Author: Phạm Huyền

03 risks when performing off-the-plan real estate contracts

Written by Phạm Huyền on 13 September, 2021. Posted in Pháp luật Hợp đồng.

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.

You may need Contractor delays the construction schedule – What are solutions for the investor?

Join Fanpage Dispute Settlement and Debt Collection to have more useful legal knowledge.

TNTP and Associates International Law Firm

Lawyer: Nguyen Thanh Ha

Email: ha.nguyen@tntplaw.com

Contractor delays the construction schedule – What are solutions for the investor?

Written by Phạm Huyền on 13 September, 2021. Posted in Legal newsletter.

When signing a construction contract, the contractor must ensure the construction schedule for the investor. However, in reality, many reasons can lead to construction schedule delay. This seriously affects the legitimate rights and interests of the investor. Therefore, in case the contractor delays the construction schedule, how should the investor resolve the problem? This article covers legal issues related to construction schedule delay and appropriate solutions for investors.

1. How can the investor resolve when the contractor delays the construction schedule?

In the event that the contractor delays the schedule, the investor can take one, several or all of the following measures:

a) Suspend or terminate the Contract performance

Under the regulations of law, investors have the right to solely carry out the construction work if they have the full capability of performing construction activities. However, in reality, investors often choose contractors for construction. The construction will be carried out based on the construction contract between the parties.

Pursuant to Point c, Clause 2, Article 113 of the 2014 Law on Construction, the contractor is responsible for ensuring the quality and schedule of the construction. In case the contractor delays the construction schedule, under Point b, Clause 1, Article 145 of the 2014 Law on Construction, the employer has the right to suspend the performance of the construction contract when the contractor fails to meet requirements on quality, labor safety and schedule stated in the signed contract. Thus, the investor can suspend the contract performance without any violation or fault of the contractor.

Under Point b, Clause 2, Article 145 of the 2014 Law on Construction, if the construction schedule is delayed since the contractor refuses or continuously fails to perform work under the contract, the employer has the right to terminate the construction contract. In which, the employer may be the investor or the representative of the investor or the general contractor or the main contractor; the contractor may be the general contractor or the main contractor when the employer is the investor, may be the sub-contractor when the employer is the general contractor or the main contractor.

In summary, if the investor directly signs a construction contract with the main contractor and the main contractor does not assign the work to the sub-contractor, the investor will be the employer and the main contractor is the contractor. The investor has the right to suspend or terminate the construction contract with the contractor, depending on the construction schedule delay arising from or without the violation or fault of the contractor. In case the investor terminates the construction contract, the investor has the right to sign a contract with a new contractor to continue the construction to ensure the project schedule.

b) Contractual penalty for the contractor

The investor has the right to request the contractor to pay a construction contract penalty if the parties agree and state the rate and conditions of penalty in the contract.

Pursuant to Clause 2, Article 146 of the 2014 Law on Construction, for works using state budget, the penalty rate must not exceed 12% of the value of the violated contract value. Regarding the works not using state budget, the contractual penalty shall be applied to the agreement between the parties in the contract.

c) Request the contractor to compensate for damage

Pursuant to Point a, Clause 3, Article 146 of the 2014 Law on Construction 2014, the contractor shall compensate the employer for damages when the work’s quality fails to ensure the agreements reached in the contract or the completion time is prolonged due to the fault of the contractor.

Thus, in the event that the construction schedule is delayed and the completion time is prolonged due to the contractor’s fault, the investor has the right to request the contractor to compensate for the damage. It is not necessary to stipulate compensation for damages in the contract.

2. Avoiding the risk from the construction schedule delay of the contractor before signing the Contract

In Item 1 of the article, TNTP has outlined the legal grounds as well as the resolving measures for the investor when the contractor fails to ensure the construction schedule. However, there are more benefits to prevent risks from the outset than dealing with or overcoming consequences. Therefore, with the experience of TNTP, investors should pay attention to prevent the occurrence of this situation as follows:

Specifying clearly in the contract about the schedule of each construction stage; and
Regulating penalty rate, compensation for damage, cases of suspension or termination of contract performance if the contractor delays the schedule corresponding to each stage.

It is extremely common that the contractors delay the construction schedule in practice. The reasons can be objective or subjective. To ensure maximize investor’s legitimate rights and interests, they should consider all possible reasons leading to the construction schedule delay, thereby stipulate appropriate remedies and resolving measures in the contract.

The above is the article about the construction schedule delay of the contractor under the construction contract signed with the investor. Hope this article is useful to you.

Best regards.

You may need LEGAL SERVICE SUPPORT CLIENTS TO SETTLE CONSTRUCTION DISPUTES.

Join Dispute Settlement and Debt Collection to have more useful legal knowledge.

TNTP & Associates International Law Firm

Lawyer Nguyen Thanh Ha

Email: ha.nguyen@tntplaw.com

Monthly legal consultation services for enterprises

Monthly Retainer Legal Services for Enterprises

Written by Phạm Huyền on 13 September, 2021. Posted in Legal consultation services.

Monthly retainer legal services for enterprises (also known as Outsourced Legal Department) are legal services provided by law firms to clients on a regular basis. In other words, the monthly retainer legal services of a law firm can replace the function of the legal department in the enterprise.

TNTP’s Lawyers have been cooperating and providing regular legal services to many large and small enterprises, having extensive knowledge of the Enterprise Law as well as legal issues that enterprises often face with. Therefore, TNTP believes that TNTP can provide the best legal consultation services to clients, achieving high efficiency and ensuring it complies with the laws.

I. Why do enterprises need regular legal consultation services?

For enterprises that do not have a legal department, legal risks are easy to occur because they do not understand the provisions of the laws, which leads to the enterprise’s organizational structure is not able to operate smoothly.

Although some enterprises have already had their own legal department, they still have to hire lawyers or look for a law firm when having legal issues. This can be explained by the fact that usually, the legal departments only implement administrative procedures, drafting documents and commitments but do not have much skills and knowledge to handle when disputes happen in the company such as labor disputes, income tax disputes, or disputes between the company and shareholders, dispute with partners, … When these cases occur, legal departments of enterprises are often quite confused and cannot resolve it quickly. Therefore, enterprises still have to hire a lawyer or look for a law firm for legal advice because the law firm has a more in-depth knowledge of disputes settlement.

To avoid these risks, enterprises should use monthly retainer legal services of law firms to ensure their operations are always efficient and in accordance with regulations.

II. Works that TNTP will implement in regular legal consultation services

For monthly retainer legal services, depending on the demand of the Clients, the works that TNTP will implement include:

Draft, review Contracts, Agreements, Commitments or other documents provided by Client;
Study, research the provisions of the laws to review risks, ensure that the Client’s activities are legal;
Provided legal advice based on the issue requested by the client;
Answer client’s legal queries via e-mail or documents;
Participate in meetings with clients to protect their legal rights and interests.

In addition to the listed works, the actual works that TNTP implements may arise more depending on the client’s requirements.

III. How does TNTP receive and process information?

Receive information, documents, legal queries, and requests from Clients.
Arrange information, documents, records and identify legal issues needed to clarify.
Research the provisions of the laws related to the issues, queries, and requests of Clients.
Contact Clients to clarify issues and unclear details.
Calculate risks and make plans to be executed for Clients.
Draft legal advice; Review and draft documents and contracts based on the provisions of law and requests of Clients.
Submit draft legal advice, reviewed and drafted documents and contracts for Clients to give their opinions.
Revise draft legal advice; documents, contracts according to the opinions of Clients on the basis of ensuring compliance with the provisions of law and protecting the maximum legal rights and interests of Clients.
Send legal advice letters; complete documents and contracts for Clients.

IV. The service fees for Monthly retainer legal services for enterprises are calculated as follows:

– The service fee for the work is a fixed monthly amount of 7,000,000 VND (Seven million Vietnamese dong).

This work includes drafting emails upon request from the Client regarding legal issues in the Client’s business areas and attending one meeting with the Client and/or a third party.

The fee for attending meetings will be charged from the second meeting onwards in each month. If there are no meetings in that month, one free meeting will not be accumulated and used in subsequent months.

Please note that the above service fee for the work is only charged in the month when the Client incurs work and the service is provided by TNTP. TNTP will not charge the fixed monthly service fee in the month when the Client does not have work and TNTP does not provide any service.

– In case the Client needs the TNTP’s support in drafting and reviewing legal documents and advising on legal issues related to the Client’s business and internal management, the fee will be calculated at 700,000 VND (Seven hundred thousand Vietnamese dong) per page of legal document, consultation letter (A4 paper, Times New Roman font, font size 12).

The Client can request TNTP to make up to three (03) revisions or supplements for consultation letters, legal documents to be reviewed or legal documents to be drafted. In the event that the Client requests more than three (03) revisions or supplements for consultation letters/ legal documents, TNTP will charge a new fee and send a new fee quote to the Client.

– In case the Client needs TNTP’s support in attending meetings from the second meeting onwards in each month with the Client and/or a third party, the service fee will be charged at 2,000,000 VND (Two million Vietnamese dong) per hour for each meeting.

– In case the Client needs TNTP’s support for work beyond the scope of this quotation, a new quotation will be sent to the Client.

If the volume of work for one month increases continuously for six months, the Client and TNTP will have a meeting to agree on the new monthly service fee based on the new volume of work provided by TNTP to the Client.

Please take note that based on each scenario, the service fees may change.

V. TNTP’s commitment to legal service

With the attitude of protecting the legal rights and interests of the Client, TNTP has been and will try to bring Clients trust and comfort when using TNTP’s legal services.

Throughout the process of providing legal services, TNTP commits to support Clients and perform the work in the fastest, most timely and effective way, regularly report the progress of the case as well as give the next plan so that Clients can easily monitor and evaluate the work results.