay compensation for damages and penalty for violation (if the Contract has stipulated).

3. The house transferred to the buyer is not in accordance with the original commitment

In fact, it may occur that the investor fails to handover the house in quality of work, structure, design compared to the house introduced, advertised, and modeled; with attached utilities and services such as standing water floor, unreasonable installation socket, improper design, an actual area smaller than the committed area… And when the buyer discusses this, the Investor says that they have changed those products for the better or at least the same quality, however, when the buyer asks for the list of replaced materials as well as the comparison of equivalent quality as promised by the Investor, the Investor refuses to provide them.

In this case, due to the transferred house is not under the original commitment in violation of Article 12 of the 2014 Law on Real Estate Trading on requirements in terms of Projects, the buyer can request the Investor to remedy or negotiate a discount. If the Investor cannot remedy the violation, the buyer may ask the Investor to compensate for damage caused by the improper quality as the commitment. The buyer shall note that in case the compensation cannot be agreed or the investor has not completed the remedy for quality defects as agreed, the minutes of house handover should not be signed.

To ensure that their legitimate rights and interests are protected by law during the performance of the Contract, the buyer should be close in requesting the Investor to provide information about construction progress, advance fee use, and inspection of the construction site for the Project. Thus, the buyers can minimize the risks.

The above is legal shares of the risks when performing off-the-plan real estate contracts. I hope this article is useful to you.

Best Regard.

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TNTP and Associates International Law Firm

Lawyer: Nguyen Thanh Ha