The real estate market in Vietnam has been an effective investment market even during the Covid-19 pandemic. However, along with many profit opportunities, there are hidden and unpredictable risks. In this article, we would like to mention a risk that many real estate investors have encountered. It is the illegal capital mobilization in trading off-the-plan real estate by entering a contract with a buyer through a third party.
1. Illegal capital mobilization
a) Who has the right to sell off-the-plan real estate?
Under the provisions of the Law on Real Estate Trading, only investors have the right to open their real estate sale. And investors only have the right to open for sale if the off-the-plan real estate is eligible to be opened for sale.
However, in reality, if the investor wants to open an off-the-plan real estate sale before meeting conditions for sale, they often go through a Third Party to sign a brokerage service contract with the buyer.
b) How is illegal capital mobilization implemented?
Firstly: Through the third party signing a brokerage service contract with the buyer, the contractual term related to the buyer’s deposit will state the content “Payment amount for brokerage services” instead of for the “Deposit to buy real estate”. This term is intended to lick the deposit to buy real estate, “transform” it into a fee paid by the buyer for the third party to carry out brokerage intermediaries – which is a civil transaction allowed by the law. This conceals the illegal capital mobilization under the law on real estate trading.
In addition: The Service contracts will include the following provisions: (i) not allow the buyer to get the deposit back after a specified period of time by the investor, (ii) provisions of deposit penalty if the buyer terminates the Service contract before the term, or (iii) stipulate that the buyer cannot get the deposit back until the investor opens for sale.
These are the most unfavorable terms when the buyer has accepted to enter into the Service contract. In case the buyer finds out the problems arising from the Service contract, such as: the real estate project has not been completed under the committed schedule of the investor; or the project has still been not completed for sale despite expired time limit, etc., the buyer wants to terminate the Service contract. However, at that time, the buyer will encounter unfavorable terms of the Service contract and fall into a dilemma when it is impossible to withdraw the deposit due to the contract’s bond. If the buyer waits, the buyer is also not aware of the timeline that the investor meets the conditions for sale.
2. What does the buyer need to do?
Based on our practice experiences, many enterprises trading real estate have been conducting to mobilize capital illegally from buyers through third parties. However, the competent authorities are still “afraid” to resolve these cases. The authorities assume that the contract between the third party and the buyer contains the content and form of ordinary civil transactions. The applicable regulations of the law on sanctions against third parties conducting illegal capital mobilization are also inadequate and have many loopholes.
Therefore, the buyer needs to recognize suspicious behavior before signing any contract to protect themselves. In particular, if the investor does not directly sign a sale and purchase contract but requests the buyer to sign a sale and purchase or deposit contract with any other third party, it is likely that the investor is conducting the illegal capital mobilization. The buyer should thoroughly consider the commitments as well as the reputation of the third party before entering into a contract or depositing money with such a third party. If uncertain, the buyer should not enter into a contract and deposit money to any third party.
The above is our legal share about the illegal capital mobilization in trading off-the-plan real estate through a third party. Hope this article is useful to you.
Best regard.
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TNTP & Associates International Law Firm
Lawyer Nguyen Thanh Ha
Email: ha.nguyen@tntplaw.com
