Real estate is a potential investment channel that many investors choose. However, the real estate market is currently experiencing a temporary downturn due to various reasons. Many investors are now questioning how to recover the capital they have invested when purchasing a real estate project that does not yield the expected potential. In this article, TNTP’s lawyer will provide a perspective to answer the question: “Can the deposit be recovered when purchasing a real estate project?”
1. Contract for purchasing a real estate project
According to the provisions of the law, real estate for business purposes includes various types of houses, buildings attached to the land, and types of land that are permitted to be transferred, leased, or subleased the right to use the land. Real estate projects are investment projects that are appraised and approved according to investment decisions and investment policies, as well as relevant permits according to the provisions of the law. Real estate projects include investment projects for the construction of houses and buildings; investment projects for the construction of infrastructure structures for the transfer or lease of land use rights, as stipulated by the law. In this article, TNTP will only address issues related to investment projects for the construction of houses and buildings between individual investors and real estate business enterprises, excluding the purchase, and transfer of residential houses and land use rights between individuals and households.
2. Legal provisions regarding the contract for purchasing a completed real estate project
The law does not specifically define what constitutes a completed real estate project. However, according to TNTP’s perspective, a completed real estate project refers to properties that have been formed or completed before the occurrence of civil transactions between the parties involved. Therefore, buyers can see the structures, shapes, and dimensions of these properties.
According to the provisions of the law, a contract for the sale, lease, or lease-purchase of houses, or buildings must include the following essential contents:
(i) Names and addresses of the parties involved; (ii) Information about the real estate; (iii) Purchase, lease, or lease-purchase price; (iv) Method and payment deadline; (v) Deadline for delivery and acceptance of the real estate and accompanying documents; (vi) Warranty; (vii) Rights and obligations of the parties; (viii) Liability for contract breaches; (ix) Penalties for contract breaches; (x) Termination, cancellation of the contract, and measures for handling; (xi) Dispute resolution; (xii) Effective date of the contract.
From the above provisions, it can be seen that a contract for the business of real estate must satisfy all the conditions prescribed by law to have legal validity. Additionally, in some cases, if a contract for purchasing a completed real estate project violates the prohibitions of the law, it will not be recognized and will be declared void.
3. Can the deposit be recovered when purchasing a completed real estate project?
Although a deposit serves as a means to ensure the fulfillment of obligations, according to the provisions of the 2015 Civil Code, the 2013 Land Law, and the 2014 Housing Law, there is currently no legal document that stipulates the mandatory requirement to place a deposit when purchasing real estate. Therefore, in the case of a contract for purchasing a completed real estate project that includes an agreement on a deposit, it will not violate the law. However, it should be noted that the deposit must safeguard the rights and interests of the parties, depending on the commitments made in the contract. For example, if an investor places a deposit to ensure that the developer will deliver the Certificate of Land Use Rights, Ownership of Houses, and Assets on time, but the developer fails to do so, the investor has the right to demand the refund of the deposit and seek compensation for damages (if stipulated in the contract).
However, in reality, many developers draft contracts for the sale of completed real estate projects that contain clauses disadvantageous to the investor. These clauses may include provisions stating that the investor voluntarily forfeits the deposit or agree that the deposit will not be refunded under any circumstances. In cases where the developer has entered into such contracts, it becomes difficult to recover the deposit because it is not an illegal agreement, and the legal provisions regarding civil transactions respect the autonomy of the parties. Therefore, if the developer has accepted the terms of a contract for the purchase of a real estate project that is disadvantageous to them, it becomes challenging to safeguard their rights and interests.
Therefore, to safeguard their legitimate rights and interests, developers need to carefully study the provisions of the contract for purchasing a completed real estate project and apply the relevant legal regulations to avoid entering into disadvantageous contracts that may affect their interests.
The above is Part 1 of TNTP’s article addressing the question: “Can the deposit be recovered when purchasing a real estate project?” In the next article, TNTP will continue to discuss the issue of requesting the recovery of deposits in contracts for purchasing real estate projects formed in the future. We kindly ask our readers to continue following along.